New York City Local Law 1–2013, effective July 1, 2013, amends the City’s laws concerning participation by Minority-Owned, Women-Owned, and Emerging Business Enterprises (“M/W/EBE”) in City contracts. The City’s M/W/EBE laws, including the amendments, are imposed upon the individual agencies and serve to guide the agencies in the administration of M/W/EBE programs under their respective contracts; these laws are not imposed directly upon the contractors and vendors themselves. Among the amendments concerning construction contracts are a reduction in the participation goals for African-American and Hispanic-Americans and increased goals for WBEs. The $1 million cap for eligibility as a “disadvantaged” entity has been removed.

Although not imposed directly upon contractors or vendors, the “Enforcement” provisions and the amendments can seriously impact a contractor. The enforcement mechanisms that agencies are authorized to implement include the referral of suspected non-compliances to various City officials for investigation and/or referral to the Department of Investigation. For violations, the consequences may include the contractor’s loss of pre-qualification status; termination of a contract; damages (including liquidated damages); and, caution notices and adverse information potentially affecting the contractor’s ability to be awarded City contracts in the future. To strengthen these enforcement techniques, the amendment requires annual reviews by agencies that track the work actually awarded by a contractor to M/W/EBEs and the payments actually made by the contractor to the M/W/EBEs throughout the term of a contract.

Additional amendments include the required inclusion of a clause in an agency’s contract that the agency’s participation goals in fact shall be met by the contractor. Also, the participation credits given to a contractor for payments to an M/W/EBE subcontractor may be subject to reduction by the amounts paid by that subcontractor to its sub-subcontractors (or “indirect subcontractors”). While contractors may request a change in participation goals considered “unreasonable,” and, separately, waivers may be requested, the agency determines whether to grant such requests by the contractor.

Contracts subject to federal or state law participation goals for MBEs, WBEs, EBEs and, now, under the amendment, Disadvantaged Business Enterprises (“DBEs”), are not subject to the City’s participation goals. Contractors and vendors should fully familiarize themselves with these laws.