5 Ways Cities Can Use Their Purchasing Power to Support Minority-Owned Businesses

The teams involved in this year's City Accelerator program met recently to discuss how they could improve the representation of minority-owned businesses in government contracts.
by Julie Bosland | March 15, 2018 AT 4:00 AM
Representatives from five different cities met recently in San Antonio. (Sterling Johnson)

How can cities use their purchasing power to increase economic opportunity for businesses owned by people of color?

That was the crucial question explored recently as five cities gathered to discuss how they could better use the money they’re already spending on goods and services to help support minority-owned businesses in their community. On January 25-26, Charlotte, N.C., Chicago, Los Angeles, Memphis, Tenn., and Milwaukee, Wis., gathered in San Antonio, Texas, to share strategies for making local procurement more equitable. These five cities are part of the City Accelerator, a Living Cities initiative with funding from Citi Foundation and technical expertise by Griffin & Strong, PC, that is designed to support and share municipal innovation.

After two days of robust discussion, the cities left with 5 key takeaways:

1. Public policy has historically created or reinforced racial disparities, but cities have the opportunity to intentionally promote equity. The convening kicked off with a presentation by Brion Oaks, the Chief Equity Officer of Austin, Texas, who said that to make progress, cities must first acknowledge the policy decisions that contributed to the racial income, wealth and quality of life gaps we see today.

For example, in 1928, the city of Austin had a policy that it would only provide services to people of color if they lived in specific zones within the city. These zones received dramatically less investment in physical infrastructure and supports for families and businesses. And for decades, whenever there was a policy decision about locating a waste treatment plant, industrial site, correctional facility or any other undesirable development, the city would place them in these zones. In the 1960s, when many explicitly racist policies were outlawed as a result of the civil rights movement, the government moved to race-neutral policies.

But because of the vast racial inequalities already in place, these “neutral” policies only served to perpetuate the inequity. Today, when you map poverty, distress and the racial wealth gap in the city, it is still largely contained in those geographic zones, a clear modern embodiment of intentionally racist policy decisions of the past.

In addition to being conscious of inequities rooted in past decisions, Austin’s Equity Action Team recommended leading with a focus on race/ethnicity (while recognizing other experiences of inequity), focusing on human-centered policies and programs, engaging residents in decision-making, using disaggregated data, and analyzing the unintended consequences of city policies and other decisions.

2. Process re-engineering in procurement can open the door for local business owners of color. Cities are not fully leveraging the potential economic impact of their own procurement. Too often the process for selecting public contractors or vendors disadvantages small, locally-owned businesses or businesses owned by people of color. All of the cities in this cohort of the City Accelerator are exploring opportunities to make their contracts more accessible by overcoming the barriers that businesses typically face, and they were able to gather new ideas and approaches from their peers.

For example, cities are looking at prompt payment policies to address delays in the process of paying prime contractors – and those prime contractors paying their subcontractors – that currently make it difficult for entrepreneurs of color to stay afloat doing work on city contracts. The participants also recognize that risk-shifting provisions that require excessive bonding and insurance from public contractors have an exclusionary effect, prompting several cities in the cohort to explore changing their standard requirements or offering supports for small businesses to help them to qualify for a higher level of insurance.

Finally, there is more that cities can do to ensure that businesses owned by people of color can prepare for and connect to public contracting opportunities, including comprehensive forecasting of upcoming opportunities to bid on city contracts, matchmaking events to build relationships and demystify the process, and joint contract compliance efforts across multiple public agencies to ensure that prime contractors are meeting their commitments to give a portion of their subcontracting opportunities to businesses owned by people of color.

3. It takes a village to build business capacity. On the second day of the convening, participants gathered at LaunchSA, a partnership with LiftFund and the San Antonio Economic Development Department that provides space where those with an idea or a full-fledged business can access specialty programing, workshops, tailored support and resources.

In a panel discussion, Ryan Salts, director of programming at LaunchSA; Celina Pena, chief program officer of LiftFund; and Renee Watson, director of Bexar County’s program for small, minority and women-owned business enterprises, shared the importance of engaging in partnerships to ensure that new businesses can not only successfully launch but continue to grow.

Through a shared focus on the goal of building up local businesses owned by people of color and greater collaboration, a city can develop a supportive ecosystem that brings together diverse stakeholder: banks and community development financial institutions like LiftFund who provide capital; established business leaders who serve as mentors to provide inspiration and practical guidance to entrepreneurs; public programs that provide training and support to strengthen back-office functions related, such as financing or hiring; ethnic chambers of commerce that provide a networking and advocacy platform; and procurement offices in public agencies and other anchor institutions that offer the contracts that spur business growth.

4. Public, nonprofit and corporate anchor partnerships can take equitable procurement strategies to scale. While equitable procurement strategies within city government can make a difference, several of the cities in the City Accelerator cohort are focusing on how to use an anchor strategy – across different public agencies, traditional “eds and meds” anchors or corporate anchors – to increase the scale of this impact. Jonathan Salzman, an associate at Next Street, a private company focused on business development in revitalizing communities, shared his reflections on the options and opportunities that anchor partnerships present. Because anchors institutions are rooted in the community, their well-being is bound up in the well-being of the community and economy in which they reside.

The city of Chicago has a robust anchor strategy, the Chicago Anchors for a Strong Economy (CASE) initiative, which brings together 16 “prominent public, private, non-profit and cultural Chicagoland institutions “ looking to build economic vitally across Chicago’s neighborhoods by committing to local hiring, purchasing and investment. As a collective, they have been able to assist 443 businesses in their community, spurring the creation of 180 new jobs and $51.8 million in revenue. In addition, Chicago’s Procurement Reform Task Force brought together the City of Chicago and six participating public anchors – Chicago Public Schools, Chicago Transit Authority, Chicago Housing Authority, City Colleges of Chicago, Chicago Park District, and Public Building Commission – to determine how best to align and improve their collective procurement efforts, which add up to more than $6 billion in contracts. These partners are committed to working together to increase the efficiency and equitable impact of their contracting and contractor compliance efforts.

5. Shared learning accelerates change. The cities that gathered cited peer learning as one of the major benefits of participating in the City Accelerator. Each of the cities in the initiative has had opportunities to borrow ideas from other cities -- whether those in their cohort or others that have been engaged in the convenings, like San Antonio, Austin or Atlanta. Building on each other’s best practices, they are continuing to push these ideas further and adapt them to new environments. By open sourcing learning, the City Accelerator is advancing and spreading promising innovation in city practice.

Be part of the campaign for civic innovation at the City Accelerator, presented by Citi Foundation.