ANNAPOLIS – Construction contractors working for the state can keep more of their income and save on legal fees, while more minority-owned businesses will be able to qualify for state contract set-asides beginning today when new laws passed last spring take effect.
A new procurement law reduces the amount state agencies — the departments of General Services and Transportation, for example — may withhold from a contractor in monthly security payments from 10 to 5 percent.
“Contractors start off with having less retention held on them and they benefit,” said Joseph Kovars, a principal with the law firm Ober Kaler’s Baltimore office.
The existing law allows public bodies to hold back 10 percent of payment due to the contractors for the first half of the project’s completion. Contractors receive that 10 percent in a later payment after they’ve finished the required work.
Some public institutions are exempt from the new law, including county and city governments, local boards of education, University of Maryland and Maryland Stadium Authority.
In addition, construction contractors may not retain a higher percentage of security payment from subcontractors than the public body keeps from them.
“It’s especially important for the small contractors who need the money to bid and work for the next contract,” said Bob Zinsmeister, director of government affairs at the Metro Washington chapter of the Associated Builders and Contractors Inc. in Calverton.
The 5 percent retention rate is an “equitable number” for the state, as well as small contractors, whose normal operating expenses often offset earnings, said Zinsmeister.
Another new law permits contractors to be legally represented by their officers, directors and general partners, instead of by attorneys, before the State Board of Contract Appeals in claims involving $10,000 or less.
Zinsmeister hailed the legislation as a cost-saving measure.
A minority business law expands the pool of eligible individuals for the minority business enterprise program, which aims to help minority and women-owned businesses gain greater access to state resources.
The legislation allows individuals with a $1.5 million net worth –previously the limit was $750,000 — to be included in the program.
“It opens the door for minority businesses,” said Sharon Pinder, who becomes special secretary of the governor’s Office of Minority Affairs today.
The new rule “removes the artificial barrier placed on minority businesses,” Pinder said, adding that the $750,000 was a “federal limit set arbitrarily, years ago.”
“No evidence supports that the $750,000 federal cap equated to discrimination,” she said, citing a study by Morgan State University that provided input for the bill.
Wayne Frazier Sr., president of the Maryland Washington Minority Contractors Association, said that while he was pleased with the legislation he believes it applies to only a few minority businesses.
“Most minority small business owners don’t have personal net worth exceeding $750,000,” Frazier said. “Most of them are struggling and broke.”
The bill applies to “less than 5 percent of Maryland’s minority small business owners, not the masses,” he said.
Frazier urged Gov. Robert Ehrlich to “act as the cheerleader” for minority businesses by enforcing state procurement quotas with small businesses and encouraging more private companies to hire them. -30- CNS-9