MSBCA Deems Bid Unresponsive When MBE Subcontractor Does Not Perform Commercially Useful Function Within the Scope of the Contract

In any Maryland bid that contains MBE participation goals, the MBE entity must provide a “commercially useful function” within the scope of the contract. In a recent MSBCA opinion, In the appeal of the Sherwin Williams Company, found here, the MSBCA sustained the procurement officer’s determination that Sherwin Williams’ bid was unresponsive because its MBE subcontractor was to perform work not required by the contract and, thus, would not perform a commercially useful function. 

The IFB issued by the State called for an indefinite quantity contract to provide paint, stains and supplies, and contained a 3% certified Minority Business Enterprise participation goal.  Sherwin-Williams attempted to meet the MBE goal by subcontracting a portion of the contract to a Hispanic-American owned company.  Per Sherwin-Williams’ bid, the MBE subcontractor would perform “paint sales development” and “paint sales management,” but would not provide supply, warehousing or delivery services of the paint or paint products.

Although the PO confirmed that contractors were expected to be creative with MBE involvement, he determined that paint sale development and management was unnecessary under the IFB, which primarily called for paint supply and delivery.  Accordingly, Sherwin-Williams’ MBE subcontractor did not provide a commercially useful function and the bid was deemed unresponsive.

The MSBCA affirmed the PO’s decision and noted that under COMAR 21.11.03.12-1(B), a certified MBE performs a commercial useful function when it is responsible for execution of the work and

“carrying out its responsibilities by actually performing, managing, and supervising the work involved and, [w]ith respect to materials and supplies used on the contract, for negotiating price, determining quality and quantity, ordering the material, and installing (where applicable) and paying for the material itself.”

Furthermore, under the Maryland Minority Business Enterprise Program Manual, a business provides a commercially useful function when “it is responsible for the execution of a distinct element of the work of a contract and carries out its responsibilities by actually performing, managing and supervising the work involved….”

Since paint sales development and management was outside the scope of the contract, it did not constitute a commercially useful function and Sherwin-Williams’ bid was correctly determined to be unresponsive.