The Steel Ceiling
A handful of workers in hard hats scurry up and down the scaffolding, hanging steel frames, pounding nails, smoothing concrete. Like an overgrown erector set, tentacles of metal reach out of the hole dug last year in the heart of downtown Minneapolis, evolving slowly into the new Hennepin County jail. On this sunny afternoon, the crews are puttering along, inching toward successful completion in 2001. But in one area--offering opportunities to small construction companies owned by women and minorities--many say the project has already failed.
With a $96 million budget and 64 separate contracts, the Hennepin County Public Safety Facility, located at the corner of Fourth Street and Fifth Avenue South, is the largest project the county has undertaken since 1996. That was the year officials established a race- and gender-neutral mechanism, formally known as the Small Business Enterprise (SBE) program, to manage the county's construction projects. In the decade before that, the county had followed an affirmative-action plan that developed specific goals to include women- and minority-owned businesses. But following a U.S. Supreme Court ruling that struck down a similar city-sponsored business program in Richmond, Virginia, municipal governments around the nation re-evaluated their minority set-aside programs.
For the jail project, the county's objective for small-business participation was 30 percent. But although virtually all the contracts have been assigned, as of August only 17.2 percent of the work had been awarded to small businesses. More tellingly, only 3.8 percent of the contracts were granted to women-owned small businesses, and a mere 2.4 percent to minority-owned ones. (In the years before the SBE program was instituted, the county's goal for minority-owned business participation was 10 percent; for women-owned companies, 2 percent.)
"It's been just a farce," says Rich Antell, executive director of the Minnesota American Indian Chamber of Commerce, referring to the jail project. "There are definite concerns from the Indian community. I don't think I have an Indian business that got a nickel out of that. The intent was originally there, but it just never happened."
According to Kathy Capra, manager of Hennepin County's Targeted Contract Services division, which monitors the SBE program, the outcome stands in stark contrast to the county's intentions. "There is no question in my mind that the commitment was there," asserts Capra, who came to the division in April, when plans for the new jail were already well under way. "We wanted SBEs--including small women-owned and minority-owned businesses--in there on the job."
At least part of the problem would seem to lie in the design of the county's SBE program itself. So as not to run afoul of the Supreme Court decision, the program doesn't allow the targeting of minority- and women-owned companies. Instead, it sets goals to ensure that a certain percentage of any county construction project is apportioned to businesses with annual sales of less than $5.3 million--the assumption being that such firms are more likely to be owned and operated by minorities and women than are larger companies.
And that's not necessarily the case, asserts Bob Nold, senior project manager for Knutson Barton Malow, the construction firm that won the bid to coordinate the jail project. "There are more majority-owned small businesses than minority-owned small businesses," says Nold. "Some people have thought that when you say small business, you have numbers that contain all women-owned and minority-owned businesses, and that's not true. You have two different numbers that overlap each other."
Adding to the complexity, Capra points out, is the fact that several local minority-owned firms are too large to fit the county's definition of a small business. She's unable, however, to say how many (if any) of those are involved in the jail project, because the county's race-neutral guidelines preclude tallying that information.
Looking back, Kathy Capra says that resolving to give 30 percent of the project to small businesses may have been too ambitious--especially given the current local construction boom, which is keeping many small businesses busy elsewhere. "Given the marketplace, the 30 percent goal would be unrealistic," Capra says. "But that is the goal we set. We have to own that." (The goal for the jail project was unusually aggressive; the county's standard goal for large projects is 20 percent small-business participation.)
Furthermore, she says, the security requirements involved in constructing a jail make it a complicated structure to build, and one that many small businesses may not be equipped to handle. "It's a jail," Capra notes. "It's not an arena or an office building."
But Bob Nold says the project could have included more small businesses if the county had made it a priority. His company envisioned a project in which large firms would partner with small ones, sharing the labor and giving the small businesses the experience and expertise to grow. Indeed, as the first contracts were awarded, the project was ahead of its goal for small-business participation--reaching a high of 41 percent. "I don't think we would have exceeded 30 percent [by the end]," Nold says, "but we could have been in the 20 to 25 percent range. You have to get there by thinking outside the box: What can you do to make this happen?"
Nold sees two problems with the county's implementation of the SBE program. First, some contractors were excused from signing up small-business subcontractors for work they normally handled themselves; and second, the program's "good-faith effort" clause was not strictly enforced.
The clause requires any winning bidder to show that the scope of its work will include enough small-business participation to meet the county's overall goal. (In the majority of the jail contracts, that level was 30 percent.) Any firm that fails to meet those numbers must show that it made a good-faith effort but was unable to find enough small businesses to participate. The effort must include documentation of all attempts to include small-business suppliers and subcontractors. If a contractor can't show that appropriate efforts were made, the county could drop that firm in favor of the next-lowest bidder.
That level of enforcement has not taken place. According to the county, of the 48 contracts that have been awarded to date, 23 did not meet their SBE goals. All were approved. In one instance a contractor whose SBE level was set at 30 percent came in at less than 1 percent but was allowed to proceed anyway.
Why? Nold contends that the county didn't want to increase spending on the jail. At the same time, he adds, hundreds of thousands of dollars in contracts were awarded to consultants paid to increase small-business participation. "[The county] may have been better served if they had spent less on consulting, with a set-aside for those cases when they had to go to the second-lowest bidder," Nold says. "I wanted them to implement this with teeth--make the statement and do it early."
Owners of some small businesses on the jail site say the convoluted process made it clear to them that the county wasn't committed to bringing minority firms on board. Joseph Boone, owner of Boone Trucking Inc., a black-owned business based in Minneapolis, toiled for a year and a half to get a sliver of the project. Boone, whose eight-employee outfit hauls construction debris, says that in order to win the bid he had to attend countless meetings and spend a couple of thousand dollars on a consultant familiar with the county's procedures.
Part of the problem, he says, is that because there are no set-asides for minority business contracts, municipalities and private developers have no incentive to use minority-owned contractors, and he has often felt as if they'd rather not deal with him.
"We've got three trucks and we can't keep them busy," says Boone. "We should be able to keep three trucks busy with the amount of work that's going on. Unless there's a set-aside, you don't get called," he concludes. "That's just a fact. If they have nothing to lose, why even worry about it? This is what we are experiencing."
As a result of such frustration, many minority businesses have stopped pursuing work on public construction projects, says K. David Hirschey, a Minneapolis affirmative-action expert who consults with small businesses. Although he deems Hennepin County's race- and gender-neutral program "a good attempt," he says it is likely to be unsuccessful in including minority- and women-owned businesses.
Under current law, if the county shows that the program is failing, it would be allowed to switch back to a set-aside program. Capra says that's an option that may eventually be explored. For his part, Hirschey predicts that the change will happen, though he can't say when. "It depends on how many times they fail," he says. "And on who's counting."
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