Overview
DCR lacked the policies and procedures to ensure that all contractors submitted Certificates of Payment. These certificates list total payments made by a contractor to minority-owned business enterprises (MBEs) and woman-owned business enterprises (WBEs) on a construction contract during a fiscal year. DCR uses them to ensure that contractors comply with its business ownership goal. DCR did not receive Certificates of Payment for 26 of 66 construction contracts for fiscal year 2020 or for 23 of 52 construction contracts for fiscal year 2021. Without such processes and procedures, DCR cannot monitor contractors’ compliance with the 10.4% combined women and minority business ownership goal.
Authoritative Guidance
Part III of DCR’s standard construction contract requires contractors to complete a “Certificate of Payment by Contractor/Designer to Minority, Women Business and Veteran Owned Business Enterprises” documenting the amount paid to MBEs and WBEs during the quarter. If no payments have been made to MBEs or WBEs, the certificate documents that fact. The certificate states,
MBE, WBE and [veteran-owned business enterprise] payment reports are required for each quarter of the fiscal year for each of your DCR projects. . . . Reports must be submitted within 10 business days of your receipt of this form.
DCR officials told us DCR used Certificates of Payment to determine whether a contractor has complied with the combined women and minority business ownership goal.
All construction contracts that were ongoing during the audit period required the contractor to meet DCR’s combined women and minority business ownership goal unless DCR agreed to waive or reduce it. The requirement was detailed in DCR’s “Instructions to Bidders” for construction contracts.
During the audit period, DCR had an agency-wide business ownership goal for all its construction projects. Each contract had a combined women and minority business ownership goal of 10.4% documented in the “Instructions to Bidders,” except those for which DCR had agreed to a request from the contractor to waive or reduce this percentage.
Reasons for Issue
DCR officials told us they did not request Certificates of Payment from contractors each quarter. Instead, they requested the reports from contractors twice a year and monitored business ownership goal compliance on construction contracts after receiving the reports. Additionally, DCR officials told us that they had limited enforcement mechanisms to ensure that contractors submitted Certificates of Payment. DCR officials did not believe it was feasible to enact enforcement procedures against contractors that did not submit Certificates of Payment. DCR also did not have policies and procedures to effectively monitor the extent to which each construction contractor achieved the business ownership goal for women and minorities.
Recommendation
DCR should develop policies and procedures to effectively monitor the extent to which each construction contractor achieves the business ownership goal for women and minorities. These policies and procedures should include the enforcement provisions, stated in the contract, that DCR will use against contractors that do not meet the goal.
Auditee’s Response
DCR appreciates the importance of improving compliance with requirements to submit certificates of payment. DCR contracts currently include specifically-stated enforcement mechanisms to support compliance with the requirement to submit certificates of payment, including suspension of payment and/or termination of contract for non-compliance. These mechanisms enable DCR to enforce, where appropriate, the requirement to submit certificates of compliance. DCR retains the discretion to determine whether and how to deploy these enforcement mechanisms in the context of a particular contract.
DCR agrees that it is desirable to improve rates of submission of certificates of payment and has taken a number of steps to improve compliance. Under DCR's current Director of Contracts, who began work on the same day the audit period began, DCR has implemented three initiatives to improve compliance with certificate of payment obligations.
First, DCR developed a tracking system specifically for certificates of payment during the audit period. This system is now in place and compliance with reporting today far exceeds the rate of reporting observed during the audit period. This system includes a dedicated email address specifically for collecting quarterly reports from all its contractors, and for sending requests to the contractors to remind them of the need to file the certificates of payment for each quarter. DCR also created a construction tracking sheet within its Sharepoint system, which contains all relevant information for each active construction contract, including whether they have or have not reported for each quarter since the onset of the contract. Prior to these changes, DCR was searching multiple places for this information, whereas now it can all be found in an easily accessible spot.
Second, DCR has instituted a practice of discussions with contractors during the contracting period. DCR's Contracts Unit ensures that each low bidder is aware of their responsibilities and the enforcement mechanisms regarding MBE/WBE compliance at the onset of the contract. This practice ensures that contractors understand and can appropriately respond to requests for quarterly reports. DCR is also in the process of hiring an assistant director of contracts, whose job description includes working with DCR contractors to ensure supplier diversity compliance. This position will further strengthen information exchange and voluntary compliance with contractor reporting obligations.
Third, DCR is using a new supplier diversity hub offered by the Operational Services Division (OSD). This hub will allow contractors to upload their documents directly to the online portal and allow OSD to conduct up to the minute tracking of contractor compliance with all supplier diversity commitments for all contracts. While this hub is still a work in progress, DCR believes that this system will be helpful in enabling it to track and improve rates of submission of certificates of payment.
Auditor’s Reply
Based on its response, DCR has taken measures to address our concerns on this matter.
| Date published: | November 3, 2022 |
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