A law that took effect Oct. 1 states that contractors who include minority-owned companies in bids for Maryland construction projects but don’t use those companies during the projects could be deemed felons, according to the Washington Business Journal. The legislation passed in the Maryland General Assembly during its spring 2009 session.

The law imposes a maximum sentence of five years in prison, a $20,000 fine or both. It also applies to contractors who include a minority business in a bid without its permission and pay a minority company for simply using its name in a bid.

The law’s purpose is to give minorities more business opportunities in Maryland. The state requires that 25 percent of state contracting dollars go to minority- and women-owned companies. Previously, contractors who didn’t hire the minority businesses named in a bid were punished with temporary or permanent restrictions on bidding for state contracts.

The law could cause problems for general contractors who sometimes have to rush to organize bids and may not have time to adequately investigate subcontractors. Steve Kimball, president of Kimball Construction Co., Baltimore, says contractors often are waiting on subcontractors’ prices at the last minute and may not realize until after the bid that the costs are more than they thought and another contractor would be a better fit.

“That is unfortunately an all-too-common practice within the construction industry,” Kimball says. “The law should be for everybody, but it’s hard to legislate every situation.”

Other measures that took effect in Maryland Oct. 1 relating to minority businesses include:

  • It is a felony to commit fraud when applying for minority certification or to obstruct investigation of an application.
  • State agencies must avoid bundling several contracts into one bid if the contracts could be broken up and awarded to small and minority businesses.
  • Businesses owned by women who are minorities can obtain minority certification in both categories.
  • A business owner with a personal net worth of more than $1.5 million is not eligible for minority certification; that dollar value will be adjusted each year for inflation based on the Consumer Price Index.