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Government Purchasers Could Do Far More to Help Minority-Owned Businesses

They need to correct the long history of discrimination baked into the system.

Minnesota Department of Administration Commissioner Alice Roberts-Davis, in red,
Minnesota Department of Administration Commissioner Alice Roberts-Davis, in red,
(AP)
Ask any demographer: One of the main keys to America’s future prosperity is increasing the wealth of its people of color, and that means expanding their opportunities for economic productivity. Currently, employers make up 2.2 percent of the white population but only 0.5 percent of Hispanics and 0.2 percent of African-Americans. These numbers are the result of centuries of oppression and discrimination, and one of the principal tools state and local governments have to improve them is to leverage their enormous purchasing power -- estimated at $1.5 trillion annually -- through various types of set-asides and purchasing preferences.

Yet what we’ve mostly seen is administrative and political sound and fury without much progress. You might assume, for example, that a progressive, growing city such as Boston would be an exemplar of equity-driven procurement, but less than 1 percent of the $664 million in city contracts last year went to businesses owned by minorities or women. And pushback isn’t uncommon. Even though a 2016 study done for Shelby County, Tenn., showed that 88.3 percent of the county’s prime contract dollars went to white male contractors, a mechanical contractors’ trade group has nevertheless sued the county for reverse discrimination over its efforts to increase minority contracting.

There are many more such cases, reflecting the tension between getting the best deal for the taxpayers and assuring that those doing business with government are representative of all of those taxpayers. There is no quick fix, but there are places to look for inspiration and guidance. One of those is the inclusive procurement guide produced by the City Accelerator, a joint initiative of Governing and Living Cities supported by the Citi Foundation. You’ll find it and many other relevant stories and strategies at governing.com/cityaccelerator.

Another place to look is the state of Minnesota. The Governing Institute, the good-government think tank associated with this magazine, surveyed state procurement practices in 2015 and again this year, and in both surveys Minnesota demonstrated the strongest response of any state in promoting contracting inclusion. The Minnesota Office of Equity in Procurement (OEP) was created in 2015 with a goal of increasing the state’s contracting with minorities, women, veterans, people with disabilities and residents of economically disadvantaged counties in the state. The OEP is part of the Department of Administration, which is headed by Alice Roberts-Davis, who as an assistant commissioner had overseen OEP. She joined the department in 2015 after a career with Target, where she ran the retailer’s supplier diversity program.

Roberts-Davis told me that the first thing OEP staff did was to mine the data to understand what the baseline was. They found that out of the state’s $2.5 billion in annual spending, just $135,000 was with black-owned businesses. “It was embarrassing and shocking,” she says, “but I think we made the right move to be very transparent out there, to share that information very broadly.” Three years later, according to Roberts-Davis, state spending with black-owned businesses has increased by 2,000 percent.

Minnesota’s contracting equity effort employs an array of good strategies. Each state agency has a dashboard to track how it’s performing and how that compares to other agencies. Every agency also has a direct point of contact within OEP, and each of the state’s 800 staff members with procurement responsibility gets mandatory training. The state also created a program called Equity Select, which for certain types of contracts allows procurement professionals to directly select the kind of businesses the state is trying most to impact without going through the standard procurement process.

Dugan Petty, a procurement expert and the director of the two Governing Institute surveys, told me that he sees state preference programs, which have long been largely politically driven and situational, moving into a sustainable framework with a longer-range vision. That’s what we need if we’re going to correct the long history of discrimination baked into the system. 

Mark Funkhouser, a former publisher of Governing and former mayor of Kansas City, is president of Funkhouse & Associates, an independent consulting firm. He can be reached at mark@mayorfunk.com.
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