The House of Representatives voted late Friday evening to approve a bill that takes aim at those who try to take advantage of the minority-contracts program administered by the troubled state Office of Minority and Women Business Enterprises. House Bill 1674 passed by a vote of 72-25 and goes to the Senate for consideration.
The measure creates an investigative unit inside the OMWBE and imposes sanctions for those who cheat the system – everything from disbarment from lists of contractors eligible to bid on state contracts to penalties of up to 10 percent of the contract, or $5,000 per violation.
The agency has struggled under previous management to keep its certifications of businesses up to date – amid allegations of fraud that have been turned over to the FBI.
Democratic Rep. Sharon Tomiko Santos of Seattle sponsored the bill and said it provides accountability for the program, which had a change in management last June. She said her efforts to fix the program were well under way before news accounts of fraud and mismanagement surfaced last year.
In a floor speech Santos said her measure also encourages public agencies to use more minority or women-owned businesses when contracting out for services. It does that by requiring OMWBE to report on how well agencies are using minority contractors and to provide technical help to agencies that do a lousy job of extending opportunities to minority owned firms.
“The problem … is that while some of our agencies do a really good job of expanding economic opportunity to all businesses across the state, others clearly don’t know how to do the outreach,’’ Santos said.
Santos said fewer than 2 percent of all public contracts went to minority owned enterprises in 2010 and fewer than 3 percent in 2011.
Twenty Republicans voted for the measure and 25 opposed it. Republican Rep. Cathy Dahlquist of Enumclaw said she also backed the bill because it does “two simple things: It adds accountability and it adds investigation for fraud. This program has been wrought with fraud and whatever we can do to stop that is a step in the right direction.’’
The measure also carries a two-year price tag of about $570,000 for three new staffers and other resources, according to a cost analysis prepared for the Legislature. That report also estimates the agency could recover $105,000 in costs from sanctions.
The minority-contractor certifications are required by federal law and are key on federally funded highway projects, which must give a share of subcontracted work to historically disadvantaged groups.
Certifications not only help small businesses get a piece of government contracts but are relied on by general contractors, governments and others who must follow federal rules.
Rep. Shelly Short, R-Addy, urged a vote against the bill. Short said the agency already has a new director taking on the fraud issues, and she thinks the bill tries to move “too far, too fast.”
Chris Liu, a former state Lottery director with a background in Wal-Mart’s global businesses, took over as director of the agency in June at the request of then-governor Chris Gregoire. In a January interview, Liu said the agency has cleared away most of a 1,800-case backlog of requests from businesses wanting to be certified as minority- or women-owned.
Liu said the biggest change he and his deputy brought to the agency is professional management.
Five employees in the agency — more than one-quarter of the 17-employee work force — also faced formal ethics complaints last year before Liu arrived. One case involved the former director, Cathy Canorro, who gave a $65,000 no-bid consultant’s contract to a longtime friend when she took over the agency at Gregoire’s request.
Canorro resigned in May but landed an administrative hearings job with the Department of Licensing.
In testimony during a committee hearing last month, former OMWBE staff and minority-business owners urged the Legislature to clean up the program.
“People who cheat the DBE program hurt everyone. It’s a domino effect,’’ said Elton Mason, owner of Washington State Trucking in Kirkland, a minority-owned business that is certified.