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Ohio moves to weed out pass-through MWBE firms

The Ohio Department of Administrative Services (DAS), at the recommendation of a working group of minority and economically disadvantaged business owners, has moved to institute several new rule changes with the goal of weeding out "front and pass-through companies" taking advantage of the certification programs for disadvantaged businesses offered by DAS.

"Front and pass-through companies" refers to companies that have attained certification as a disadvantaged business but which have done so erroneously or which do no actual work on the relevant project. The three certifications under the purview of DAS that will institute more rigorous procedures under the new rules are the Minority Business Enterprise (MBE), Women's Business Enterprise (WBE), and Encouraging Diversity, Growth, and Equity (EDGE) certifications.

The new rules make a variety of requirements, including: certified companies must demonstrate that their owners are "performing, paying, managing and supervising the work" on relevant contracts; more "stringent and frequent financial documentation requirements"; and setting up a DAS hotline to which potential violations can be reported.

In addition, rules have been made for the WBE certification program, which is new. The new rules empower DAS to establish reciprocity agreements with other certifying agencies and organizations that use comparable standards to those set forth by DAS, so that DAS can accept the WBE certifications on that basis.

Other changes made by the new rules which do not directly relate to battling fraud or the new WBE certification include: removing the 10-year cap for EDGE certification; adopting the U.S. Small Business Administration (SBA) standard size cap for EDGE certification; and allowing more non-minority individuals to sit on an MBE's board of directors.

All new rules go into effect on October 9th, 2020.

Read the press release from DAS on the rules at https://das.ohio.gov/Portals/0/DASDivisions/DirectorsOffice/PressReleases/2020%20press%20releases/9-29-20%20MBE%20rule%20changes.pdf.