You Make Me Blush

Contractor Steele Construction got its first big break with Hennepin County's jail project
Craig Lassig

At the downtown Minneapolis intersection of Fifth Street and Fourth Avenue, a wrecking ball has been taking its last bites out of the former Main Welfare building. Every time the ball slams into what appears to have been a back stairwell, it sends doghouse-sized chunks of concrete and rebar plummeting into the man-made canyon below.

The din is music to Jerry Steele's ears. The African-American owner of Steele Construction, which boasts a full-time crew of three, he has waited 16 years for the kind of contract that helps small firms like his graduate into the ranks of the stable and prosperous. Three years after applying for recognition from Hennepin County as a small, minority-owned business, Steele Construction made it onto a list of companies eligible for help in doing business with the county. In January, when the rubble at the site of the future public safety building is finally carted away, Steele will get his first big break in the form of a contract to manage subcontractors working on the project.

"I've seen my share of ups and downs," he laughs. "It's my hope that the opportunity I'm getting from Hennepin County will help this company to be a more substantial employer in this city, specifically in the inner city."

Before he landed his county contract, Steele had tried to get on another list of small firms eligible for assistance participating in government work--Minneapolis's Small Business Enterprise Program, housed across the street from the site of the new jail in City Hall. While the Minneapolis program is open to contractors of any race or gender, one of its stated goals is to increase the number of minority companies that do business with the city.

Thank God for Hennepin County, Steele says, because his encounters with the city program's overseers in the Minneapolis Department of Civil Rights gave him nothing but heartbreak. He says they wanted data he didn't have, numbers only a highly sophisticated bookkeeper could have produced, records going back longer than he'd owned the company. Steele grew so frustrated that he hired a consultant to walk his budding business through the paperwork. The specialist failed, too. Finally the two of them trekked down to City Hall and asked one of the program's certification officers for help finishing the paperwork. When the bureaucrat shrugged, Steele gave up.

It's not like he'd have been rewarded for surviving the red tape by a guarantee of a lucrative contract. At the end of the gauntlet, Steele Construction would merely have gotten free advice, a spot in a directory of small businesses, help with finding insurance and financing, and a hotline number listing upcoming city projects. "They don't do anything to make sure you get the job," says Steele. "You've still got to go out and be low bidder, you've still got to get more expensive insurance, still got to get more expensive bonding." (He and other fledgling minority business owners say they often can't find companies willing to provide them with insurance or bonding, and that when they do, it's invariably more expensive than it is for their white counterparts.)

The city program was supposed to help small businesses navigate such barriers. But Kenneth White, head of the civil rights department, recently told City Council members that when it comes to increasing the number of woman- and minority-owned companies doing work for the city, the 18-month-old SBE program has failed disastrously. "Our numbers are horrible," he reported to the council's Ways and Means Committee late last month. "It's an embarrassment." According to a report released at that meeting, in 1996 slightly more than 1 percent of city contract dollars went to woman- and minority-owned firms. Last year the number was even lower. The report contrasted those figures with minority participation rates in the late '80s and early '90s ranging from 14 percent to 18 percent.

When White finished presenting the report, a lone member of the public rose to speak. Ron Edwards, former chair of the Minneapolis Civil Rights Commission, the quasi-judicial panel that examines the civil rights department's findings, said the city's poor performance shouldn't have come as a surprise. "I was really disappointed to hear comments by White that he just now discovered that there is a disaster out there," Edwards said, adding that the council has reviewed the same "crisis" virtually every year since the late '70s.

In 1980, Minneapolis established goals for minority contracts ranging from 0.5 percent to 10 percent of the city's total contracting, depending on the type of expenditure. The program enjoyed some success, but came to a halt in 1989.

That year, the U.S. Supreme Court ruled on a suit filed by the Associated General Contractors against the city of Richmond, Va. The lawsuit claimed that a city program reserving a percentage of city business for women- and minority-owned firms discriminated against companies owned by white men. The high court agreed, with a couple of caveats; Richmond hadn't shown that the program's beneficiaries were indeed the victims of discrimination, and the city hadn't attempted any "race- and gender-neutral" measures prior to creating its set-asides. Moreover, the court ruled, it wasn't enough to prove that minority-owned businesses had experienced discrimination. Municipalities and other government agencies had to show that the bureaucracy in question had contributed to continuing "marketplace discrimination."  

Following the ruling, the trade group Associated General Contractors of Minnesota filed suit against several local governments, including Minneapolis. The city settled the suit by agreeing to abandon its minority-oriented program. In its place, the Emerging Small Business Program was created; since a large number of fledgling enterprises are owned by women or minorities, officials argued, disadvantaged firms would still benefit from the program. The city set a goal of awarding 20 percent of contracts to minority contractors. The numbers, however, quickly began to fall, from a high of 18 percent in 1990 to 5 percent four years later.

In 1994, Minneapolis, Hennepin County, and the Minneapolis Public Housing Authority together hired a Denver-based consulting firm, which found that there was a disparity between the number of minority-owned companies in the Twin Cities and the number of contracts being awarded to them, and that the gap would have satisfied the Supreme Court's criteria for creating a program tailored to minority businesses. (The report did not include specific numbers.)

Yet in 1997 the city replaced its small-business program with the current version, which no longer includes goals for the number of city contracts minority businesses should be awarded. And, White noted at the Ways and Means Committee hearing, the numbers continued to plummet.

Meanwhile, the city of St. Paul--which in another study by the same company, BBC Consulting, had been found to have its own contracting problems--created a program that both satisfied the Supreme Court's guidelines and addressed the discrimination. The Vendor Outreach Program certifies small woman- and minority-owned businesses, provides them with assistance, and publishes a directory; in addition, contractors must either show that they have made a good-faith effort to find minority subcontractors or participate in seminars on the matter.

Although White told the Ways and Means Committee he had just become aware of the gravity of Minneapolis's problem, others involved in the discussion say they're concerned that the city has been sitting on the information long enough to let another construction season go by. Critics charged that the release of White's report was delayed for months because White was unhappy with a first draft and ordered extensive revisions. City Council members Brian Herron and Steve Minn concede this is true; White won't discuss it. Edwards, who suspects that its numbers are even more dramatic than those now on the record, has repeatedly asked the council members to make that first draft public. White denies there was such a document, but Minn and Herron both say there was, and that the council earlier this year asked White to turn it over. He eventually did, but council members refused to release the information.

White won't discuss who authored the report. But both council members say the initial version was written by BSEP Director Marvin "Corky" Taylor, who worked for the city's minority contracting program before the Supreme Court decision. He and White disagreed about the way the report should be crafted, they add, and for a time Taylor was suspended from working on it, according to Herron. "Management made a decision to take Corky off there for a minute," says Herron. "But he's back working on it and that gives us a comfort level." Minn confirms that account, adding that "people shouldn't read anything into [White's] taking Taylor out to the woodshed and telling him he didn't like his first draft."

Neither council member will say whether Edwards's concerns are justified; both agree that the city is long overdue in aiming some remedies toward female and minority business owners. The Ways and Means Committee gave White 60 days to formulate recommendations for resolving the problem. White refuses to say what measures are under discussion; in committee he suggested that the city might create a directory of women and minority businesses and make it available to contractors. Directories of small businesses participating in various city programs have been available for years, Edwards noted.

News of the committee deliberations causes Steele to groan with frustration. The city doesn't seem to be addressing the reasons that the last decade's programs haven't worked, he says, reiterating the snafus that kept Steele Construction from securing city certification. "If they want to increase participation, they've got to remove these barriers. If they want to leave the barriers in place and have this program, then it's not worthwhile," he says. "Once these businesses get going, they'll be fine."  

Joy Runquist, a Native American and partner in Loretto-based American Liberty Construction, echoes Steele's assertions. She says in the past she has gotten her best breaks from being included in publicly financed projects including the Minneapolis Veterans' Administration medical center, and a federal prison in Waseca, as well as county and state jobs. Like Steele, she tried to take advantage of Minneapolis's program, but found herself stymied at City Hall. Runquist succeeded in getting American Liberty certified under the city's SBE program, but found that every time she checked its telephone hotline for news of upcoming contracts, the recorded voice listed only projects long since expired. "We never even bid on anything," she says.

City Pages news intern Dan Gearino contributed to this story.

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