New York City’s Construction Contracts: Are minority firms ready to bid?

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It’s no secret to even the most casual observer that the building boom in New York City is growing at a frenetic pace. Bidding for construction projects in New York is a competitive and contentious process for local contractors. With the city planning to spend a record $110 billion on construction projects in its five boroughs over the next five to nine years, Black and women entrepreneurs must aggressively jump on the industry bandwagon or risk being shut out of thousands of multimillion-dollar subcontracts. More than 30 projects already are under way in lower Manhattan alone.

While the amount of work set aside in the past for minority and women business enterprises (M/WBEs) in New York was, by some accounts, moderately acceptable, it was dramatically increased when New York City Mayor Michael Bloomberg signed an order last September to increase the number of minority vendors that do business with the city. Executive Order 71 calls on the city’s Department of Small Business Services (SBS) to establish and monitor a goals-based program for contract letting by city agencies. Signed into law by Bloomberg in May and known as Local Law 129, it effectively establishes a minority- and women-owned business enterprise program.

Under the legislation, all city agencies are held responsible for submitting annual procurement plans, including detailed goals for employing certified minority- and women-owned businesses on projects throughout the city. SBS statistics for fiscal year 2005 show that the city awarded more than $58.5 million in microcontracts, $119 million in small-purchase contracts and about $234 million in all construction-related service and product contracts under $1 million. Microcontracts (for the purchase of goods and services valued at less than $5,000), small-purchase contracts (valued at between $5,000 to $100,000) and service contracts of less than $1 million would all be positively impacted by the new law. In the construction industry, lead primary contractors such as Bovis Lend Lease, Turner Construction Co. and Hunter Roberts Construction Group must also commit to using M/WBEs as subcontractors on city projects.

Ready or Not?
All this sounds good for M/WBE prospects seeking to increase their bottom lines. Plenty of questions remain, however. For example, how will minority businesses be able to tap into the construction market and carve out more than just a sliver of the “Big Apple” pie? Are there enough qualified and certified M/WBEs locally to meet the industry’s current and projected demands? Moreover, will the M/WBEs that secure contracts deliver the stellar products and services expected?

“There are still some primary contractors—particularly in the construction business—that are reluctant to use minority-owned subcontractors,” says Dennis Prude, senior vice president and director of operations for Bovis Lend Lease in New York. “I make it a priority to use qualified MBEs in most of the projects that I oversee throughout the city,” he says, adding that “qualified” M/WBEs generally are businesses that have established themselves as skilled and competent contractors in all aspects of business.

However, too many M/WBEs fall short when it comes to meeting basic requirements for securing contracts, some small-business experts say. For Aldonna R. Ambler, founder of Ambler Growth Strategy Consultants Inc., a small-business think tank in Hammonton, N.J., M/WBE certification is perhaps the first and most essential step in securing a contract, but it’s one that’s often overlooked. “Even though the general contractors involved with most of these projects are privately owned and are not government-driven construction projects, certification matters,” she says.

Ambler, who was named the National Woman Business Owner of the Year in 2000 and is a past president of the New Jersey Association of Women Business Owners, says her current client list includes more than 100 construction-related companies, some of which are active participants in New York’s building frenzy. Each state has its own certification process, she says, adding, “If a business is not certified as M/WBE they will likely miss out yet again.”

M/WBEs also are unaware of set-aside programs that exist at dozens of federal, state and local agencies. “Agencies such as the School Construction Authority and the Port Authority of New York and New Jersey must allocate 20 percent of all jobs to women- and minority-owned companies. I would suggest that the owners of women- and minority-owned businesses contact various city departments and inquire about seminars, classes and networking events that exist solely for minorities,” says Helen Sideris, president of J&S Builders of Flushing Inc., in College Point, N.Y.

Questions or not, Daniel Doctoroff, the city’s deputy mayor for economic development and rebuilding, says his office is moving forward with Mayor Bloomberg’s initiative and has already increased the pool of minority vendors. “We are in the greatest building boom period in recent memory. The mayor’s strategy will result in new standards and a higher level of accountability in agency procurement and allow us to leverage our buying power,” he says.

Still Contentious
Local Law 129 notwithstanding, set-asides remain a contentious issue.
“Race and gender preference programs are undesirable because such programs tend to move business away from the supplier who would have been awarded the contract and use the public procurement process for social means,” says Rita Gunther-McGrath, an associate professor of business at Columbia University Business School in New York.

By protecting suppliers on the basis of race or gender, those suppliers can continue to operate in ways that may not be competitive, thus diminishing their effectiveness with customers, Gunther-McGrath notes. “It is simpler and cheaper to use social programs, including training or work through Small Business Development Centers, in order to achieve social ends,” she says.

Others disagree. “Set-aside programs enable small minority-owned businesses to assimilate into the work economy faster,” says Brian Drum, president of Drum & Associates Inc., New York, a consultant on small-business issues. “It would speak well of America if race- and gender-based programs weren’t needed. But they are, and I don’t think we will see that change in the foreseeable future.”

Drum, whom the New York District Office of the U.S. Small Business Administration named its 2004 “Small Business Person of the Year,” says federal and state set-aside programs are perhaps the strongest government diversity initiatives currently in place.

Spotlight on Projects
Hundreds of major construction projects already exist or are slated to come on stream in and around the area, including private-sector projects, which M/WBEs can pursue. The following projects are examples of the opportunities they offer.

Atlantic Yards. A multibillion-dollar development in Brooklyn, the Atlantic Yards project is expected to stretch out for more than 10 years and will include skyscrapers, affordable housing and an arena for the New Jersey Nets basketball team, among other amenities. Real estate and business mogul Bruce Ratner, whose firm, Forest City Ratner Cos., is the project’s developer, touts Atlantic Yards as an economic windfall for M/WBEs and the local community, with its promise of endless contracts, subcontracts, jobs and a hefty boost in revenues for Brooklyn, as well as for New York and New Jersey in general.

Cheryl Duncan, director of public relations for the project, says the project is unprecedented in that it will include a significant number of Black and women contractors in both the short and long terms. “This is the best deal our community has seen [in years],” Duncan says. “About 20 percent of the construction dollars will go to minority-owned firms and 10 percent to women-owned firms. On the average, only about half [of that is generally awarded to such firms].”

Delia Hunley-Adossa, chairperson of the Atlantic Yards Community Benefits Agreement Coalition, notes that after years of having development projects surreptiously thrust upon minority neighborhoods, this is the first legally binding Community Benefits Agreement in the state of New York and should be celebrated and not condemned. “Right at the start [contractors] are including minority firms in the demolition work they are doing,” she says.

As part of the agreement, for example, McKissack & McKissack, the nation’s oldest minority-owned professional design and construction firm, was named construction manager for the $182 million Atlantic Rail Yards. Even so, Atlantic Yards has its detractors, and at least one community organization, Develop Don’t Destroy Brooklyn, is threatening a lawsuit to halt the project. Critics lambaste the deal on a number of levels, including what they contend is a blatant abuse of eminent domain, the process by which government seizes private property for public use. The government buys the property and pays the owner what is determined to be the fair market value.

Outspoken Brooklyn Councilwoman Letitia James is perhaps one of the project’s most vocal opponents. She was quoted in a June 1 article in the New York Amsterdam News and in the March issue of The Network Journal as saying that while she supports just about anything that will bring affordable housing, jobs and business to a community, she proscribes the Atlantic Yards deal. “It’s too big. It’s out of scale and involves the abuse of eminent domain. It is a waste of taxpayers’ money,” she says.

A coalition of about a dozen religious leaders formed the Downtown Brooklyn Leadership Coalition to scrutinize every aspect of the project. The Rev. Clinton Miller, senior pastor at Brown Memorial Baptist Church, insists that the group is not antidevelopment but simply wants to be assured that everyone benefits “organically” from the massive undertaking.

Duncan, the Atlantic Yards spokesperson, says criticism of the project may simply be a case of sour grapes and misinformation. “At one time some of the ministers who are causing a ruckus tried to be the only group negotiating with the developer. When they saw that the developer was conceding to the various community demands [things changed],” she says.

If approved, the Atlantic Yards Project will officially break ground in October or November.

Department of Education. The New York School Construction Authority (SCA) manages the more than $2 billion school construction and renovation projects for the city’s Department of Education. School Chancellor Joel Klein says the agency is currently implementing the department’s five-year, $13.1 billion capital improvement plan, which includes the building of more than 100 new schools, as well as major renovations and upgrades to dozens of existing facilities throughout the city.

“All of our school reforms, from curriculum change and classroom improvements to new schools, smaller class size and better libraries, depend on having the facilities to provide a sound and basic education,” Klein said in a press release in April. “The funding in this year’s state budget ensures that we’ll begin construction on new schools and renovations and repairs to dozens of existing facilities throughout the city.”

Klein notes that design standards for new schools and renovations were modified to reduce costs and foster competition among contractors and subcontractors. (See sidebar on SCA mentor program.)

Ann Taylor Retailer Inc. When Christopher Gallin, vice president of John Gallin & Son Inc., one of the oldest family-owned construction companies in New York City, was contracted in September 2004 to build the 300,000-square-foot corporate headquarters for women’s clothier Ann Taylor Inc., one of the contract’s stipulations was that the firm use as many M/WBE subcontractors as possible. The massive undertaking was completed in April 2005, with more than 40 percent M/WBE participation in three stages of the project and overall M/WBE participation at nearly 20 percent.

“I regularly use M/WBE subcontractors on all of my construction projects in and around New York City. A diverse group of contractors and subcontractors is good business for the client,” Gallin says.

Gallin says the most profitable deals for M/WBEs are the ones that are best suited for the contractor in terms of size, expertise and available resources. “When you work inside your comfort zone, you will see better profits and less headaches than when you reach beyond your abilities,” he says.

One subcontractor on the Ann Taylor project was Mac Felder Inc., plumbing and heating contractors in New York. CEO Amy Breslaw says the size of many of the N.Y.C. construction projects can reach the multimillion-dollar level and may intimidate many smaller and locally based M/WBEs. Some fear that contractors will engage subcontractors from other states if they cannot find qualified, locally based M/WBEs.

That may not always work, Breslaw says. “There are trades that require professional licenses and insurance requirements that cannot be accepted by out-of-town organizations,” she says. “WBEs are represented in every trade required to build in New York City.”   

Key Construction Contacts

The following New York City agencies and industry organizations assist M/WBEs through business-development programs, industry intelligence and contract opportunities:

l Building Trades Employers’ Association, 212-704-4367, www.bteany.com.
l Dormitory Authority of the State of New York, 212-273-5000, www.dasny.org.
l Empire State Development Corp., 212-803-2414/518-473-0582, www.empire.state.ny.us.
l National Association of Minority Contractors, New York State chapter, 718-246-8380, nysamc@worldnet.att.net.
l New York City School Construction Authority, 718-472-8048, www.nycsca.org.
l New York Metropolitan Transportation Authority, 646-252-1364, www.mta.nyc.ny.us.
l Port Authority of New York and New Jersey, 212-435-7808, www.panynj.gov.
l Regional Alliance for Small Contractors, 212-268-2991, www.regional-alliance.org.

PROJECT NAME        COST        OWNER            CONSTRUCTION MANAGER/GENERAL CONTRACTOR/DEVELOPER

Goldman Sachs         $2.4 billion    Goldman Sachs Group    Tishman Construction
Group World Hqs.
(Battery Park)   

World Trade Center     $2.2 billion    Port Authority of New     Phoenix Constructors
Transportation Hub             York & New Jersey   

Jacob K. Javits     $1.7 billion    New York Convention     Tishman Construction
Convention Center             Center Development    
(Phase 1)                Corp.   

Freedom Tower        $1.5 billion    Silverstein Properties    Tishman Construction

JetBlue Terminal    $875 million    Port Authority of New    Turner Construction
York & New Jersey

Daniel Patrick         $818 million    Empire State           Vornado Realty Trust &     Moynihan Station       
(new Penn Station)            Development Corp.    Related Cos.
Moynihan Station   
Development Corp.

Lincoln Center-W. 65th     $500 million    Lincoln Center for the     Turner Construction
Street Redevelopment            Performing Arts

World Trade Center     $493 million    Lower Manhattan     Bovis Lend Lease
Memorial                Development Corp.

Bronx Gateway Center      $400 million    Related Cos.        Related Cos.
(at Bronx Terminal Market)

Citigroup Court Square     $290 million    Citigroup        Tishman Speyer
Two (Long Island City)

Triborough Bridge     $271 million    MTA Bridges         Koch Skanska
Rehabilitation        and Tunnels

Current private and public projects.
Source: New York Construction http://newyorkconstruction.com