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Tuesday, January 12, 2016 by Audrey McGlinchy
Disparities persist within city’s contracting
The city of Austin continues to disfavor minority- and women-owned businesses in its contracting, a 750-page study finds.
Jon Wainwright, a senior vice president with NERA Economic Consulting, which authored the study, spoke to City Council’s Economic Opportunity Committee on Monday. “We examined a total of over $4 billion across more than 3,500 prime contracts and over 8,500 subcontracts over this six-year period (from 2008 to 2013),” he said. “M/WBEs (minority- and women-owned businesses) received 18.75 percent of those dollars.”
Analyses like this one, called disparity studies, legally allow the city to implement race-based goals for the companies with which it conducts business. Supreme Court case City of Richmond vs. J.A. Croson Co. established that in order to act upon race-based contracting goals, a city must have the data to prove that a disparity exists in the first place. Austin conducted its last disparity study in 2008.
Consultants working on this latest study found that women- and minority-owned businesses in the city earn significantly less for their work. It also found that minority business owners, specifically African-Americans, have a harder time being approved for commercial loans – even when adjusting for differences in credit histories.
“We also noted in the chapter that minority- and women-owned firms, when they were able to have their loans approved, paid higher interest rates for them – on average, almost a full percentage point higher,” Wainwright told Council members. “So very disturbing results and a large part of the explanation of why some of these disparities that we found … exist.”
The city will use this data to inform the goal it sets on contracts going forward. When a city approves a major contract, it can set a goal for what percentage of the subcontracts should be awarded to minority- and women-owned businesses. The only requirement for setting a goal is that there be at least three minority- and women-owned businesses available to do the kind of work that subcontract would require.
“For example, building the new city library,” said Veronica Lara, director of the city’s Small and Minority Business Resources Department. “You have many opportunities because you’re looking at concrete work, you’re looking at woodwork and so forth. So the larger the project and the more complex the project, the opportunities expand.”
Using this example, if the city were to set a goal that 10 percent of its subcontracts to be given to minority- and women-owned businesses, and if there were 10 subcontracts within the larger project of the city’s new public library – one to install shelves, another to lay carpet, etc. – then the city would recommend that a minority or woman own one of those companies.
City staff will bring the disparity study to the full Council on Feb. 28. Staff will then present proposed amendments to the city’s current minority- and women-owned business ordinance sometime in May.
Photo of the new Central Library courtesy of the city of Austin.
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Key Players & Topics In This Article
Austin City Council Economic Opportunity Committee: The Economic Opportunity Committee reviews the city’s economic opportunities and matters related to fair wage and business contracting policies.
City of Austin Small and Minority Business Resources Department: The city department charged with administering Austin's minority-and-women-owned-business procurement program. That program was first established by the Austin City Council in 1987.