New Maryland MBE Subgoals

If you missed it, in July 2011, the Maryland Governor’s Office of Minority Affairs (GOMA) issued a directive setting “recommended subgoals” for spending by Maryland agencies under the state’s Minority Business Enterprise (MBE) Program.  Under Maryland’s MBE Program, to be eligible for certification as an MBE firm, a business must be at least 51% owned and controlled by one or more socially and economically disadvantaged individuals.  An individual is presumed to be socially and economically disadvantaged if that individual is African American, Hispanic American, Asian American, Native American, a woman, or disabled.

Under GOMA’s July 2011 directive, for the first time in the State’s history, state agencies have subgoals for contracting with Hispanic-owned businesses.  GOMA’s directive also provides subgoals for the following subgroups: African American-, Asian American-, and Women-owned businesses.

GOMA’s directive implements substantial changes to Maryland’s MBE Program that were made earlier this year in legislation that was signed into law in May 2011.  That legislation extended Maryland’s MBE Program until July 2012.   The legislation, however, also made significant changes to the MBE Program.  Before the legislation was enacted, MBE law dictated that government agencies set an overall goal of spending 25% of their contracting dollars with women and minority-owned businesses.  State agencies also were required to set subgoals of spending 7% and 10% of their contracting dollars with African American-owned businesses and women-owned businesses, respectively.  Under the May 2011 legislation, agencies must still try to meet the overall goal of spending 25% of their procurement dollars with minority and women-owned businesses.  However, the legislation eliminated the statutory subgoals for women-owned and African American-owned companies.  This change to MBE law in Maryland was prompted by a lawsuit in Maryland (which was eventually voluntarily dismissed) challenging the constitutionality of Maryland’s subgoals and a federal court of appeals decision that found North Carolina’s subgoal requirements were unconstitutional.

Under the May 2011 legislation, GOMA was required to issue recommended subgoals to replace the statutory subgoals, which GOMA did in its July 2011 directive.  Importantly, GOMA’s directive establishes subgoals to be applied on a contract by contract basis that vary depending on the goods or services provided.    For example, the directive sets the following subgoals for contracts with Hispanic-owned businesses:

• Architectural & Engineering and Construction Related Services (2%)
• IT Services and IT Supplies & Equipment (2%)
• Maintenance (3%)

And an agency is only required to try to meet subgoals on a contract only after the agency has met overall goals for participation by all MBE’s.   MBE participation goals range from 13% (Construction contracts) to 25% (Contracts for Human, Education and other Services).   GOMA’s directive can be found here.

Companies that have teamed together in the past should examine carefully how MBE participation goals are allocated among different MBE subgroups in the contracts they compete for.