Contractors and business owners performing public work face an increasingly complex compliance landscape as New York State continues to enforce Minority and Women-Owned Business Enterprises (MWBEs) and Service-Disabled Veteran-Owned Businesses (SDVOBs) participation requirements, while federal contracting obligations have shifted significantly in response to recent changes to federal DEI and affirmative action policies.
Under New York Executive Law Articles 15-A and 17-B, all state-funded contracts include utilization requirements for MWBEs and SDVOBs. Certain municipalities and public entities, including counties, cities, and public authorities, have adopted their own participation requirements that mirror or build upon this framework.
For projects subject to these requirements, contractors are typically required to:
- Meet participation goals for both MWBE and SDVOB firms
- Submit utilization plans at the time of bidding
- Track participation and payments throughout the project
- Demonstrate “good faith efforts” where goals are not met
State and local agencies retain authority to enforce these requirements through bid review, payment controls, and responsibility determinations. Enforcement efforts may include penalties, up to and including the withholding or “claw back” of contract funds, for failure to meet participation requirements or demonstrate good faith efforts.
For contractors, compliance with these requirements is not optional. Against that backdrop, many contractors and grant recipients remain uncertain about their obligations in light of recent federal developments.
Why Confusion Exists
As mentioned above, recent legal and policy shifts at the federal level have increased scrutiny of programs that explicitly consider race or gender. This has raised questions about how MWBE participation goals will be implemented, particularly on:
- Federally funded or assisted projects
- Mixed-funded projects involving multiple funding sources
- Procurement practices that could be perceived as quota-driven
While SDVOB programs are generally less impacted by these developments, their inclusion alongside MWBE requirements means contractors must navigate both frameworks simultaneously.
Funding Source Still Controls
When assessing compliance, a simple rule of thumb is that the governing rules depend primarily on the source of funding:
New York State-Funded Projects
- MWBE and SDVOB requirements apply in full
- Participation goals are enforceable
- Compliance is mandatory
Federally Funded Projects
- Federal frameworks may apply
- MWBE-related practices may face heightened scrutiny
- Agencies may adjust implementation approaches
Mixed-Funding Projects
- Often the most complex
- May involve overlapping or inconsistent requirements
- Require careful upfront analysis
Understanding this distinction before bidding is one of the most effective ways to manage risk.
Practical Steps for Contractors and Business Owners
In the current environment, the most effective procurement approaches are those that are both intentional and well-documented across both MWBE and SDVOB participation.
Given the rapidly evolving regulatory environment, contractors should consider:
- Reviewing standard bid and contract compliance procedures
- Auditing current MWBE, SDVOB, DBE, and supplier diversity practices
- Updating utilization tracking and reporting systems
- Training project management and procurement personnel on documentation requirements
- Reviewing DEI and affirmative action policies with counsel
- Carefully evaluating project funding sources before bidding
As enforcement activity and legal scrutiny continue to evolve at both the state and federal levels, proactive compliance planning remains essential for businesses performing public work.
This article is the first in a series examining the evolving compliance landscape for contractors and business owners. In upcoming installments, we will address issues such as navigating mixed funding sources, understanding and documenting good-faith efforts, and the areas that agencies are increasingly scrutinizing during compliance reviews and audits. Be sure to check back regularly for additional insights and practical guidance.
If you have questions regarding MWBE, SDVOB, or contractor compliance obligations, please contact Mario A. Roque an attorney in our Labor & Employment, Litigation, and Municipal practice groups at mroque@underbergkessler.com or (585) 258-2887.
