SB 649
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
Senate Bill 649 (Senator Griffith, et al.)
Education, Health, and Environmental Affairs Health and Government Operations
Procurement - MBE Program Compliance Review and Oversight
This bill requires State agencies to submit specified contracts valued at $1.0 million or
more to the Governor’s Office of Small, Minority, and Women Business Affairs (GOSBA)
for review and approval of minority business enterprise (MBE) goals and subgoals
established for the contract, as specified. State agencies must also (1) make a good faith
effort to solicit at least one bid from a certified MBE for Category II and Category III small
procurements and (2) require prospective contractors to attend a prebid or preproposal
meeting as a prerequisite to submitting a bid or proposal, and then share the contact
information of each prospective contractor with all attendees. The bill also expands annual
reporting requirements for State agencies as well as for GOSBA in accordance with the
bill’s requirements. The Department of Legislative Services (DLS) must study the
implementation of statutory and regulatory requirements of the State’s MBE program, and
report its findings and recommendations to specified committees of the General Assembly
by December 15, 2021. The bill takes effect July 1, 2021, but the provisions related to
GOSBA’s expanded oversight responsibilities take effect July 1, 2022, contingent on
the statutory extension of the MBE program.
Fiscal Summary
State Effect: No effect in FY 2022 as DLS can conduct the review with existing resources.
General fund expenditures increase by $446,800 in FY 2023 to otherwise implement the
bill; out-year expenditures reflect ongoing costs. Submission of procurement solicitations
to GOSBA for review may result in brief delays in the release of solicitations. Revenues
are not affected.
(in dollars) FY 2022 FY 2023 FY 2024 FY 2025 FY 2026
Revenues $0 $0 $0 $0 $0
GF Expenditure 0 446,800 434,200 449,700 465,700
Net Effect $0 ($446,800) ($434,200) ($449,700) ($465,700)
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: None.
Small Business Effect: Potential meaningful.
Analysis
Bill Summary:
Oversight by the Governor’s Office of Small, Minority, and Women Business Affairs
In general, before awarding a contract with a value of at least $1.0 million, a State agency
must submit to GOSBA (1) a draft of any proposed MBE participation goals and subgoals
for the contract and (2) for sole source procurements, an explanation of any proposed
waivers of requirements to establish MBE goals for the contract. However, agencies do not
need to submit emergency or expedited contracts to GOSBA for review.
Within 10 days of receiving an agency’s submission, GOSBA must either (1) approve the
MBE goals and subgoals or, for sole source procurements, the proposed waiver of the
establishment of MBE goals and subgoals; (2) establish alternative MBE goals and
subgoals for the contract; or (3) require the agency to establish alternative MBE goals and
subgoals based on recommendations from GOSBA. If appropriate, GOSBA must make
recommendations on how a procurement can be unbundled to facilitate participation by
MBEs.
If GOSBA provides recommendations to a State agency regarding MBE goals or
unbundling, the agency must (1) consider the recommendations made by GOSBA and
(2) notify GOSBA of any changes to the MBE goals and subgoals or any unbundling that
results from GOSBA’s feedback. If a unit unbundles a procurement based on GOSBA’s
recommendations, it must resubmit each resulting contract to GOSBA for review,
regardless of the value of the resulting contracts.
Study and Report by the Department of Legislative Services
The review by DLS must examine:
 the process for certifying businesses as MBEs;
 the process for establishing MBE participation goals and subgoals for procurement
contracts;
 outreach, training, and notification regarding the MBE program provided to
specified businesses;
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 the application of MBE participation goals and program requirements to different
types of contracts;
 the experience of MBEs that participate in State procurements; and
 tracking of actual MBE participation upon contract completion.
Current Law: For a broad overview of the State’s MBE program, please see the
Appendix – Minority Business Enterprise Program. Additional information related to
the MBE program is discussed below.
Small Procurements
In general, a small procurement is a procurement for which an agency spends $50,000 or
less. Regulations classify small procurements into three categories. Category II consists of
procurements with a value of more than $5,000 but not more than $15,000, and
Category III consists of procurements with a value of more than $15,000 but not more than
$50,000. For Categories II and III, responsive bids or acceptable offers from at least
two vendors should be obtained. Each procurement agency must solicit bids or offers from
a sufficient number of certified MBEs.
Minority Business Enterprise Program Waivers
For sole source, emergency, and expedited procurements, the head of a State agency may
waive any of the requirements related to the establishment, use, and waiver of MBE
contract goals if the public interest cannot reasonably accommodate use of those
requirements.
For solicitations or contracts that have MBE participation goals, a State agency may award
a waiver of any part of a contract’s MBE goals if the contractor provides a reasonable
demonstration of good-faith efforts to achieve the goals. In general, when a waiver is
granted, the head of the agency must issue the determination in writing, keep a copy of the
waiver and the reasons for it, and provide a copy of the waiver to GOSBA.
By July 31 of each year, agencies must submit a report directly to GOSBA and the Board
of Public Works (BPW) that includes (1) contract titles, numbers, and dates; (2) the number
of waivers requested; (3) the number of waivers granted; and (4) any other information
specifically requested by BPW. In turn, BPW reports annually on waivers granted by all
State agencies.
Minority Business Enterprise Program Compliance Monitoring and Reporting
The Special Secretary of GOSBA is charged with, subject to the limitations of law that
governs the activities of other units of the Executive Branch, carrying out each State or
SB 649/ Page 3
federal program that is created to promote the growth of, or participation in, MBEs. To
ensure proper implementation of the MBE program by State agencies, GOSBA employs
two MBE compliance monitors.
Within 90 days of the end of each fiscal year, each agency must submit a report to GOSBA,
the Maryland Department of Transportation (MDOT, as the MBE certification agency),
and the Joint Committee on Fair Practices and Personnel Oversight that includes, among
other things:
 the total number and value of procurement contracts between the agency and
certified MBEs, including whether the MBE participated as a prime contractor or as
a subcontractor; and
 the percentage that those contracts represent, by specific category of MBEs, of the
total number and value of procurement contracts.
By December 31 of each year, GOSBA must submit a summary report to BPW and the
Legislative Policy Committee. The agency level MBE participation rates from GOSBA’s
fiscal 2019 report are summarized in the appendix to this analysis.
State Expenditures: Based on data provided by BPW and MDOT, it is anticipated that
the bill results in approximately 350 solicitations being submitted for GOSBA’s review
each year. With just two MBE compliance monitors, GOSBA lacks the staff to conduct the
necessary reviews of that many solicitations.
Therefore, general fund expenditures increase by $446,821 in fiscal 2023, which assumes
extension of the MBE program so that the provisions related to GOSBA’s oversight
responsibilities take effect July 1, 2022. The estimate reflects the cost of GOSBA hiring
one MBE compliance manager, three MBE compliance monitors, and one administrator to
review agency submissions, provide feedback to agencies on their submissions, and report
the additional data required by the bill. It includes salaries, fringe benefits, one-time
start-up costs, and ongoing operating expenses. It also assumes that existing MBE
compliance staff can develop policies and procedures during fiscal 2022 for GOSBA’s new
oversight responsibilities, which begin in fiscal 2023.
Positions 5.0
Salaries and Fringe Benefits $418,096
Operating Expenses 28,725
Total FY 2023 State Expenditures $446,821
Future year expenditures reflect full salaries with annual increases and employee turnover
and ongoing operating expenses.
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Small Business Effect: MBEs benefit from more opportunities to participate in State
procurement to the extent that the additional review by GOSBA results in (1) State
procurements having higher MBE participation goals; (2) more contracts having MBE
participation goals; or (3) larger contracts being unbundled.
Additional Information
Prior Introductions: None.
Designated Cross File: HB 1348 (Delegate Sample-Hughes) - Health and Government
Operations.
Information Source(s): Department of General Services; Board of Public Works;
Department of Legislative Services
Fiscal Note History: First Reader - February 15, 2021
rh/ljm Third Reader - April 1, 2021
Revised - Amendment(s) - April 1, 2021
Analysis by: Michael C. Rubenstein Direct Inquiries to:
(410) 946-5510
(301) 970-5510
SB 649/ Page 5
 Appendix – Minority Business Enterprise Program
The State’s Minority Business Enterprise (MBE) program requires that a statewide goal
for MBE contract participation be established biennially through the regulatory process
under the Administrative Procedure Act. The biennial statewide MBE goal is established
by the Special Secretary for the Governor’s Office of Small, Minority, and Women
Business Affairs (GOSBA), in consultation with the Secretary of Transportation and the
Attorney General. In a year in which there is a delay in establishing the overall goal, the
previous year’s goal applies. The Special Secretary is also required to establish biennial
guidelines for State procurement units to consider in deciding whether to establish subgoals
for different minority groups recognized in statute. In a year in which there is a delay in
issuing the guidelines, the previous year’s guidelines apply.
In August 2013, GOSBA announced a new statewide goal of 29% MBE participation that
applied to fiscal 2014 and 2015; as no new goal has been established, the 29% goal remains
in effect for fiscal 2021. GOSBA issued subgoal guidelines in July 2011 and then updated
them effective August 2020, as summarized in Exhibit 1. The guidelines state that subgoals
may be used only when the overall MBE goal for a contract is greater than or equal to the
sum of all recommended subgoals for the appropriate industry, plus two. In June 2014, new
regulations took effect allowing MBE prime contractors to count their own work for up to
50% of a contract’s MBE goal and up to 100% of any contract subgoal. Previously,
certified MBE prime contractors could not count their own participation toward any goal
or subgoal on an individual contract, but their participation was counted toward the State’s
MBE goal.
Exhibit 1
Subgoal Guidelines for Minority Business Enterprise Participation
Architectural/ Information Supplies/
Construction Engineering Maintenance Technology Services Equipment
African
American 8% 7% 9% 10% - 6%
Hispanic - - 3% - 2% 2%
Asian - - 2% - 3% -
Women 11% 10% - 10% 10% 8%
Total 19% 17% 14% 20% 15% 16%
Total +2 21% 19% 16% 22% 17% 18%
Source: Governor’s Office of Small, Minority, and Women Business Affairs
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There are no penalties for agencies that fail to reach the statewide target. Instead, agencies
are required to use race-neutral strategies to encourage greater MBE participation in State
procurements.
History and Rationale of the Minority Business Enterprise Program
In 1989, the U.S. Supreme Court held in the City of Richmond v. J.A. Croson Co. that state
or local MBE programs using race-based classifications are subject to strict scrutiny under
the equal protection clause of the Fourteenth Amendment to the U.S. Constitution. In
addition, the ruling held that an MBE program must demonstrate clear evidence that the
program is narrowly tailored to address actual disparities in the marketplace for the
jurisdiction that operates the program. As a result, prior to each reauthorization of the
State’s MBE program, the State conducts a disparity study to determine whether there is
continued evidence that MBEs are underutilized in State contracting.
The most recent disparity study was completed in 2017 and serves as the basis for the most
recent reauthorization of the MBE program. It found continued and ongoing disparities in
the overall annual wages, business earnings, and rates of business formation between
nonminority males and minorities and women in Maryland. For instance, average annual
wages for African Americans (both men and women) were 37% lower than for comparable
nonminority males; average annual wages for nonminority women were 33% lower than
for comparable nonminority males. It also found continued disparities in the use of MBEs
by the State compared to their availability in the marketplace to perform work in designated
categories of work. For instance, African American-owned construction businesses were
paid 5.1% of State construction contract dollars, but they made up 10.3% of the
construction sector in the relevant State marketplace. Nonminority women-owned
construction businesses were paid 7.5% of State construction contract dollars but made up
13.7% of the construction sector. According to the analysis, these differences were large
and statistically significant.
The MBE program is scheduled to terminate July 1, 2022; it has been reauthorized
eight times since 1990, the latest by Chapter 340 of 2017. Exhibit 2 provides MBE
participation rates for major Executive Branch agencies based on contract awards made
during fiscal 2019, the most recent year for which data is available.
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 Exhibit 2
Minority Business Enterprise Participation Rates, by Agency
Fiscal 2019
Cabinet Agency % Participation
Aging 1.4%
Agriculture 4.9%
Budget and Management 7.4%
Commerce 1.2%
Education 6.0%
Environment 28.6%
Executive Department 1.8%
General Services 15.0%
Health 14.6%
Higher Education Commission 3.0%
Housing and Community Development 38.4%
Human Services 14.7%
Information Technology 15.4%
Juvenile Services 19.5%
Labor 26.1
Military 7.0%
Natural Resources NA1
Planning 4.6%
State Police 15.0%
Public Safety and Correctional Services 17.5%
Transportation – Aviation Administration 27.2%
Transportation – Motor Vehicle Administration 16.0%
Transportation – Office of the Secretary 18.5%
Transportation – Port Administration 18.5%
Transportation – State Highway Administration 20.3%
Transportation – Transit Administration 15.1%
Transportation – Transportation Authority