MBE/WBE participation and usage, use of PNW and the Economic Disadvantage definition in the MBE/WBE Procurement — original pdf

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City of Austin – Minority Participation Comparison of MBE/WBE Programs vs. other Cities And resulting MBE/WBE spend since the 2015 Disparity Study Jan 31st 2021 Position on Minority Participation - Both the US Hispanic Contractor’s Association and the Greater Austin Hispanic Chamber of Commerce have identified “Increasing Minority Participation” for our members as a key initiative for 2019/2020 and will work diligently to advocate on our members behalf ensuring we put forth our best efforts to increase the percentage of contracts awarded to minority/women-owned businesses - Collectively, we support approximately 1,800 local business members in the Greater Austin area, the majority whom are small minority/women-owned businesses. Approximate membershipGreater Austin Hispanic Chamber of Commerce600 U.S. Hispanic Contractors Association1,200 Subtotal1,800 The City of Austin’s Aspirational Goals - The City of Austin has some of the most ambitious goals in the state when it comes to Minority participation….second only to San Antonio. - The Question is whether the structural elements of the program allow MBEs/WBEs to succeed vs. these aspirational goals. - Let’s see what the data says….. Minority Participation GoalsFortSan DallasWorthHoustonAntonioAustinConstruction25.0%25.0%34.0%44.0%41.2%Professional Services36.3%15.0%24.0%40.0%47.4%Architectural/Engineering25.7%15.0%n/a31.0%n/aGoods/Commodities18.0%25.0%11.0%42.0%13.2%Other Services23.8%n/an/a55.0%43.2%Highest2nd HighestSource: City Code 2-9A-192015 Disparity Study 2015 COA Disparity Study Key Findings Before we dive into the data…let’s understand what was recommended previously by the previous Disparity studies… Executive Summary – Section F – Paragraph 1. Minorities and Women Chapter III demonstrates that current M/WBE availability levels in the City of Austin’s market area, as measured in Chapter II, are substantially lower in most instances than those that we would expect to observe if commercial markets operated in a race- and gender-neutral manner and that these levels are statistically significant. In other words, minorities and women are substantially and significantly less likely to own their own businesses as the result of discrimination than would be expected based upon their observable characteristics, including age, education, geographic location and industry. We find that these groups also suffer: - - whether they work as employees or entrepreneurs. substantial and significant earnings disadvantages relative to comparable nonminority males, The 2015 City of Austin’s Disparity Study identified that we have an issue that has existed for a significant period of time that required action and changes in policy. 2015 COA Disparity Study – Key Recommendations The 3rd party (i.e. Consultant) recommendations in the 2015 Disparity study were extensive….these are a few of the key recommendations that we thought as having the potential for significant change if executed properly…. Race and Gender Neutral Recommendations - Increase Efforts to Ensure Prompt Payment on City of Austin Contracts Race- and Gender-Conscious Remedies - Adopt a Renewed M/WBE Ordinance and Accompanying Program Regulations - Tailor the MWBE Ordinance to the Specific Type of Procurement - Review firm size standards - Consider reciprocal certification opportunities M/WBE Goal Setting - Adopt annual aspirational M/WBE goals Changes since last Disparity Study - Both of these organizations, and all of the associations supporting these recommendations, are not aware of any significant changes, aside from setting aspirational goals, to the MBE/WBE/DBE programs and associated ordinances since the last disparity study. The Results (2015 to 2019) Spending and MBE/WBE Because after all – the results should speak for themselves A Diverse Community is a strong community Posted on 11/06/2018 by Beverly Kerr Vice President, Research at Greater Austin Chamber of Commerce - Startups account for a larger share of businesses in Austin than in nearly all major U.S. metros in 2016. - Women-owned firms represent 22.8% of Austin businesses with paid employees and the number of women-owned firms increased 11.5% in the last year. - Minority entrepreneurs make up 18.2% and veteran entrepreneurs represent 6.6% of Austin area employer firms. According to this study women-owned and minority-owned businesses represent 41% of firms in the Austin metro area. Total City of Austin Spending Data - Actuals Total City of Austin Spending 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1,400,000,000 1,200,000,000 1,000,000,000 800,000,000 600,000,000 400,000,000 200,000,000 - 2015 Total COA Spend 900,197,949 Total MBE/WBE Spend 65,965,454 Total MBE/WBE % 7.3% 2016 911,184,019 75,656,953 8.3% 2017 2018 2019 1,026,664,689 1,190,169,101 1,290,761,364 76,936,730 73,891,090 79,446,850 7.5% 6.2% 6.2% Total COA Spend Total MBE/WBE Spend Total MBE/WBE % Despite highly aspirational goals, MBEs and WBEs continue to get less and less opportunity with the City of Austin with only 6.2% of City of Austin spend. Since 2015, while City of Austin spend has gone up 43% in total, MBEs/WBE spend has grown by only 20%....less than half the growth rate Construction Spending Data - Actuals Orange line is the City of Austin Target City of Austin spending in Construction up 67% in 5 years MBE/WBE spending only up 1% in 5 years! Total MBE/WBE spending down from 17.4% to 10.5% The City of Austin goal is 41%. Something is structurally wrong! Non Professional Spending Data - Actuals Non-Professional Spending - COA and MBE/WBE 600,000,000 500,000,000 400,000,000 300,000,000 200,000,000 100,000,000 - 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Orange line is the City of Austin Target 2015 2016 2017 2018 2019 Non-Professional - COA 374,878,626 428,628,128 455,056,286 500,054,870 510,921,333 Non-Professional - MBE/WBE 19,544,963 22,924,495 21,119,967 20,362,254 25,464,767 Non-Professional MBE/WBE % 5.2% 5.3% Non-Professional/Other Svcs - Goal 4.6% 43.2% 4.1% 43.2% 5.0% 43.2% Non-Professional - COA Non-Professional - MBE/WBE Non-Professional MBE/WBE % Non-Professional/Other Svcs - Goal City of Austin Non Professional spending up 36% in 5 years MBE/WBE spending only up 30% in 5 years! Total MBE/WBE spending down slightly from 5.2% to 5.0% The City of Austin goal is 43%. No progress in this category. Professional Spending Data - Actuals Professional Spending - COA and MBE/WBE 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 - 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Orange line is the City of Austin Target 2015 2016 2017 2018 2019 Professional - COA 57,937,063 34,910,291 58,324,843 78,356,761 101,684,729 Professional - MBE/WBE 5,332,912 3,672,743 6,115,780 6,894,239 8,793,213 Professional MBE/WBE % 9.2% 10.5% Professional - Goal 10.5% 47.4% 8.8% 47.4% 8.6% 47.4% Professional - COA Professional - MBE/WBE Professional MBE/WBE % Professional - Goal City of Austin Professional spending up 76% in 5 years MBE/WBE spending up 65% in 5 years. Total MBE/WBE spending down slightly from 9.2% to 8.6% The City of Austin goal is 47%. No progress in this category either. Commodity Spending Data - Actuals Orange line is the City of Austin Target City of Austin Commodity spending up 26% in 5 years MBE/WBE spending up 72% in 5 years. Only category to grow faster. Total MBE/WBE spending increasing from 1.1% to 2.1%. The City of Austin goal is 13%. No significant progress in this category as well. City of Austin Spending Data - Actuals Source: City of Austin, Texas Purchasing Office (Mark Walsh)20152016201720182019GoalTotal Category SpendConstruction - COA220,281,112 213,398,195 284,907,748 393,759,105 367,759,146 Commodities - COA247,101,148 234,247,406 228,375,812 217,998,364 310,396,156 Non-Professional - COA374,878,626 428,628,128 455,056,286 500,054,870 510,921,333 Professional - COA57,937,063 34,910,291 58,324,843 78,356,761 101,684,729 Total COA Spend900,197,949 911,184,019 1,026,664,689 1,190,169,101 1,290,761,364 City Certified MBE SpendConstruction32,886,051 36,922,607 38,862,604 35,484,100 36,725,468 Commodities2,163,774 3,563,136 3,816,067 2,648,948 3,723,510 Non-Professional11,893,501 13,742,043 12,722,285 11,490,132 15,199,106 Professional2,407,374 1,504,581 3,055,597 2,650,081 3,804,879 Total49,350,700 55,772,066 58,456,553 52,273,261 59,452,963 City Certified WBE SpendConstruction5,360,025 7,142,147 5,430,659 7,488,515 2,063,433 Commodities677,728 1,392,127 1,591,653 934,032 2,676,459 Non-Professional7,651,462 9,182,452 8,397,682 8,872,122 10,265,660 Professional2,925,539 2,168,162 3,060,183 4,244,158 4,988,334 Total16,614,754 19,884,887 18,480,177 21,617,829 19,993,887 Subtotal MBE/WBE SpendConstruction - MBE/WBE38,246,076 44,064,754 44,293,263 42,972,615 38,788,901 Commodities - MBE/WBE2,841,502 4,955,263 5,407,720 3,582,980 6,399,969 Non-Professional - MBE/WBE19,544,963 22,924,495 21,119,967 20,362,254 25,464,767 Professional - MBE/WBE5,332,912 3,672,743 6,115,780 6,894,239 8,793,213 Total MBE/WBE Spend65,965,454 75,656,953 76,936,730 73,891,090 79,446,850 Certified MBE/WBE % of total spendConstruction MBE/WBE %17.4%20.6%15.5%10.9%10.5%41.2%Commodities MBE/WBE %1.1%2.1%2.4%1.6%2.1%13.2%Non-Professional MBE/WBE %5.2%5.3%4.6%4.1%5.0%43.2%Professional MBE/WBE %9.2%10.5%10.5%8.8%8.6%47.4%Total MBE/WBE %7.3%8.3%7.5%6.2%6.2%MBE/WBE Comparison – by City - The city of Austin is the only municipality that does not reciprocate with other regional certification agencies to increase it’s minority business pool…especially important for SMSDC and State HUB. Many of our members have their regional MBEs and state HUBs but no COA MBE. - Lastly, the City of Austin limits MBE/WBE firm size - The City of Austin imposes a Personal Net worth Cap that limits the pool of qualified minority businesses unlike every other City in Texas. FortSanDallasWorthHoustonAntonioAustinMBE/WBE Certification availableYesYesYesYesYesSBE Certification availableYesYesYesYesYesMBE/WBE ConstraintsAccepts MBE/WBE certificates from other regional organizationsYesYesYesYesNo North Texas Regional Certification Agency (NCTRCA)YesYes--No DFW Minority Supplier Business CouncilYesYes--No Womens Business Council - SouthwestYesYes--No SCTRCA - South Central Texas Regional Certifying Agency---YesNo HSMDC - Houston Minority Supplier Business Council--Yes-No Houston Women's Business Enterprise Alliance (WBEA)--Yes-No SMSDC - Southwest Minority Supplier Development Council (pertinent to City of Austin firms)NoLimits to MBE/WBE firm sizeNoNoYesNoYesper industrySBA GuidelineclassificationPersonal Net Worth Limit for MBE/WBE OwnersNoNoNoNoYes$1.5MPersonal Net Worth Limit for DBE OwnersYesYesYesYesYes$1.32M$1.32M$1.32M$1.32M$1.32MWhy the lack of success? Very few of the recommendations from years of disparity studies have lead to change. Every single recommendation we now support was actually recommended by the 3rd party consultant in the various disparity studies but no visible action was taken since the study was done. The pool of minority businesses registered is too small. It seems the City of Austin is overlooking many successful minority businesses, that have the resources to handle City of Austin contracts, because they no longer qualify as an M/WBE with the COA due to the city’s current W/MBE ordinances. Personal Net Worth Cap eliminates many firms, whether large, medium or small. Lack of reciprocity. Every other City in state of Texas accepts minority certificates from regional minority certifying agencies, with the exception of Austin. There are many City of Austin businesses that have State HUBs and are registered MBEs with various agencies but unfortunately not with the City of Austin limiting the pool. - Additional work needs to be done to continue to improve payment process. If MBE/WBE firms lack funding, then waiting 3-4 months for payment (sometimes) for work performed does not incent participation. - With the current W/MBE structure and ordinance constraints, it seems the City of Austin will continue to struggle to attain their W/MBE goals. Lastly, the city loses the procurement leverage and expertise from M/WBE firms which compounds affordability issues in the City. - - - - Recommendation - Our minority and women-owned businesses are not asking for handouts. They just want a fair shot at opportunity. - First, we ask that you support eliminating the Personal Net Worth Cap for MBE certified firms and support immediate State HUB reciprocity for City of Austin MBE/WBE projects, while firms recertify. Expand the pool immediately, prior to the Disparity study, and then revise the program once the Disparity study is completed. - Secondly, we ask that you support a request of City Council to drive accountability to increase MBE/WBE/DBE participation as part of a COVID- 19 economic recovery plan. - Make the City Manager accountable for achieving MBE/WBE participation goals. These goals mean nothing if someone is not directly responsible for driving them. - Create aspirational goals for DBE firms as well as MBE/WBE. - Create quarterly reporting that is presented to City Council on MBE/WBE/DBE participation to drive accountability and improvement. - Appoint someone at SMBR to identify DBE Federal projects and recruit DBE firms that would meet project requirements and incorporate MBE/WBE/DBE requirements into any large City of Austin project (e.g. Project Connect). Add this initiative also to the City Manager’s slate of goals. Recommendation (continued) - Lastly, we would like the City to revisit prompt payment performance on city projects to encourage MBE/WBEs and DBEs to compete and prosper. - Create reporting that shows the trend of payment performance to MBE, WBE and DBE firms on City of Austin projects - Present this reporting to City Council once per quarter - Challenge the City Manager and his/her staff to streamline payment processes to drive improvement in payments to disadvantaged firms over time. This may actually result in cost savings to the City of Austin. - Once we expand the pool…we can work towards setting real targets for city projects that represent the diversity of our community. - This is not just a Hispanic issue. This is a Minority and a Women’s owned business issue. One last note about the Personal Net Worth Cap - Please realize that we are not asking for the City to change their firm size limits at this time, although we would welcome eliminating all size limits for legitimate Austin-based MBEs/WBEs/DBEs. - Dallas, Fort Worth and San Antonio do not limit firm size and it appears that they in fact are more progressive than the City of Austin - The Net worth cap is not tied to any federal regulation. It is unique to Austin and while it excludes the value of your primary home and the business it requires the inclusion of commercial property and other personal assets. - Many firms are asset rich and cash poor and lose their MBE/WBE as a result of the commercial property appreciation in Austin. - This request is not designed to pick winners/losers out of MBE/WBE firms. The significant miss in MBE/WBE spend requires structural change to create more opportunity for all. Associations supporting these recommendations - US Hispanic Contractor’s Association - Greater Austin Hispanic Chamber of Commerce - Associated General Contractors – Austin Chapter - Austin LGBT Chamber of Commerce - Austin Minority and Women Alliance - Greater Austin Asian Chamber of Commerce - Greater Austin Black Chamber of Commerce - Hispanic Advocates Business Leaders of Austin - The Association of Women and Minority Contractors (pending review with their President) BACKUP City of Austin Spending Data – Actuals - continued 20152016201720182019State Certified HUB SpendConstruction2,259,007 41,474 162,847 10,834,334 15,825,154 Commodities16,304,591 10,080,141 7,929,098 27,938,227 56,646,278 Non-Professional15,230,270 17,578,012 20,114,945 109,669,926 108,876,946 Professional1,481,215 926,161 1,316,887 2,633,179 2,434,204 Total35,275,083 28,625,787 29,523,777 151,075,665 183,782,582 State HUB % of total spendConstruction1.0%0.0%0.1%2.8%4.3%Commodities6.6%4.3%3.5%12.8%18.2%Non-Professional4.1%4.1%4.4%21.9%21.3%Professional2.6%2.7%2.3%3.4%2.4%Total3.9%3.1%2.9%12.7%14.2%Self Identified MBE/WBE SpendConstruction13,124,516 8,942,491 9,455,057 37,336,733 3,053,807 Commodities34,590,727 24,709,337 19,788,499 18,780,118 26,080,033 Non-Professional25,500,440 33,289,673 40,248,336 56,872,036 34,262,060 Professional2,883,739 2,161,799 2,843,307 8,139,623 4,075,762 Total76,099,422 69,103,299 72,335,198 121,128,510 67,471,663 Self Identified MBE/WBE % of total spendConstruction6.0%4.2%3.3%9.5%0.8%Commodities14.0%10.5%8.7%8.6%8.4%Non-Professional6.8%7.8%8.8%11.4%6.7%Professional5.0%6.2%4.9%10.4%4.0%Total8.5%7.6%7.0%10.2%5.2%Total - Certified/State HUB and Self ID - MBE/WBEConstruction53,629,600 53,088,417 53,911,167 91,143,682 57,667,862 Commodities53,736,819 39,744,741 33,125,316 50,301,324 89,126,280 Non-Professional60,275,673 73,792,179 81,483,248 186,904,216 168,603,772 Professional9,697,867 6,760,704 10,275,973 17,667,040 15,303,179 Total177,339,958 173,386,040 178,795,705 345,794,731 330,701,094 Total - Certified/State HUB and Self ID - MBE/WBEConstruction24.3%24.9%18.9%23.1%15.7%Commodities21.7%17.0%14.5%23.1%28.7%Non-Professional16.1%17.2%17.9%37.4%33.0%Professional16.7%19.4%17.6%22.5%15.0%Total19.7%19.0%17.4%29.1%25.6%MBE/WBE Requirements – Austin, TX City of Austin MBE/WBE Qualifications The City of Austin's Small & Minority Business Resources Department certifies qualified firms as Minority-Owned Business Enterprises (MBE), Women-Owned Business Enterprises (WBE), Disadvantaged Business Enterprises (DBE), Airport Concession Disadvantaged Business Enterprise (ACDBE), and Small Business Enterprises (SBE). The Certification Division verifies that the minority and/or woman business applicant owns, manages, and controls the day-to-day operations of the for-profit business in compliance with the MBE/WBE Procurement Program Ordinance, Chapter(s) 2-9 (A)(B)(C) and (D) of the City Code. In general, the eligibility requirements are: At least 51% of the company must be owned, managed, and controlled by a socially and economically disadvantaged individual from one of the presumed groups i.e. Asian-American, African-American, Native American, Hispanic or Women A small business as defined by the Small Business Administration's (SBA) Size Standard Guidelines Personal Net Worth (PNW) must not exceed $1,565,000 for MBE/WBE certification or $1,320,000 for DBE/ACDBE certification MBE/WBE applicant must have a facility located within the State of Texas for at least 90 days Must be a for-profit business MBE/WBE/DBE Profiles for other Cities in Texas City of Houston – MBE Requirements City of Houston – Certification Reciprocity City of Dallas – MBE Policy NCTRCA – Certification Details City of Fort Worth – MBE Policy City of San Antonio – Certification Reciprocity City of Austin – MBE Policies BACKUP – COMPLETE 2015 DISPARITY STUDY RECOMMENDATIONS 2015 Disparity Study – complete recommendations (page 32) K. Recommendations for Revised Contracting Policies and Procedures. Finally, in Chapter IX we present the following suggested recommendations for revised contracting policies and procedures, based upon the Study’s results and findings and upon our views on best practices for contracting diversity programs. 1. Race- and Gender-Neutral Recommendations • Increase Efforts to Ensure Prompt Payment on City of Austin Contracts • Ensure Bidder Non-Discrimination • Review Surety Bonding, Insurance and Experience Requirements • Increase Contract Unbundling • Provide Greater Access to Information for Upcoming Contract Opportunities • Facilitate Increased Access to Capital • Adopt a Mentor-Protégé Program • Continue to Provide Supportive Services for Construction Firms and Expand Supportive Services for Non-Construction Firms • Implement a Small Local Business Enterprise Program • Initiate Recordkeeping for Third Party Contracts 2015 Disparity Study – complete recommendations (page 32) - continued 2. Race- and Gender-Conscious Remedies • Adopt a Renewed M/WBE Ordinance and Accompanying Program Regulations • Tailor the MWBE Ordinance to the Specific Type of Procurement • Revise Certification Eligibility Standards • Adopt a social disadvantage test • Adopt an economic disadvantage test • Review firm size standards • Review the certification period • Certification database and outreach • Consider reciprocal certification opportunities • Contract Award Policies and Procedures • Standardize Good Faith Efforts waiver requirements and related policies • Standardize M/WBE Program implementation across City departments • Scrutinize Commercially Useful Function and increase contract monitoring • M/WBE Goal-Setting • Adopt annual aspirational M/WBE goals • Revise the method for counting M/WBE prime participation towards meeting M/WBE goals • Count lower tier M/WBE participation towards meeting M/WBE goals • Continue to set contract-specific goals • Consider the effects of discrimination on current levels of availability when setting M/WBE goals Clarify SMBR Authority • Review Sanctions Policy • Continue the M/WBE Program Sunset Review Process