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GRANTS AND MINORITY AFFAIRS COMMITTEE October 10, 2007 The electronic and print media were duly notified in accordance with the State Freedom of Information Act The Grants and Minority Affairs Committee meeting was held Wednesday, October 10, 2007, at 5:00 p.m. in the Executive Conference Room of the Administration Building. ATTENDANCE Committee Chairman Gerald Dawson, Committee Vice-Chairman Laura Von Harten, and members Rick Caporale, Herbert Glaze, William McBride, and Jerry Stewart present. Non- Committee member Stu Rodman also present. Staff: Scott Grooms, Broadcast Specialist; Suzanne Larson, Public Information Officer; Mary Lohr, County Attorney. Public: Larry Holman, Beaufort Black Chamber of Commerce President; Dewayne Lockhart, Rea Contracting Salesman and Chamber of Commerce member; John Moore, Block Construction; Carlotta Ungaro, Beaufort Regional Chamber of Commerce President and CEO. INFORMATION ITEM 1. Text Amendments to an Ordinance Adopting a Resident Vendor Preference Provision and Female and Minority-Owned Business Notification Program Discussion: Committee Chairman Mr. Gerald Dawson opened the meeting, stating this Committee has been meeting for months to work on the Resident Vendor Preference Ordinance for the County. We have had assistance from both Staff and the County Attorney in making changes to the proposed ordinance. Through months of discussion and deliberation, the Committee came forward with several recommendations. With the assistance of Mr. Gary Kubic, County Administrator, and Ms. Mary Lohr, County Attorney, we went through this. We looked at small and minority businesses and could not come up with a definitive term for what is a “small business”. Legal counsel suggested substituting “small” with “female”. In the new proposed ordinance it will state “female and minority business” instead of “small and minority business”. In addition to this, the Committee made two recommendations: First, there would be language in the contract for a bid that the County gives to prime contractors that suggests the “prime” submit the bids of all of the subcontractors. This would supply the Engineering Department with the data they need to verify compliance, and would gauge just how well the Minutes - Grants and Minority Affairs Committee October 10, 2007 Page 2 Ordinance was working regarding female and minority recruitment. Secondly, there was a text change to the Ordinance, where the reference to a state requirement for certification be “encouraged”, rather than required, by female and minority-owned businesses. This Ordinance has gone through first and second reading. Input has been solicited from the business community, some who took exception to the removal of the state requirement for certification. Mr. Dawson distributed copies of the existing ordinance, with the definition of “Small and minority business” highlighted. Every place there is a reference to “small,” it will now state “female”. Committee member Mr. Jerry Stewart took issue with the substitution, stating it penalizes white males, and also questioned the removal of a State requirement for certification. The Federal government defines exactly what a small business is. County Attorney Ms. Mary Lohr responded, stating at the last meeting members were unclear as to what a small business was. The Federal definition did not necessarily coincide with what a small business might be in Beaufort County. In essence, any business that was not listed with the Fortune 500 was considered a small business. It has been challenging trying to define what a small business was (as it applies to Beaufort County). Committee member Ms. Laura Von Harten concurred - “female” was discriminatory to males. It was agreed by Committee members that the County would use what is believed to be the state’s definition of “small”, which is “gross receipts of less that $5 million or fewer than 100 employees.” On page 2 of 3, Sec. 2-537.2 Female and Minority Business Program, Committee members discussed paragraph 4, referring to a definition of “minority”. Members questioned the inclusion of some groups such as Arab-Americans and Asian-Americans, stating their businesses are rarely disadvantaged here. Attorney Lohr will work on that definition Mr. Larry Holman, Beaufort Black Chamber of Commerce President, stood before the Committee. He circulated a copy of the form required to be filed when applying for state certification. It consisted of approximately 25 pages, and requested copies of numerous documents such as a copy of your incorporation papers, company by-laws, business license, personal finance statement, and tax returns for the last 3 years, both corporate and personal, etc., to be filed with it. It is a long and cumbersome process. Minutes - Grants and Minority Affairs Committee October 10, 2007 Page 3 He told of many minority sub contractors having gone broke while waiting for the prime contractor to pay them the agreed wage for jobs done. Mr. Holman believes a set-aside would take care of all of this. The city of Chattanooga, TN has an ordinance that works beautifully for minority contractors, and Mr. Holman will attempt to secure a copy of their ordinance. Ms. Carlotta Ungaro, Beaufort Regional Chamber of Commerce President and CEO, distributed copies of some recommendations from the Beaufort Regional Chamber of Commerce, prepared at the request of Council, for small businesses and disadvantaged businesses. This had been discussed at length with Mr. Dewayne Lockhart, Rea contracting salesman and Chamber of Commerce member. Ms. Ungaro stated the City of Atlanta, GA, has an ordinance which requires employers to document that they employ a certain percentage of local employees. Charleston, SC also has a good program. Recommendations for Small Businesses and Small Disadvantaged Businesses Goal Increase business opportunities for small and disadvantaged businesses (SB/SDBs) in Beaufort County and in turn, provide within the County geographical boundaries, desirable jobs and opportunities for entrepreneurship for Beaufort County citizens. Disadvantaged businesses for the purposes of these recommendations are defined as small businesses that are minority-, women- and veteran-owned businesses. The U.S. Federal Government has other categories of disadvantaged businesses that may be considered and included. Strategy Increase the number of contracts awarded to SB/SDBs in Beaufort County. These contracts can be either awarded directly to the SB/SDB or the County can put in place requirements that large/prime contractors (L/PCs) who are awarded contracts with the County use SB/SDBs sub- contractors. The intent is to provide a hand-up to businesses that may not understand the processes or may be at that point where they need to grow to success but can’t grow without a break, not a hand out. Tactics 1. Goals for participation Specific targets would gauge the success of the program. For example, Beaufort County could set a goal to increase participation SB/SDBs in the procurement process by X percent each year over the next Y years. Minutes - Grants and Minority Affairs Committee October 10, 2007 Page 4 2. Support system Providing guidance and support for SB/SDBs to participate in the bidding process will increase their chances of winning bids. This may include but not be limited to, seminars, mentoring, job shadowing etc. The County can partner with business entities like the chambers, state organizations or contractors associations to deliver these programs. The County could set as a goal is that each year, X number of businesses participate in these programs and of those that participate X percent successfully receive bids based on their qualifications. If this last goal is not met, the programs offered must be reviewed and improved to reach its deliverable. 3. Bid Notification SB/SDBs must understand information delivery on bids. As with any business, it is important to know where your customers are. The County currently offers the bid announcements in a multiple venues including local newspapers, the Dodge Report and the County website. Additionally, the County partners with the three chambers of commerce in Beaufort County who push out this information to their members. The county also makes available a list of small disadvantaged businesses available upon request by large or small businesses. When the County provides business licenses, this information should be made available to businesses in case they see the County as a potential client. 4. Bonding Bonding creates barriers for SB/SDBs. The first step for the SB/SDB is to work with its commercial banking and insurance agencies to find out what is required to become bondable. The County could waive the bond requirement on smaller projects to allow more SB/DBE participation. Risk is minimalized by the size and if the specified procurement request can go to another bidder if the first defaults or is unable to complete the project. It is important to note that L/PCs do not and cannot offer bonding to sub-contractors. If the subcontracted portion of work that the SB/SDB is to perform is large, the L/PC may even require the sub-contractor to bond their portion of work. Bonding is not a quick or guaranteed fix for the owner. The process of activating the bond generally takes months and usually costs the owners more in delays than it is worth to fire one contractor and hire another, even if it is at a loss,. 5. Payment (cash flow) Any business, especially SB/SDBs, struggles with cash flow. If a primary contractor does not pay in a timely fashion, or worse, not at all, it can be devastating to a small business. The County should require the L/PC to deliver a “lien release” for the work completed on each draw request stating that all subcontractors/suppliers will be paid upon receipt of the draw. Minutes - Grants and Minority Affairs Committee October 10, 2007 Page 5 Before payment, The County should require the L/PC to not only state that all subs and suppliers have been paid but also provide a list of those sub-contractors that have been or will be paid for the work performed as it relates to those items being billed. Outcomes to Avoid 1. Insuring the playing field is fair Require SB/SDBs to prove their respective designations to qualify as a disadvantaged business. Legitimate SB/SDBs will benefit from this step because it will address companies or individuals that are not truly minority- or female-owned or otherwise disadvantaged. Additionally, there have been circumstances when contractors or other entities are used that are in direct conflict with the program/ordinances objectives and requiring proof of designation helps prevent these conflicts It may be worth considering requiring the SB/SDB to “self perform” a certain percentage of the contract to insure that the contractor is not just an additional “middleman” adding costs. 2. Insuring quality and capacity SB/SDBs often have a challenge in demonstrating their ability to deliver the desired quality and capacity for any given procurement opportunity when they have not had the opportunity to build a reputation or a track record. Demonstrating relationships with suppliers, workforce and other key components are examples of appropriate indicators in determining ability to deliver on a contract. 3. Paving the way for success Make the objectives outlined as the first tactic listed above as goals for the L/PC versus a requirement to win the bid. Requirements generally end up costing the government entity proportionately greater dollars, greater than the differential allowed in the current legislation. This also can limit the ability of the L/PC to self perform the work. The most effective way to issue the goals is as a percentage of the total sub contracting effort of the L/PC. 4. Make sure Beaufort County citizens benefit Beaufort County government is responsible for the welfare of Beaufort County citizens. As far as taxes go, Beaufort County is a donor county in a donor state. The last thing the County needs to do is create a program that no local businesses qualify for and contractors from other parts of the state are the only ones that do, thus sending more taxes out of the county. If the program focuses on both small and small disadvantaged businesses, it will likely have a greater economic Minutes - Grants and Minority Affairs Committee October 10, 2007 Page 6 impact on a greater number of Beaufort County residents. For example, a non-minority business owner domiciled in Beaufort County that employs a majority of minority employees could be given an opportunity to bid as long as 51 percent of the employees are minority and that this ratio is maintained for at least 12 months. The County could even go one step further and consider the percentage of Beaufort county residents employed with the contractor as criteria in addition to the number of minorities. Additionally, another objective of this program could be to raise the wages of the workforce. This program may provide an opportunity to require that all businesses that receive contracts from the County be required to demonstrate that all employees are paid in accordance with published guidelines for specific job titles by requiring submission of certified payrolls prior to payment on a draw request. Mr. Dewayne Lockhart commented there are two groups. One is a “small business” and the second is a “small disadvantaged business”. Rea Contracting fully supports this endeavor. Attorney Lohr will make the changes in the Small and Minority-Owned Businesses Ordinance as discussed in Committee, including replacing “female” wherever it appears in the Ordinance with “small”. “Local” will be defined as the four-county region of Beaufort, Jasper, Colleton and Hampton Counties. The ordinance will use the state’s list of eligible minority groups. The revised ordinance will be presented at the next Grants and Minority Affairs Committee meeting on November 14, 2007. Status: No action required. Informational only.
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