Minority firms suffering: MBDA

Minority-owned firms win proportionally fewer government contracts

Minority business enterprises (MBEs) typically are awarded a lower number and dollar amount of public sector contracts in proportion to the number of available MBEs in a market.

And despite efforts to change this disparity in many jurisdictions, “the needle has not moved,” according to a new report by the Commerce Department’s Minority Business Development Agency (MBDA).

The MBDA reviewed over 100 disparity studies in the last 10 years to outline the factors that create the disparities, identify what solutions have been attempted, and point to new ideas for solving the problems.

Many of those studies had been commissioned as a result of legal challenges to contracting programs. Many of the challenges alleged that the programs were racially biased and unconstitutional.

The MBDA looked at disparity ratios computed in the studies. For example, if minorities make up three of the five engineering firms in a given market (38%), but only received one of the four contracting awards (25%), then the disparity ratio is the utilization (25%) divided by the availability (38%), which is .67. Any ratio under .80 is considered a sign of a significant disparity.

In addition to looking at the disparity ratios, the MBDA also looked at anecdotal evidence of discrimination and other barriers to minority contracting within the last ten years.

The findings included:

• The “needle has not moved” with respect to overcoming disparities. “Every study identified significant contracting disparities and many supported these findings with additional quantitative and anecdotal evidence that supported the need for both race-neutral and race-conscious remedial efforts. Yet, over time disparities were prevalent even within the same jurisdiction,” the MBDA noted.
• Many of the disparity studies reported the same remedies to address contracting disparities, but few reported the success or failure of those remedies.
• Race-conscious programs were helpful to MBEs. However, these programs need to comply with strict scrutiny legal standards and be narrowly tailored.
• There are perceptions that prime contractors do not show good faith in complying with race-conscious programs, and that agencies do not adequately enforce these programs.
• Because proposed solutions often require significant investments, and because jurisdictions often lack funding, many suggestions for improvements do not go forward.
• There is too little analysis of subcontracting activity.

More information: MBDA study: http://goo.gl/0jpqir

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