Council Member Helen Rosenthal (photo: William Alatriste/New York City Council)
The City Council’s Committee on Economic Development and the Committee on Contracts held a joint hearing on Thursday to discuss proposed legislation that would create a bill of rights for subcontractors working with the city.
Intro.1615, sponsored by Council Members Laurie Cumbo, Robert Cornegy, Jr., and Helen Rosenthal, would require the Department of Small Business Services to create a bill of rights that clearly lays out expectations for prime contractors and subcontractors, and makes it easier for subcontractors to find out what services and resources are available to them should they have a problem or concern with their contract. The legislation would apply to any contracts worth more than $100,000.
“[Contracting] is the heart of so much of what we do here -- construction of public infrastructure and affordable housing, a whole range of human services from pre-K all the way up to senior services,” said Rosenthal, chair of the contracts committee, in her opening statement. “The contracting process is an essential part of how New York City government works.”
The city has registered 12,949 expense contracts worth $20.3 billion in the 2017 fiscal year, which runs through June 30, and subcontractors accounted for $558 million of that sum, according to data available on the comptroller’s Checkbook NYC website. These subcontractors often face a number of hurdles including a lack of access to adequate legal representation to navigate contracts, receiving late payments, and not being able to apply for loans. This is especially true for subcontractors working in human services.
“Contractors often pay subcontractors late because they cannot disburse government funds prior to completion of the service they are paying for, and they themselves are paid late,” explained Tracie Robinson, a senior policy analyst at the Human Services Council of New York, in her testimony. HSC represents thousands of nonprofits in New York and advocates for human services providers as a whole. “[Subcontractors] operate in the context of a broken contracting system. Only if we address the underlying causes of subcontractor instability -- problems at the government-contractor level -- will we be able to set prime contractors and subcontractors alike up for success.”
Many subcontractors are nonprofit organizations and small businesses that are overshadowed by larger entities and do not have the same access to credit and fundraising. Intro. 1615 would make sure that subcontractors get an overview of the payment process, know the points of contact between government agencies, and can get the appropriate documents necessary to get the information and assistance they need.
“Many smaller nonprofit organizations do not have in-house attorneys or staff with experience understanding and administering government contracts,” said Laura Abel, senior policy counsel for Lawyers Alliance for New York, a provider of business and legal services for nonprofits. “City contracts are long, dense, and full of legalese. As a result, nonprofit organizations may take on obligations that they do not understand and cannot fulfill.”
Abel also added, “I have asked clients dealing with an unexpected development what their contract says about that issue, only to hear, ‘Oh, it’s all boilerplate, it’s no help.’ A subcontractor bill of rights can help by encouraging subcontractors to consult counsel before entering into a contract, and whenever they have questions during the life of the contract.”
In addition, subcontractors are frequently minority- and women-owned businesses, commonly referred to as M/WBEs. The city has been trying to encourage the growth and development of M/WBEs to ensure a more equitable distribution of city money. M/WBEs also tend to be more familiar with local community needs compared to larger contractors. M/WBEs accounted for $245.8 million in subcontracts registered in fiscal 2017. Mayor Bill de Blasio’s OneNYC plan includes a commitment to award at least 30 percent of city contract dollars to M/WBEs by 2021 and to award $16 billion in city contracts to M/WBEs by 2025.
Michael Owh, director of the Mayor’s Office of Contract Services and the city’s chief procurement officer, said the de Blasio administration supports the bill and that it “is a step in the right direction toward providing information to businesses and connecting them with resources.”
When asked by Council Member Daniel Garodnick, the chair of the Committee on Economic Development, if the bill warranted any changes or edits, Owh emphasized that it would need input from all the stakeholders. “[We] want to make sure that we get enough feedback from not just our agencies but also the community, the contracting community, as well as the subcontracting community to make sure that we are able to take in all of the various factors,” Owh said.