City of Cleveland
Helping Small Businesses Get a Share in Procurement and Incentive
Contracts
Mayor Frank Jackson strongly...
Horizontal Construction
• 30% Certified Small Business
In 2010, the City reduced the amount of City funding under which Ch...
Cleveland Resident Employment Law
The City goes further by having a law (commonly called the Fannie Lewis Law after
the Co...
Results from the 2007 study contain the following recommendations,
which the City has implemented or is currently implemen...
• In addition to increasing the enforcement of its codes and ordinances,
the City should implement penalties for prime con...
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Big Ideas for Small Business: Comments CSB presentation

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Big Ideas for Small Business: Comments CSB presentation

  1. 1. City of Cleveland Helping Small Businesses Get a Share in Procurement and Incentive Contracts Mayor Frank Jackson strongly believes in “Self-Help” and convened a large number of large businesses and institutions in 2008 to ask that we set a collective goal to increase our “spend” by $2 billion in our purchasing, locally. Cleveland had a “race- based” procurement policy for many years. When challenges to this system were raised nationally, Cleveland undertook a Disparity study which was completed in 2007. The study showed a Disparity (i.e. contract dollars were awarded were far less than what would be expected due to the number of available contractors) only in Vertical Construction projects. A new disparity study is underway in Cleveland at this time. At that time (2008), the Mayor extended procurement policies to add Certified Small Businesses. The definition for Certified Small Businesses are companies in the County- in this case, Cuyahoga County, which is our contracting area. This is directly related to the Mayor’s understanding of the “regional economy”. The program is defined under Chapter 187 of the City’s codified ordinances These incentives provide mandated participation and bid discounts, allowing a bigger share of Cleveland’s procurement, Community Development construction contracts and Economic Development incentive contracts which include construction for horizontal construction, vertical construction and service contracts, to be awarded to local small businesses. The Office of Equal Opportunity, under Chief Natoya Walker-Minor, certifies these businesses, assists departments with pre-bidding and pre-construction conferences and tracks the actual hours and dollars of subcontracting. They have a staff of 15, however, other large departments have their own compliance staff, including Utilities, Public Works and the Airport. Currently the subcontracting goals are: Vertical Construction (where the only disparity remains in Cleveland’s contracting) • 15% Minority Owned Business • 7% Female Owned Business • 8 % Certified Small Business
  2. 2. Horizontal Construction • 30% Certified Small Business In 2010, the City reduced the amount of City funding under which Chapter 188 applies to $10,000 or more from the original $100,000. There were many contracts in Community Development and Economic Development that were under $100,000 and the OEO staff believed these may provide more opportunities to small businesses. Also in 2010, in response to committees that started through the Mayor’s Sustainable Cleveland 2019 efforts, the City added “Local Producer/Sustainable Business” policies (Chapter 187A of the City’s codified ordinances). These policies add 2% bid discounts (Contracts requiring bids) and 2% evaluation credits (consultants contracts). These bid discounts or evaluation credits can be combined with MBE, FBE and CSB incentives for a total of up to 9%. The three areas for bid preferences are: Local Producer • Covers a 5-county region for companies that fabricate, process or supply goods and services • Cover companies located in a 15-county region for food growers or food producers Sustainable Business • Eligible Businesses with sustainable practices are headquartered in a 5-county area • Must be certified by one of two agencies o Green Plus www.gogreenplus.org o E4S, Green City Certification Program www.e4s.org Local Food Purchaser • A company who buys at least 20% of food per contract from within 15-county region
  3. 3. Cleveland Resident Employment Law The City goes further by having a law (commonly called the Fannie Lewis Law after the Councilwoman who worked on the legislation; Chapter 188 of the City of Cleveland Codified Ordinances) requiring 20% of all construction hours under City bid contracts and City incentive contracts of $100,000 or more to go to Cleveland residents. Of those hours, 4%, or .8% of all construction hours, must go to “Low Income” Cleveland residents as defined by HUD. There are penalties for failing to make best efforts under this law, however they are relatively small and some businesses opt to pay the penalty. This is especially the case for Union contracts, where hiring a “low income person” is impossible under the terms of the Union contract which bans non-members on the job site. The City is looking at stiffer penalties. Disparity Study 2007 Disparity contract only included “prime contracts”- no loan contracts were included. The new study (being conducted at this time) will include ED Loan contracts. The original approval data frequently was not the final mix of subcontractors working on the project. So original approval documents were not the sole source of information. Reporting documents were also used. A survey of prime contractors was also used. The difference between subcontractor reporting between the original approval document and all subsequent reporting was great (Table 1.07) Vertical construction includes construction of residential, industrial, commercial, or other buildings; building renovation; and special trades typically performed on buildings or building-related projects such as painting, electrical work, carpentry work, plumbing, heating, air-conditioning, roofing, and sheet metal work. Horizontal construction includes bridges, highways, streets, sewers, landscaping, and irrigation projects. Architecture and engineering services included construction related professional services, such as architectural, engineering and construction management services. Chart 1.01 shows the clear disparity for African American businesses in Vertical Construction
  4. 4. Results from the 2007 study contain the following recommendations, which the City has implemented or is currently implementing (software tracking system): In order to determine the availability of businesses to perform the specific items of work, the City will need to maintain a current database which identifies available African American and non-African American firms. The City’s data collection process needs to be enhanced. The following recommendations are presented as strategies to enhance the City’s collection and maintenance of subcontracting data. • Modify the City’s prime contractor and subcontractor tracking process to ensure subcontractor utilization records are collected and maintained throughout the duration of the contract on all construction, architecture and engineering, and professional services contracts. • Strictly enforce Cleveland City Code 181.37, which requires all subcontractor substitutions to be approved by the Board of Control prior to the subcontractor being replaced. This will ensure that all subcontractors are listed on Board of Control Resolution amendments. • Cleveland City Code 181.37 should be amended to establish a penalty for prime contractors that fail to list all subcontractors in their bids, proposals, and qualification statements for review and approval by the Board of Control at the time of contract award. • Strictly enforce and monitor Cleveland City Code 188.04 to ensure that prime contractors and subcontractors submit certified payroll reports. The City should manage these documents electronically, and the prime contractors should be required to submit an electronic file. • Cleveland City Code 187.03 should be amended to explicitly state that the bidder must submit executed agreements with MBE/FBEs listed in their bids, proposals, and statements of qualifications. The executed agreements must be received before the release of the prime contractor’s first payment. • Cleveland City Code Chapter 187 should be amended to require a signature from the Office of Economic Opportunity (OEO) before the execution of a contract. This will ensure the OEO provides the necessary review for contract compliance and receives a complete Schedule 6. • The City’s first payment to prime contractors should not be released until all required documents, such as Schedule 6 records and subcontractor contracts, have been submitted by the prime contractor. • Board of Control Resolutions amendments should be prepared to reflect changes in listed subcontractors.
  5. 5. • In addition to increasing the enforcement of its codes and ordinances, the City should implement penalties for prime contractor non- compliance with its document submission requirements. • The City should include a clear statement of the reporting requirements and payments on its website. RESOURCES: The disk provided includes the following resources that would provide more information and contact people to gain more information on establishing legislation, implementing a program and the results. They include: • Background for Legislative changes adding certified small businesses- information on why this was added • Increased Small Business Participation Numbers-powerpoint slide showing the increase in participation due to the program. • Local_Purch_Presentation_CWRU DRAFT SJ- Powerpoint that explains the Local Purchaser program • LPE-SUBE Speaking Points 1-2012- Talking points on the Local Purchaser Legislation and program • OEO-187CABCode-NoticetoBiddersandSchedules-1-27-10- Information to bidders on Minority, Female and Certified Small Business Participation • OEO-NoticetoBidders01-10-11 (3) – Information and forms to bidders on Cleveland Resident Employment Law • Office of Equal Opportunity Mission Purpose Process 2_2012- A powerpoint summary of the programs, compliance and outcomes • Resources for City of Cleveland Equal Opportunity Policy and Process- Contact information for the Office of Equal Opportunity and Law Department to discuss these programs and their implementation • SubcontractorDisparityAnalysis Summary- A Summary of the Disparity Study. For the entire Study, go to the City of Cleveland’s website under Departments, Office of Equal Opportunity www.city.cleveland.oh.us • The two laws are called Chapter 187 and Chapter 188 of the City of Cleveland Codified Ordinances and are on the disk provided.

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