Even Majority-Black Cities Struggle With Minority Contracting Programs

Just how much should race be taken into account in city purchasing?
by | October 30, 2017
Downtown Milwaukee with City Hall in the background
Downtown Milwaukee with City Hall in the background (Flickr/Paul Sableman)

This story was produced with support from the City Accelerator program.

In 2010, Memphis, Tenn., released a report on the status of the city’s certified minority- and women-owned businesses. How well were those businesses being represented in city contracts? Was the city discriminating against them? Were official policies getting in the way? The results were not promising.

Then in 2016, the city released a follow-up study -- and the picture was even worse. The second disparity study, conducted by Atlanta consulting firm Griffin & Strong, showed that disparity in the city’s purchasing practices had actually increased for most businesses, including major categories like construction, architecture, engineering and other goods. The only place where things had gotten better was in “other professional services,” which includes lawyers, doctors, accountants and banks.

In response to the report, Mayor Jim Strickland sought to improve the city’s business relationships with minority- and women-owned enterprises (MWBEs), which was one of his campaign promises when he assumed office in 2016 after defeating A C Wharton.

First, Strickland named Joann Massey as director of minority- and women-owned business development. The city consolidated multiple programs under the new office, including the Office of Business Diversity and Compliance and the Memphis Office of Resources and Enterprise. One of Massey’s biggest moves so far was her decision earlier this year to make it easier for qualifying firms to get certified for MWBE benefits. The city now offers free in-house certifications to specified minority- and women-owned professional service businesses for architects, engineers, physicians, certified public accountants and attorneys. “This is heart work, and not just hard work,” Massey wrote in a report outlining the city’s total plans. “We must meet cultural change with policy changes in order to address the systemic conscious and unconscious discrimination that exists in our country.”

All of this can be especially frustrating for leaders in a place like Memphis, where most of the residents are black. Memphis is 63 percent African-American, according to the latest Census figures. Its also has an increasing Hispanic population, a decreasing Caucasian population, and a 4 percent larger female population. But less than a quarter -- 24 percent -- of city contracts go to MWBEs (and even that is a sizeable increase from only a few years ago).

“It’s not fair,” Rev. Jesse Jackson told reporters in Memphis earlier this year.  “We want the city’s procurement list to match with our supply capacity.” Jackson said that at least 50 percent of city contracts should go to minority firms.

As a majority-black city struggling to support minority-owned businesses, Memphis isn’t alone. Other majority-minority cities, including Los Angeles, New Orleans and Charlotte, N.C., are dealing with similar challenges.

Sometimes existing policy can be a barrier. In Milwaukee, Wisc., another minority-majority city, addressing potentially disadvantaged firms is complicated by race-neutral laws, which prohibit the city from considering race when awarding contracts.

Milwaukee’s racial challenges are acute. It’s a highly segregated place. In 2010, only San Antonio had a higher concentration of poverty in its core city, and Milwaukee’s 53206 ZIP code has the nation’s highest rates of incarceration of black men. “Unfortunately, our city has pockets of communities, for whatever reason, that we can say are segregated,” says Nikki Purvis, the director for the office of small business development. “It’s unfortunately how Milwaukee is, There’s no better way to describe it.”

Purvis says she wants to assist minority businesses, and she sees opportunities for growth in the city’s core by increasing workforce development. But the city can’t implement race-specific initiatives without first establishing “factual predicate” of the need for them. In other words, Milwaukee would first need to conduct a disparity study, like the ones in Memphis, to see whether minority firms truly are being disadvantaged. (The city had a short-lived racial-preference contracting program a few years ago, but it was  suspended indefinitely in 2012 due to a lawsuit allegeing that the city’s previous disparity study, conducted by a Florida-based consulting firm, was “methodologically flawed,” and that the contracting program had done nothing to actually help black-owned businesses.)

“We can’t legally implement a race and gender program without the disparity study,” Purvis says. So far, the city has not put any resources toward funding a new study.

Memphis, too, is confronting a question of just how race-informed its contracting policies should be. One of the recommendations from last year’s disparity study was that the city should break its contracting goals into smaller categories based on race -- African-American, Hispanic, Asian and so on -- rather than just a blanket goal for “minority” businesses. But that’s not something Massey plans to do. Earlier this year, she said that such an approach was “not a viable strategy.”

“The facts are, where there are low numbers of minority firms of any race or women firms, the outcomes of separating goals by race would be counterproductive to accomplishing diversity and inclusion,” she says. Part of her concern of divvying up the goals is that a business that receives multiple certifications -- if it’s, say, a firm owned by a woman who is African-American -- might inadvertently be double-counted by the city in two different categories.

More importantly, Massey says, dividing its purchasing goals by race would water down the program’s overall effectiveness. “If we were to break down the goals by race, the formula would produce a much lower goal,” she says.

 

Julian Wyllie joined Governing as a City Accelerator Fellow. This story was produced with support from City Accelerator, a joint initiative of the Citi Foundation and Living Cities.

Julian Wyllie | City Accelerator Fellow
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