Better Contracting, Greater Diversity

Stephen Goldsmith is deputy mayor of operations for the City of New York.

How can a city encourage women and minority contracting, and still maintain a fair process that delivers value for taxpayers? It's a conundrum and a contentious issue. Critics have long argued that cities aren't doing enough to ensure equality in purchasing, citing statistics that show minority- and women-owned enterprises (M/WBEs) winning a disproportionately small percentage of city contracts.

But the idea of "set asides," or guaranteeing a certain fraction of work for M/WBEs, is also of dubious constitutionality, and in practice can act as a ceiling rather than a floor.

Moreover, juxtaposing a set of secondary requirements on procurement can lead to results no one wants. While serving as chair of the Anacostia Waterfront Corporation in Washington, D.C., I saw firsthand how difficult it was to implement the maze of social policy goals mandated by the City Council. Our procurement had to promote affordable housing, local contracting, minority contracting, environmental best practices and union-only contracting -- some of which were inconsistent with each other.

Public procurement should reflect and promote the diversity of the city whose tax dollars fund the work. But how?

New York City Mayor Michael Bloomberg is leveling the procurement playing field by clearing away obstacles to small business contracting in general, and women and minority contracting in particular. Rather than using set asides to push women and minority contracting through unfriendly procurement systems, New York is trying to make it easier for the little guy to do business with the city.

In May, the city unveiled a package of reforms to dismantle the obstacles to an equitable marketplace. The initiatives are designed to support smaller firms by helping them build capacity and gain access to capital. Examples of the city's reforms include:

• Increasing bid and proposal support services to help small and minority- and women-owned businesses better navigate city procurement rules and submit competitive responses.
• Improving access to capital by offering a mobilization loan program to help with upfront contracting expenses, and by ensuring prompt payment to winning small business bidders to reduce the pressure on their credit lines.
• Requiring city agencies to post contracting opportunities and supporting materials online in one location, reducing the time small businesses spend tracking down contracting opportunities and solicitation materials.
• Implementing bond reforms to reduce the number of required bonds in the construction sector, remove unnecessary bonds in other sectors and create a bond education program.
• Increasing tracking and transparency of subcontracts awarded to M/WBEs by requiring that prime contractors provide information about their subcontractors, which will allow the city to measure dollars awarded to M/WBEs over the course of a contract, rather than tracking the dollars promised to minority- and women-owned firms.
• Increasing partnership opportunities, both through support for joint venturing, which enables small businesses to team up to compete, and through the new Corporate Alliance Program, which will connect M/WBEs to contracting and capacity-building opportunities with major financial institutions and partners in the private sector.

A big part of this effort is educational. Increasing training and mentoring can make it easier for small firms to do business with the city. Early next year, a construction mentoring program will debut for 200 work-ready, but still emerging M/WBEs, offering classroom and on-the-job training for those firms that win contracts.

In 2008, New York City began a partnership with Columbia University to offer a training and mentorship program in the construction trades. To date, 40 graduate firms have won $32 million in city and Columbia contracts. A third class of 22 firms just finished a year of classroom training and will now begin to bid on campus projects. We also recently graduated the first class of Strategic Steps for Growth, a nine-month executive management program for M/WBE leaders at the Stern School of Business at New York University. The program incorporates curriculum developed by Interise, a Boston-based nonprofit with extensive experience in educating small business owners.

The topic of minority and women contracting is a highly charged one, but it doesn't have to be. By working toward fairness and equality in purchasing, we can also remove procurement barriers that will allow the marketplace to operate more efficiently. If that helps the city get the most value out of taxpayer dollars, it's a winning proposition for all.