May 1, 2008 — Vol. 43, No. 38
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City to boost biz deals for minorities, women

Jin-ah Kim

With little fanfare, Mayor Thomas M. Menino recently took a small step forward in his attempt to increase city business with minority- and women-owned businesses (MWBEs).

The mayor in late March proposed an ordinance that would require city departments to aggressively pursue bids from underrepresented businesses to perform certain city work. The measure seeks to address the “continuing negative impact” of conditions identified in a 2003 independent study, which concluded that MWBEs have not been able “to equitably participate in the receipt of city contracts under $25,000,” specifically within the areas of architectural and engineering professional services.

“Nondiscrimination alone … is not sufficient to maximize economic opportunity for all residents of Boston,” Menino wrote to city councilors in a March 31 letter. “The need exists for purposeful steps to be taken to ensure that both minority- and women-owned businesses are utilized by the city to a more substantial and equitable extent.”

Menino’s measure, however, stops far short of reinstituting the city’s minority set-aside program. The mayor, anxious about potential court challenges, ended that program five years ago.

At the time, Menino said the 25-year-old Minority and Women Business Enterprise Program was unlikely to withstand a court challenge because the city could not prove that minority- and women-owned businesses were at a disadvantage in the Boston business market and needed the aid such preferential treatment provided.

Until it was discontinued in 2003, the MWBE Program required city departments to make best-faith efforts to contract a minimum of 15 percent of their business with certified minority business enterprises (MBEs) and 5 percent with certified women’s business enterprises (WBEs). The program aimed to “promote economic opportunities for small minority- and women-owned businesses through outreach, certification and advocacy,” according to the city’s Web site.

The program’s name was changed to the Small and Local Business Enterprise (SLBE) Office, which assists small local businesses, including those owned by minorities and females. The office certifies MBEs and WBEs, along with other small businesses. Once certified, a company’s information is added to the city’s business directory, providing a higher public profile and increased access to potential clients.

“We partner with other organizations, make referrals and do technical assistance,” said Brooke Woodson, director of the SLBE Office, who has worked for the office in both incarnations for 14 years. He said that the city has not come up with a program that satisfactorily replaces the abolished one, which featured “set-asides” — meaning the government preserves a certain portion of government contracts for MBEs and WBES.

But even Woodson acknowledges that losing the set-aside program has created a void.

“It has been slower than we wanted to be,” Woodson said. “We have been pushing for it. [But] when you face a lawsuit, it’s really devastating on the program.”

P.J. Gear

That 1999 lawsuit involved William Gear, president of the Everett-based construction company P.J. Gear & Sons. The company had received a $1.3 million contract from the City of Boston to repair three firehouses. Gear refused to comply with the city’s ordinances to “make best faith efforts” to use minority sub-contractors, and filed for a waiver to only award 1 percent of the total contract, or $13,000, to a minority firm.

The city denied Gear’s waiver request, and he sued in 2001, arguing he “engaged in good faith efforts” but was unable to find enough minority companies to satisfy the city’s requirements.

“They claimed their constitutional rights [were] being violated because they are a white-owned company,” Woodson said.

By then, Gear’s argument had merit in the U.S. Supreme Court. Ten years earlier, in its decision in the 1989 case of City of Richmond v. J.A. Croson Co., the Court deemed minority set-aside programs unconstitutional.

The impact of the decision reverberated across the nation.

In 1989, at least 234 jurisdictions — including states, cities, countries and “special districts” such as Washington, D.C. — had a set-aside program, according to a report released that year by the Minority Business Enterprise Legal Defense and Education Fund. Today, the nonprofit advocacy group says, there are fewer than 50 such programs in the nation.

“The Croson decision really made it difficult for cities,” Woodson said.

Given how difficult it was, Woodson said he believes the city deserves some credit for maintaining the MWBE Program as long as it did.

“We kept our programs from ’89 to 2003,” he said. “No one appreciates that anymore.”

The City of Boston and the Boston Redevelopment Authority, which had an identical MWBE policy, had been sued four or five times by contractors since 1994, he said. All of those cases were settled.

“The biggest settlement was on the construction of the Boston Police Headquarters, which I believe was about $1.5 million,” said Woodson. “The other cases were smaller settlements.”

There was no settlement in the P.J. Gear case.

“The case went before [U.S. District Judge Nancy Gertner], at which point the city asked the judge if it could hire an independent firm to conduct a disparity study to demonstrate the need for a race and gender based business program,” Woodson wrote in an e-mail. “The judge and plaintiff agreed and the city hired a minority-owned firm to conduct the study.”

The disparity study was conducted in January 2003 by Mason Tillman Associates Ltd., an Oakland, Calif.-based public policy research and public relations company. The resultant 136-page report detailed how many minority and women contractors were available and utilized at the time in the Boston market.

“When the study was completed in 2003, it showed a disparity did not exist and this did not give the city evidence to uphold its MWBE program,” Woodson wrote.

But the wording of the report’s conclusions is confusing. In its final section, it states that disparities, in fact, did exist in most cases considered.

“Although the City has been far-reaching in its efforts to ensure that all businesses have an equitable opportunity to participate in City contracts, the statistical evidence indicates that a disparity exists between the use of M/WBEs and their availability,” the report concluded.

The only case where no such disparity existed, according to the study, was in construction subcontracting, an area that Woodson quickly notes was “the only element of the program that ever had a set-aside type policy.”

Woodson said he understands why the set-aside program still gets attention five years after its demise.

“It was a good program, and that’s why people are upset, because it’s not there anymore,” he said.

After the lawsuit

There are no statistics available measuring how much the abolition of the city’s program impacted the business environment for minorities and women in Boston. But some in the business community say it has changed the entire landscape.

“In the absence of the program, there has been a dramatic reduction in the utilization of minority-owned or women-owned companies,” said Bruce Bolling, executive director of MassAlliance for Small Contractors, a nonprofit organization dedicated to increasing the number of state and city contracts with small businesses.

Woodson said he knows that the contractors who win city contracts would not use MBEs and WBEs without the mandates. According to the 2003 Mason Tillman disparity study, the city’s most recent such study, businesses owned by white males won 98 percent of the dollar amount of available contracts.

“I have no question that some amount of minority businesses suffered,” he said.

Bolling, who has worked with minority and women contractors for more than 10 years, emphasized the significance of programs requiring the government and primary contractors to make their best efforts to assign contracts to MBEs and WBEs.

“These programs are absolutely important and critical,” he said.

Bolling said few know why the city of Boston eliminated its program in 2003. And that’s a problem for Woodson.

“I don’t want give an impression that the program just ended on its own,” Woodson said. “We were sued, and the judge ruled, ‘Your program is not constitutional.’ So we had to end it.”

The city’s movements

Anthony A. Samuels, founder and CEO of Done Right Building Services Inc., a Boston maintenance and cleaning service company, has worked with Woodson for nine years.

Samuels said his company won its first contract to clean City Hall in 1999, before the MWBE Program was abolished. It was a three-year contract, worth $500,000.

That opportunity, he said, allowed Done Right to demonstrate that it did quality work. The company has won the same contract three times since.

Samuels, an African American, said it has become more difficult for minority-owned businesses to win contracts in both the public and private sectors.

The odds are “just like participation from minority [contractors] — zero,” he said in a telephone interview.

Since the program was abolished in 2003, he said, minority-owned companies have struggled to participate in the kinds of bids that would give them the chance to compete that Done Right found at City Hall.

“It’s not a matter of set-asides. It’s like, ‘Let me [in] on the bid, period, and not just give it to your buddies,’” he added.

Responding to concerns such as Samuels’, the city at first implemented a race-neutral plan that included small white-owned firms needing the same amount of help as minority firms.

“A lot of people weren’t warmed up to” that idea, Woodson said.

The city defines small businesses based on The North American Industry Classification System (NAICS) codes, which apply different gross income limitations to different industries.

This year, Woodson said, the city is starting to develop aggressive new programs to help MBEs and WBEs. In addition to Menino’s proposed ordinance, Woodson recently met with the director and business coordinator of the Affirmative Market Program (AMP), a state program that aims to promote state contract awards to develop and strengthen MBEs and WBEs.

“What we are trying to do is develop a program similar to Affirmative Market Program — what the state level does,” he said.

Like AMP, Woodson said his office plans to examine how many city contracts go to minority- and women-owned businesses in order to provide more direct assistance.

Woodson said the city will collect data for future disparity studies, “which may be an indication that we need to go back to [a] set-aside program,” as well as finding private sector opportunities for MBEs and WBEs.

“It’s great to help minority- and women-owned businesses, but it’s very challenging, the expectation is very high,” he said. “That’s why you hear a lot of frustrations out there, especially since our tool got eliminated by the lawsuit.”

Material from The Associated Press was used in this report.

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