SB 697
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader
Senate Bill 697 (Senator Eckardt)
Education, Health, and Environmental Affairs Health and Government Operations
State Procurement - Minority Business Enterprise Program - Participation by
Gender or Race
This bill allows a business that is certified as a woman-owned business and as a business
owned by a member of an ethnic or racial minority to be counted, for the purpose of
achieving goals under the State’s Minority Business Enterprise (MBE) Program, as a
business owned by both (1) a woman (or women) and (2) a member of an ethnic or racial
minority.
Fiscal Summary
State Effect: The bill is procedural in nature and does not affect governmental finances.
Local Effect: None.
Small Business Effect: Potential meaningful.
Analysis
Current Law: For an overview of the State’s MBE program, please see the Appendix --
Minority Business Enterprise Program.
As the appendix explains, a firm that is owned by a woman (or women) who is also a
member of a racial or ethnic minority may be certified as both a woman-owned MBE and
a minority-owned MBE. However, for the purpose of meeting MBE goals on a specific
contract, a dually certified firm may be counted as either a woman-owned firm or a
minority-owned firm, but not both.
Small Business Effect: The flexibility that the bill gives to dually certified MBEs may
facilitate or expand their participation in State contracting. At the same time, allowing
one firm to count as both a woman-owned firm and as a minority-owned firm on a given
contract may displace another firm that would have filled one of those roles on a contract.
Additional Information
Prior Introductions: None.
Designated Cross File: None.
Information Source(s): Board of Public Works; Maryland Department of Transportation;
Department of Legislative Services
Fiscal Note History: First Reader - February 15, 2021
rh/ljm Third Reader - March 17, 2021
Analysis by: Michael C. Rubenstein Direct Inquiries to:
(410) 946-5510
(301) 970-5510
SB 697/ Page 2
 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
SB 697/ Page 3
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.
SB 697/ Page 4
 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 11.6%
Statewide Total2 17.9%
1
Data not provided.
2
Includes the University System of Maryland, Morgan State University, St. Mary’s College of Maryland,
and non-Cabinet agencies.
Source: Governor’s Office of Small, Minority, and Women Business Affairs
SB 697/ Page 5
Requirements for Minority Business Enterprise Certification
An MBE is a legal entity, other than a joint venture, that is:
 organized to engage in commercial transactions;
 at least 51% owned and controlled by one or more individuals who are socially and
economically disadvantaged; and
 managed by, and the daily business operations of which are controlled by, one or
more of the socially and economically disadvantaged individuals who own it.
A socially and economically disadvantaged individual is defined as a citizen or legal
U.S. resident who is African American, Native American, Asian, Hispanic, physically or
mentally disabled, a woman, or otherwise found by the State’s MBE certification agency
to be socially and economically disadvantaged. An MBE owned by a woman who is also
a member of an ethnic or racial minority group may be certified as being owned by both a
woman and by a member of a racial or ethnic minority, but for the purpose of participating
on a contract as an MBE, it can only be counted as one or the other. The Maryland
Department of Transportation is the State’s MBE certification agency.
A socially disadvantaged individual is someone who has been subject to racial or ethnic
prejudice or cultural bias within American society because of his or her membership in a
group and without regard to individual qualities. An economically disadvantaged
individual is someone who is socially disadvantaged whose ability to compete in the
free enterprise system has been impaired due to diminished capital and credit opportunities
compared with those who are not socially disadvantaged. An individual with a personal net
worth in excess of $1.5 million, adjusted annually for inflation, is not considered
economically disadvantaged. The inflation-adjusted limit for calendar 2021 is $1,788,677.
SB 697/ Page 6


Statutes affected:
Text - First - State Procurement - Minority Business Enterprise Program - Participation by Gender or Race: 14-302 State Finance and Procurement, 14-303 State Finance and Procurement
Text - Third - State Procurement - Minority Business Enterprise Program - Participation by Gender or Race: 14-302 State Finance and Procurement, 14-303 State Finance and Procurement