“No Goals” Contracts and Marketplace Analyses from David Maher - Attorney, Partner
How can a governmental entity use “no goals” contracts to better understand and analyze the behavior of its prime contractors in public procurement and private contracting?
For a governmental entity that is implementing a goals-based program directed to certain target groups (e.g., MBE, WBE, SBE), releasing some solicitations with no goal attached can provide the entity with insights into the behavior of its prime contractors when there is not a participation requirement (goal). This information/data is useful for evaluating the effectiveness of the program and for determining whether the entity is acting as a “change agent” in its relevant marketplace. Stated otherwise, knowing how utilization or participation of target groups is affected by whether or not a mandatory goal is attached to the contract can underscore the importance of the goals—based program in the first instance; if prime contractors do not achieve meaningful participation when a contract is solicited without goals, as compared to a contract solicited with mandatory goals, the program can be viewed as effective and necessary for equal opportunity in the marketplace.
Data regarding prime contractors’ participation achievement in the private sector – where no programmatic goals are attached – can also shed considerable light on this analysis and can be collected in combination with a governmental “no goals” study.
Why is it important to conduct a comparative analysis of contracts with goals attached and contracts without goals attached when seeking to understand and improve public procurement programs?
As noted above, it is important for the procuring governmental entity to understand the role that it is playing in the marketplace, including whether a goals-based program implemented by the entity is effective in changing marketplace behavior on the part of its prime contractors (i.e., the entity is acting as a change agent).
Understanding how its prime contractors behave when there is no mandatory goal – either because a solicitation is put out without a goal, or when it is a private sector contract – gives the entity important information and data about the prime contractors who are receiving taxpayer dollars. More importantly, because the controlling federal case law requires governmental entities to avoid becoming a “passive participant” in discrimination, whether public or private, such an analysis is highly recommended (if not required). See City of Richmond v. J.A. Croson Co., 488 U.S. 469, 492 (1989) (“It is beyond dispute that any public entity, state or federal, has a compelling interest in assuring that public dollars, drawn from the tax contributions of all citizens, do not serve to finance the evils of private prejudice.”).
From a process perspective, how do you conduct a useful “no goals” analysis?
The governmental entity should randomly select a percentage of formally bid procurement contracts (perhaps, 5 percent) to be solicited without any goals attached – whether these are MBE, WBE, SBE, VBE, etc. goals in the program. These should be contracts that would otherwise qualify for the respective goals-based program.
As part of the random selection process, the governmental entity should “pull” contracts that vary in contract size and that involve all of the various industry categories (such as construction, professional services, other services, and goods/supplies). Conducting the process in this manner will yield more useful data and help the governmental entity to better understand whether there is variation in prime contractor behavior based on size and/or industry category, which will assist the entity in adjusting its program to address the specific findings/concerns identified.
Finally, it is important that the entity track the utilization of subcontractor firms (and sub-subcontractors) on “no goals” contracts based on detailed demographics to help measure changes in utilization generally (if any) and to identify any unique or varying findings specific to a particular demographic group.
Can a “no goals” analysis be used to support a more robust commercial nondiscrimination policy?
Yes. When a governmental entity finds that some (or more) of its prime contractors routinely meet established goals on goals-based contracts in a procurement program but attain significantly less participation from the target group/groups (e.g., MBE, SBE) when goals are not attached to a contract, this could raise legitimate concerns that the prime contractor(s) are behaving in a discriminatory manner when not required to include firms in the target group(s). In such situations, the governmental entity should have in place a nondiscrimination policy that permits the entity to conduct an investigation into the practices of a prime contractor that exhibits such a participation disconnect to determine whether, in fact, discrimination may be at the root of the behavior observed.
Again, having a robust nondiscrimination policy with an investigatory feature is a good way for the entity to avoid becoming a passive participant in marketplace discrimination by its prime contractors.