The legislation is a first step in reforming the state's troubled Minority Business Enterprise system, Lt. Gov. Michael S. Steele (R) said in an interview Wednesday.

Meanwhile, House members were set to detail their own reform package and hold hearings on it Thursday afternoon.

Ehrlich's proposals come after the Minority Business Enterprise Reform Commission, chaired by Steele, found subcontractor abuse, insufficient contract dollars going to certified MBEs, and problems reaching out to these businesses.

"For 25 years, our MBE program has existed pretty much in a vacuum," Steele said.

There has been little oversight, he said, resulting in a raw deal for Maryland's small and minority-owned businesses.

Over six months, the commission held four hearings across Maryland and met every two weeks to discuss issues and complaints with business leaders and federal, state and local officials, Steele said.

Commission members heard stories of small-business owners never being paid by prime contractors, problems accessing credit and capital, and difficulty navigating the MBE system, Steele said.

Small-business owners complain that state contracts are often too large for them to win as prime contractors, he said.

"We are not trying to have small businesses bid against large businesses," Steele said. The proposed 10 percent allotment "allows them to bid on projects that otherwise they would not be able to."

Dedicating 10 percent of state contracts in this fashion is "landmark legislation," said Sharon R. Pinder, executive director of the Governor's Office of Minority Affairs. "It's one of the cornerstones of the revival and revision of our MBE program."

Ehrlich's plan is also designed to fix subcontractor abuse, which "is a real issue," said Margy LaFond, a consultant with the Governor's Office of Minority Affairs.

State law currently requires that 25 percent of state contract dollars go to certified MBEs. Ehrlich's plan is designed to bring more accountability to the subcontracting process -- which often involves certified MBEs -- to help ensure that goal is met.

Many MBEs are led to believe by contractors that they will be awarded a subcontract, but are later dropped after the contractor wins the award, Steele's commission found. The contractor may then pick a non-minority subcontractor, or not subcontract the work at all.

Ehrlich's plan would require prime contractors to name their MBEs during the bidding process, not after.

Ehrlich also wants to elevate the executive director of the Governor's Office of Minority Affairs to "special secretary."

"We want to send a signal to the minority business community that this is important, and that we believe in the mission of" the minority affairs office, Steele said.

Steele said he would be working with members of the Legislative Black Caucus and Women Legislators of Maryland to gain support for the legislation.

Steele and Ehrlich planned to host a press conference this morning to announce the commission's findings and its 50 recommendations to improve the process.

Ehrlich will also sign three executive orders: to create a task force to establish a centralized bidder registration; to establish a Governor's Council for Historically Underutilized Businesses, an advisory group for the minority affairs office; and to initiate a mentor-protégé program, Steele said.

House proposals

Meanwhile, several House members have already introduced bills on MBE reform.

Members of the House Health and Government Operations Committee were set to hold hearings Thursday to discuss five of those bills.

One bill, sponsored by Del. Gareth E. Murray (D-Dist. 20) of Silver Spring, would double the personal net-worth cap for MBE owners and spouses to $1.5 million. Legislators say this will expand the pool of MBEs. The Ehrlich administration supports the bill.

Other bills would create a "yellow pages" of MBE businesses, help small businesses become prime contractors and encourage prime contractors to stick to their original subcontractors.

Some of the bills duplicate the commission's recommendations. Committee members said Thursday they had not yet seen those recommendations.

"As a legislature, we have been at the forefront of initiating the issues of MBE," said committee Chairman John Adams Hurson (D-Dist. 18) of Chevy Chase. "We welcome the administration's support of our initiative to reform MBEs, but we've been at it for a couple of years."

The commission's full report is available at www.mdminoritybiz.org/report.