Objectives

To determine whether the Metropolitan Transportation Authority (MTA) Small Business Development Program (SBDP) has a formal process for prequalifying contractors that apply for SBDP and for equitably selecting contractors to bid on the program’s contracts. Additionally, we determined whether the MTA has an outreach program to grow the number of firms that join SBDP and provides support services to the contractors throughout the program. The audit covered the period from January 2018 to July 2025.

About the Program

Historically, in the construction industry, there have been significant obstacles to the ability of small businesses to compete for public work contracts. In 2010, a New York State law was enacted to enable the MTA and its affiliates and subsidiaries to initiate a mentoring program that affords participating small businesses the opportunity to gain public work construction management experience and training. 

In 2010, the MTA launched its SBDP to help eligible small business construction firms develop and grow by establishing stable, long-term business relationships with the MTA. SBDP includes the Small Business Mentoring Program (Mentoring Program), which is funded by the State, and the Small Business Federal Program (Federal Program), which is federally funded. The Mentoring Program consists of the entry-level Tier 1 and Tier 2. The Emerging Contractors Program is a subset of Tier 1 that includes firms that do not yet meet the financial requirements for Tier 1.

A small construction business wishing to participate in SBDP must apply for admission and be prequalified by the MTA for specific construction industry trades. The application and prequalification process is designed to ensure that participants in the Mentoring Program have a sufficient foundation of experience, finances, and skills to demonstrate that, with the assistance provided by the MTA, they can complete small MTA projects safely, on time, and within budget.

SBDP prequalifies applicants and selects bidders for its projects, which are then put on a bidder’s list and forwarded to the MTA’s Department of Diversity and Civil Rights (DDCR) for approval. However, if a contractor doesn’t submit financial statements on time, has a lien or judgment against them, or has bonding that has expired, they are placed on a Bid List Hold report and cannot be selected as a bidder for any SBDP contracts until the hold is cleared. 

DDCR conducts outreach to attract small construction businesses to participate in SBDP. Additionally, DDCR offers small businesses training courses to help them learn, earn, and grow. The MTA also hired a consulting firm to provide guidance to small business contractors in the program during MTA construction projects and to provide staffing support.

From January 2018 to December 2023, SBDP received 582 applications and admitted 257 small businesses to the program. The applicants are small businesses located in New York City or other states with a presence in New York State. For the 330 applications with complete addresses, 229 businesses were located in the five boroughs of New York City, and 69 were located in Nassau, Suffolk, Westchester, Rockland, and Orange counties, which are serviced by the MTA. One business was in a State county outside of the MTA service area. The remaining 31 businesses were located in New Jersey, Washington D.C., and Florida. In addition, from January 2021 to December 2023, the program awarded 178 contracts totaling about $168.5 million.

Key Findings

Overall, there was a lack of formal written procedures for many aspects of SBDP, including the application and procurement processes, the identification of bidders, and the Mentoring Program’s training and outreach.

Although SBDP had procedures for identifying bidders, the steps to determine contractors’ eligibility were not documented. We found errors or inconsistencies in the bid criteria spreadsheets—the documents SBDP uses to select which contractors will be provided with an opportunity to bid on individual contracts—such as not meeting bonding capacity requirements, not being trade-qualified, or lacking experience on a similar-sized project. As a result, we found eligible contractors that should have been selected to bid but were not. 
Small business contractors are required to submit an accurate and complete application when they request to participate in SBDP. However, we found that 10 of 68 applications reviewed were incomplete. Furthermore, the application requires completion of a Statement of Personal Net Worth, which includes the owner’s assets and liabilities. 

Based on rules in place at the time, upon a firm’s notification of acceptance into SBDP, the firm is required to begin attending DDCR’s training courses immediately. Failure to complete all courses will automatically disqualify a firm from participating as a bidder for SBDP contracts until it has completed all required courses. Of 85 firms, seven (8%) did not complete any courses, and 39 (46%) completed only some courses, ranging from one to 17.

The MTA has a 14-county service region, but DDCR’s outreach was limited to only four counties. As a result, small construction businesses located in the other 10 counties may have missed the opportunity to hear about and apply for SBDP. Consequently, the MTA’s ultimate goal to increase the pool of qualified contractors that can complete MTA projects safely, timely, and within budget may not be achieved. 

DDCR also did not have a formal written process and did not maintain records of the outreach it conducted. For example, DDCR officials did not provide evidence for 67 of 84 events they attended.

Key Recommendations

• Implement a process such as sequential numbering and a centralized log for all incoming applications to ensure completeness and prevent applications from being lost.
• Revise the procedures for the selection of bidders to include how the Bid List Hold process should be implemented and to better clarify how bidders are selected and evaluated, and document the basis for how decisions are made to improve transparency and decrease the appearance of subjectivity.
• Develop clear and concise written procedures pertaining to the contract procurement process, including retention requirements for SBDP.
• Develop written policies and procedures related to the training of firms in the Mentoring Program and for maintaining records of training materials that provide appropriate supporting documentation of attendance.
• Develop and formally document outreach (business initiatives) activities for the entire MTA region, including, but not limited to, preparation of the annual plan, attendance at events, measures of the activities, contacting prospective contractors, and follow-up efforts.