Governing magazine, a prestigious nonpartisan publication that covers state and local government issues, just published in its April 2016 issue a critical article that indicates that in some parts of the country, programs intended to help women- and minority-owned contractors are failing to do so successfully and that often, these contracts actually benefit nonminority companies.
“Cities and states across the country are struggling to provide sufficient oversight when it comes to minority- and women-owned firms, also known as disadvantaged business enterprises, or DBEs,” the article says. “As a result, much of the money that’s targeted to help these businesses doesn’t really go where governments want it to.”
The article focuses on abuses that occurred in a number of cities across the nation, including the state of Minnesota and the cities of Denver and Louisville, Ky. At best, the article implies, this type of activity represents a failure by government to help companies that deserve a boost; at worst, it is potentially a violation of the law.
However, as we have said before, while we don’t endorse the abuse of government programs designed to help minority and other disadvantaged contractors, in our experience, abuse is not nearly as common as some in the media seem to believe. Although disadvantaged businesses are permitted to subcontract out some of their work, for example, they are often criticized for doing so, or viewed with suspicion.
As we have noted in this space, when this type of abuse occurs, it gives a bad name to the thousands of legitimate contractors that are simply trying to survive by getting government work. But those who game the system are a small fraction of the legitimate companies in the construction, repair, and other industries.
It is noteworthy that one of the cities singled out in the Governing article as failing to meet the expectations of good government was New Orleans. There, the article pointed out,
“The city has long had a minority contracting program in place, but when construction projects ramped up as the city rebuilt after Hurricane Katrina, it became clear the program had extensive problems. There was a two-year backlog of companies waiting to be certified as minority- or women-owned businesses, and the city had virtually no record-keeping or monitoring processes in place. The hurdles for disadvantaged businesses reflected larger socioeconomic realities.”
In other words, the problems in New Orleans were, in part, the result of the government’s failure to approve enough legitimate participation by disadvantaged businesses. As a result of improvements in the certification process, the article said, the percentage of city contracts that went to disadvantaged companies went from 16 percent to 37 percent, just exceeding the city’s goal of 35 percent. That’s a good lesson to draw from the current article.