BPW Advisory 2001-1

Subject:
Procurement Review Groups: SBR Designation, MBE and VSBE Determinations¹

Date Revised:
August 24, 2021

Purpose:

This Advisory instructs State agencies on the processes for determining socioeconomic preference use by the Procurement Review Group (PRG) – specifically, the Small Business Reserve (SBR), Minority Business Enterprise (MBE) and Veteran-owned Small Business Enterprise (VSBE) programs. This includes the structure for reviewing contract solicitations, proposed sole-source contracts, and contract renewal options in order to maximize opportunities for MBE, VSBE, and other certified small businesses to participate in State procurement contracts.

To ensure that State agencies examine all opportunities to increase small, minority, women, and veteran-owned business inclusion, every agency must establish a PRG to review procurement solicitations, proposals to exercise contract options, and proposals to award sole-source contracts when the resulting contract is expected to exceed $50,000.

Race Neutral Measures:

Each unit is strongly encouraged to maximize inclusion by employing race-neutral measures ². Race-neutral measures are methods that assist businesses without regard to their social, economic, racial, or sexual composition. State Finance and Procurement Article § 14-301.1(9), Annotated Code of Maryland, provides that race-neutral measures will be employed to the maximum extent practicable to drive inclusion prior to the employment of race-conscious measures.

Additionally, pursuant to Executive Order 01.01.2021.01, it is a requirement of the PRG that:

Any procurement of an Executive agency, for goods, supplies, services, maintenance, construction, construction-related services, architectural services, and engineering services, and with a total dollar value between $50,000 and $500,000, be designated for the SBR Program, unless the procurement meets certain exemptions or a waiver is granted by the Governor’s Office of Small, Minority & Women Business Affairs (GOSBA).

Beyond using the VSBE program, SBR procurement designation or the small business preference program (See COMAR 21.11.01), some additional examples of race-neutral measures include:

Maintaining a database of qualified small businesses, including MBEs/VSBEs, in order to keep them informed of upcoming procurements.
Relaxing bonding requirements, when permissible by law, including the use of irrevocable letters of credit, title to real property, and other forms of security described in COMAR 21.06.07.
Dividing a large procurement into several smaller procurements when feasible, while remaining in compliance with COMAR 21.02.01.04I. and 21.05.07.05A.
Simplifying bidding requirements to the extent permitted by law.
Advising businesses of what successful bidders are doing “right”.
Using pre-solicitation conferences to clarify complex solicitations and to link subcontractors with prime contractors.
Training small businesses on State procurement practices.
Offering financial and technical assistance for small business development.

MBE Program:

The State of Maryland strives to maximize the participation of minority and women-owned firms in State contracting through the MBE Program. Every two years, the Special Secretary of GOSBA, in consultation with the Secretary of Transportation and the Attorney General, establishes an overall Statewide MBE goal. ³ Through this process, GOSBA also issues the MBE Subgoal Directive.

MBE Overall Goals and Subgoals:

GOSBA has set the State’s overall MBE goal at 29% ⁴. To reach this goal, agencies must target spending 29% of the total dollar value of their procurement contracts directly (via prime contractors) or indirectly (via subcontractors) with Maryland-certified MBE firms.

GOSBA’s MBE Subgoal Directive includes guidelines and a worksheet to assist State agencies in setting its subgoals. ⁵ The chart below represents the current recommended subgoals for the industry categories:

Industry Category	Subgoal
	Women	African-American	Asian American	Hispanic
Construction	11%	8%	N/A	N/A
Architectural/ Engineering & Construction Related Services	10%	7%	N/A	N/A
Maintenance	N/A	9%	2%	3%
IT Services & IT Supplies	10%	10%	N/A	N/A
Human, Cultural, Social & Education Services	10%	N/A	3%	2%
Supplies & Equipment	8%	6%	N/A	2%

Select MBE Provisions:

MBE Prime Self-Performance. The MBE Program allows MBE prime contractors to count their own participation towards the achievement of MBE contract goals. MBE primes may self-perform up to 50% of the established overall MBE goal and up to 100% of not more than one of the MBE subgoals. ⁶

Regular Dealers – Materials and Supplies. Only 60% of the costs of materials and supplies provided by a certified MBE that meets the definition of a “regular dealer” may be counted towards the MBE contract goal. Excluding broker fees, commissions, or transportation charges, the costs of materials and supplies provided by a certified MBE that is not a regular dealer may not be counted towards the MBE contract goal. ⁷

Dually-Certified MBE and VSBE Subcontractors. If a solicitation contains an MBE goal and a VSBE goal, participation by a subcontractor dually-certified as an MBE and a VSBE may be counted toward either or both the MBE and VSBE contract goals up to the total committed percentage of contract work the subcontractor has been proposed to perform. ⁸

MBE Certified as Woman-owned and owned by a member of an Ethnic or Racial Group. A certified MBE may be counted as a woman-owned business, a business owned by a member of an ethnic group or racial group, or both, if the business has been certified in both categories. ⁹

Liquidated Damages. All contracts containing MBE participation goals are required to contain a liquidated damages provision that applies in the event that the prime contractor fails to comply in good faith with the provisions of the MBE requirements. ¹⁰

VSBE Program:

The State of Maryland strives to maximize the participation of veteran-owned small businesses in State contracting through the VSBE Program. GOSBA is responsible for adopting regulations that establish the overall percentage goal. The current statewide VSBE goal is 1%. ¹¹

Setting MBE Participation Goals:

Agencies are required to evaluate each procurement contract to determine the appropriate MBE and VSBE participation goal. When appropriate, each solicitation must contain an MBE and VSBE participation goal. Each solicitation (IFB, RFP, or small procurement) must encourage MBE and VSBE firms to respond to the solicitation. The following are some factors to consider when establishing MBE and VSBE goals:

Can the procurement reasonably be broken down into subcontracting opportunities?
Are MBEs/VSBEs available in the primary and subcontracting category(ies) required in the procurement?
Where are MBEs/VSBEs located if the goods or services must be provided locally?
Can sole source and emergency contracts reasonably include MBE/VSBE participation goals at the prime contractor level, subcontractor level, or both?

It is important to remember that the 29% statewide MBE participation goal is an overall goal. Individual contracts may contain MBE goals at, above or below the 29% goal provided that the annual total dollar value of a procurement unit’s contracts targets 29% MBE participation. If a contractor acquires MBE certification after a contract is awarded, MBE participation may be credited for that contractor’s work on a State contract beginning on the effective date of the MBE certification.

Likewise, the VSBE participation goal is an overall goal. Individual contracts may contain VSBE goals at, above or below the 1% goal provided that the annual total dollar value of a procurement unit’s contracts targets 1% VSBE participation.

The requirements to meet the statewide VSBE goal, MBE participation goal and the MBE subgoals are distinct and separate. Setting the MBE and VSBE goals for a particular procurement is done via a Procurement Review Group - see below; MBE subgoals are set via the worksheet provided by GOSBA with the MBE Subgoal Directive, as noted above, after the MBE goal is set with the Procurement Review Group. ¹²

Procurement Review Group:

A. The head of each procurement agency shall designate one or more standing procurement review groups. A Procurement Review Group (PRG) must include the following members:

1. The agency's chief procurement official or a senior-level procurement official designated to act in place of the chief procurement official; and

2. The agency’s MBE liaison officer or a senior-level alternate designated to act in place of the MBE liaison officer.

3. The agency’s SBR liaison officer or a senior-level alternate designated to act in place of the SBR liaison officer.

B. The PRG shall meet as often as is necessary, but at least monthly.

C. The PRG shall review proposed procurement solicitations, proposals to exercise options or otherwise modify the contract, and proposals to award sole-source contracts when the resulting contract is:

1. Eligible for designation to the SBR Program when the total value is expected to exceed $50,000, and;

2. For evaluation of MBE and VSBE participation goals when the total value is expected to exceed $100,000.

D. The PRG shall determine the appropriate socioeconomic utilization methods to encourage maximum small, minority, and/or veteran-owned business participation in each proposed contract; and shall make recommendations to the agency head or designee and the solicitation’s procurement officer concerning specific designations and/or participation goals.

E. The PRG’s evaluation of each proposed procurement shall include review and assessment of the following, as relevant:

1. The extent to which direct solicitation, subcontracting, race-neutral measures such as SBR Program designation, or a combination thereof will most likely result in maximum small and/or minority and veteran business inclusion.

2. Are MBEs/VSBEs and small businesses available to perform contracts at the prime contract level? Do enough MBEs/VSBEs exist at the prime contractor level to reasonably assure maximum opportunities for MBEs/VSBEs to compete for and potentially obtain the contract at that level?

3. Are MBE/VSBE subcontracting opportunities feasible?

4. Does the base of potentially-available MBEs/VSBEs for the contract’s work components make the MBE/VSBE subcontract goals attainable, taking into account the geographical proximity of MBEs/VSBEs to the work location?

5. Does the number of small businesses [as defined in COMAR 21.01.02.01B(80)] warrant designating the procurement as a small business preference procurement under COMAR 21.11.01?

6. Are the evaluation factors (when the solicitation is by competitive sealed proposals) designed to ensure that they do not unreasonably limit or inhibit participation by small businesses, including MBEs/VSBEs? Should the solicitation include the economic-benefits evaluation factor under COMAR 21.05.03.03A(3)?

7. Are the structure, specifications, and requirements of the solicitation designed to ensure that they do not unreasonably limit or inhibit participation by small businesses, including MBEs/VSBEs? Inhibiting factors may include unnecessary or prohibitive bonding requirements, restrictive specifications, unnecessary or unreasonable performance parameters, and unnecessary or unreasonable experience requirements. General policies for developing specifications are set forth in COMAR 21.04.01.

8. Is it feasible to divide a complex procurement into separate procurements consistent with MBE/VSBE and small business capacity?

9. Sole-source contracts: Are there work components that can reasonably be subcontracted to MBEs/VSBEs and other small businesses?

10. Renewal options: What are the benefits of exercising the option versus re-competing the contract? Consider such factors as past performance, potential for cost reduction, and current opportunities for small business or MBE/VSBE participation.

F. The recommendations of the Procurement Review Group must be documented in a written determination. When requested, the agency shall provide a copy of the determination to the Board of Public Works.

______________________________________________________________________________

¹ This Advisory combines former Advisory 2001-1 (MBE Participation) and 2001-2 (MBE Procurement Review Group).

²COMAR 21.11.03.07.

³ State Finance and Procurement Article § 14-302(a)(1)(iv).

⁴COMAR 21.11.03.01C(1)

⁵https://gomdsmallbiz.maryland.gov/Documents/Legislation/2020MBEProgramSubgoalWorksheet.pdf

⁶COMAR 21.11.03.12-1D

⁷COMAR 21.11.03.12-1E.

⁸COMAR 21.11.14.05

⁹COMAR 21.11.03.12-1F

¹⁰COMAR 21.11.03.10E.

¹¹ COMAR 21.11.14.01A