Certifying Disadvantaged Businesses

If the Division of Small Business Opportunity is not adequately overseeing city contracts with small- business requirements, it cannot ensure certified businesses receive fair and equitable opportunities to participate in city contracts. It also cannot guarantee the city’s contractors follow small-business ordinances or contract terms.

FINDING 1 – The Division of Small Business Opportunity cannot ensure contractors follow small-business program requirements

• Some contractors went months without reporting subcontractor payment information, if at all. This reporting failure hindered the compliance team’s ability to accurately calculate progress toward certified business goals.
• Prime contractors reduced subcontractor work — or substituted certified subcontractors — without notification and approval from the division, despite city ordinance requirements.
• No sanctions were issued for noncompliance. Without incentives to follow the terms of contract agreements and legal requirements, prime contractors took advantage of businesses through reduced work, late payments, or unfair termination.
• Site visits were not completed when required. Without conducting site visits to validate a contractor’s involvement on a project, resulting compliance issues cannot be identified and promptly addressed. And policies and procedures for site visits do not align with practices.

FINDING 2 – The Division of Small Business Opportunity is not aware when small or disadvantaged businesses should be involved in city projects

• Some contracts were not reviewed for program requirements — limiting opportunities for small or disadvantaged businesses to participate in available city contracts.

• Despite existing procedures, a lack of supervisory review of the contract-import process led to errors in the division’s contract monitoring system’s data. This inadequate review process resulted in some contracts being overlooked.

1.1 Evaluate number of assigned contracts – The Division of Small Business Opportunity should evaluate the number of contracts assigned to each compliance project manager and assess the appropriate number of contracts that allow proactive and effective oversight of program requirements.

Division of Small Business Opportunity – Agree, Implementation Date – Oct. 31, 2026

1.2 Enforce compliance – The Division of Small Business Opportunity should follow established standard operating procedures and use tools, including sanctions, to enforce contractor compliance with city code and small-business program requirements.

Division of Small Business Opportunity – Agree, Implementation Date – Oct. 31, 2026

1.3 Update policies and procedures – The Division of Small Business Opportunity should update its compliance policies and procedures for conducting site reviews to align with its practices. The division should specify which businesses must have a site review completed, like the Disadvantaged Business Enterprise program. 

Also the policies and procedures should specify which contracts and subcontractors will not receive a site review and how a commercially useful function will be validated.

Division of Small Business Opportunity – Agree, Implementation Date – April 30, 2026

1.4 Conduct required site visits – The Division of Small Business Opportunity should ensure site visits are conducted as required for the Disadvantaged Business Enterprise businesses performing work on city projects. This will reduce the risk of violating federal rules and regulations and ensure program compliance.

Division of Small Business Opportunity – Agree, Implementation Date – April 30, 2026

2.1 Establish a formalized contract-review process – The Division of Small Business Opportunity should establish a formalized processes for agencies that do not regularly engage with the division to assist in understanding the small or disadvantaged business program determination process. This may include developing service-level agreements, drafting additional guidance for agency procurement personnel, or offering more training opportunities.

Division of Small Business Opportunity – Disagree

2.2 Perform a contract data review – The Division of Small Business Opportunity should regularly reconcile contracts within Jaggaer or with city agencies to make sure contracts that require the division's review for program participation are reviewed.

Division of Small Business Opportunity – Disagree

2.3 Implement a supervisory review process – The Division of Small Business Opportunity should design and implement a supervisory review process to ensure contracts are manually entered into B2Gnow when the system import fails.

Division of Small Business Opportunity – Agree, Implementation Date – July 31, 2026

2.4 Perform reviews with citywide procurement system – The Division of Small Business Opportunity should regularly analyze information from the city's procurement system and compare its data with the division's contracts in B2Gnow — ensuring all contracts with a small or disadvantaged business program goal are being monitored.

Division of Small Business Opportunity – Agree, Implementation Date – April 30, 2026

Auditor’s addendum to agency response for Recommendation 2.1

The Division of Small Business Opportunity says that it maintains published tools to help city agencies understand its program determination process. While the division does maintain published tools to help city agencies understand its program determination process, it must also ensure these tools are communicated effectively to ensure agencies are aware of required processes. The Citywide Contracting Hub was not disclosed to us during our audit. Based on our knowledge, it was implemented after our audit work concluded.

During the audit, division managers said they rely on city agency procurement personnel to bring new procurements to the division to be reviewed. The division is not aware of procurements if agencies do not reach out.

Without establishing formalized processes to ensure agencies understand the division’s requirements, some city procurements may be missed, which can impact the opportunities available for small and disadvantaged businesses.

This recommendation to implement service-level agreements, draft new guidance for procurement staff, or to offer additional training is essential to strengthening division processes and to guarantee all applicable contracts are reviewed by the division. Each contract the division fails to review is a potential missed opportunity for small and disadvantaged businesses.

We reaffirm our finding and recommendation.

Auditor’s addendum to agency response for Recommendation 2.2

The Division of Small Business Opportunity says it has implemented a more efficient, system-enforced approach to ensure agencies obtain a review from the division during the procurement process. However, the process still lacks a quality control or verification step needed to assess agency compliance with obtaining a review and to identify potential gaps in its own process.

While the recently implemented system-enforced approach requires uploading a division “Program Determination Memo” into the Jaggaer system as a procedural checkpoint, it does not address previously procured contracts that may not have received division review during procurement. Also, we found memos that were not uploaded into Jaggaer despite completing division procurement review.

Our recommendation helps the division to identify reviews that were previously missed and to monitor agency compliance with the division’s process. Opportunities for small and disadvantaged businesses are impacted when agencies do not involve the division in applicable procurements.

We reaffirm our finding and recommendation.