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The latest news and announcements from Mayor London N. Breed

Mayor Lee & President Chiu Propose Reforms to Expand & Strengthen Local Small Business Contracting

New 40 Percent Goal Will Ensure Local Businesses Share in Public Contracting Dollars to Help Them Succeed in Doing Business in San Francisco

Mayor Edwin M. Lee and Board of Supervisors President David Chiu today introduced legislation to expand contracting opportunities for local small businesses.

“This legislation honors our hard working local small businesses who are the backbone of our economy and job creators for our residents,” said Mayor Ed Lee. “When the City contracts out for construction, goods or services, we need to ensure that small businesses have an equal opportunity to compete for those public dollars. These reforms will help continue the progress we have made to use more local businesses in our public work.”

“This long-needed proposal is good for small businesses, and it is good for the City,” said President Chiu, who has led the effort to draft this legislation and held two hearings on local contracting earlier this year. “When we invest public contract dollars in our local, diverse businesses, we grow our economy and put people to work in all our neighborhoods.”

“This legislation strikes the right balance between assisting local businesses to fairly compete and making City government more efficient,” said City Administrator Naomi M. Kelly. “When we prioritize local vendors, we see high quality work with the benefits of reinvesting in our City’s economy and reducing environmental impact.”

“Local business enterprises in San Francisco, many of which are owned by women and people of color, have not been receiving their fair share of the hundreds of millions of dollars that the City spends each year on contracts with private businesses,” said Alexis Chiu, President of the Coalition for Economic Equity, a group of local business organizations that advocates for fair contracting. “We are glad to see that Supervisor David Chiu and Mayor Ed Lee are introducing legislation to help address this challenge. This is a crucial step forward that we have been working on for a long time, and we look forward to working with the Mayor, Supervisor Chiu and the entire Board of Supervisors on this important legislation.”

Chapter 14B of the Administrative Code governs the Local Business Enterprise (LBE) Program, designed to level the playing field for small business. Prior to 2006, the program was known as the MBE/WBE Program provided discounts to companies owned by women and minorities. Since then, it has been applied in a race and gender neutral manner, and includes any local business that meets certain size thresholds. In 2012, Mayor Lee transferred the responsibility for this program from the Human Rights Commission to the City Administrator.

Key reforms to Chapter 14B proposed by Mayor Lee and President Chiu include:
• Establishing a Citywide goal for small business utilization of no less than 40 percent;
• Begin the “SF First” program requiring departments to make good faith efforts to first obtain three bids from local businesses for construction contracts under $400,000 and professional service contracts under $100,000 before opening the contracting process to non-LBEs;
• Adding a bid discount of 2 percent for LBEs on contracts from $10 – 20 million. Currently, the LBE program provides a 10 percent discount on contracts under $10 million;
• Expanding 14B requirements to projects that require a development agreement to be approved by the Board of Supervisors;
• Increasing the thresholds for certification of LBEs in certain industries, allowing small businesses to continue to participate in the LBE program as they succeed; and
• Creating a mentor-protégé program to foster partnerships between established contractors and local businesses.

These proposals were generated through four public workshops in the Sunset, Civic Center, Bayview Hunters Point and Mission neighborhoods, along with online surveys conducted by the Office of the City Administrator, Department-level meetings and a Department-by-Department review of how Chapter 14B is administered.

In the last fiscal year, there were 1,387 local small businesses registered with the City’s Contract Monitoring Division, with approximately 20 percent of those being women-owned and 37 percent being minority-owned.

The draft ordinance will be presented at the Mayor’s LBE Advisory Committee on October 2nd and could be heard by the Board of Supervisors as soon as late October.