City Unveils Efforts to Address Contracting Disparities

Croson Study reveals that minority and women owned businesses receive few contracts, have capacity to do much more

City of Cincinnati officials today unveiled the final draft of a long-awaited study of gender and racial disparities in the city’s contracting practices, as well as ordinances that might address some of those inequalities, including race and gender based requirements for contractors.

The so-called Croson Study shows that between 2009 and 2013, black-owned businesses were awarded only 2.7 percent of the city’s contracts, totaling about $5 million, despite blacks making up more than 45 percent of the city’s population. Businesses owned by women fared only slightly better during the study’s time frame, getting only 6.2 percent of the city’s contracts. Eighteen percent of busineses in Cincinnati are owned by blacks, and nearly 30 percent are owned by women.

Mayor John Cranley cast the report as a positive step toward more equitable contracting for the city.

“We’re finally here after a long amount of hard work,” Cranley said during a ceremony today at City Hall featuring a wide array of about two dozen city officials, faith leaders, members of the business community, activists and others. “We have a lot of great things happening in the city, but we’re not perfect, and, clearly, the city’s procurement process has not reflected the diversity of our city.” 

Councilman Wendell Young also praised the study, but sounded a much more somber note.

“Since we’ve confirmed what we already know, how hard are we willing to work to address the problems?” he asked. “It’s true that the city of Cincinnati is making great progress. It’s also true that a significant part of this community is not feeling that progress. Cincinnati has many distinctions that we’re not proud of."

Young citing the city’s sky-high infant mortality, childhood poverty and black unemployment rates.

“Today we’re at the point where we have the road map and the confirmation. From today on we find out if we have the political will, the ability, the skill and whether the work we do can make a difference. We won’t be the first, but we’re going to find a way to make this work. And if we can’t do that, heaven help us all.”

The report also revealed that 70 percent of the city's $1.2 billion in prime contracts went to a small group of businesses, a fact that many on city council found disturbing.

Councilman Christopher Smitherman said that fact should make not just minority and female-owned businesses angry, but anyone who has competed for a city contract.

"That's one hell of a country club," he said.

Cranley touted steps the city has already taken toward diversifying its contracting, including recently establishing the city’s new Department of Economic Inclusion and making changes to its Small Business Enterprise (SBE) program. But he also said the Croson Study and its suggestions are huge parts of the solution.

The study makes several suggestions for improvements in the city’s contracting process on four different monetary levels, from under $5,000 to more than $250,000, on both the prime contract and subcontract levels. Some recommended solutions are based on race and gender categories, while others are neutral.

On the subcontracting level, Cincinnati City Council will consider ordinances which create a Minority Business Enterprise program and a Women Business Enterprise program, allowing such businesses to compete with each other for certain set-aside contracts.

On the much larger prime contracting level, businesses will be given points on some bids if they are at least 51 percent owned by minorities or women.

Some council members, including Councilwoman Yvette Simpson, want the city to go farther in ensuring better equity in awarding contracts at the $1 billion prime contracting level. Both Simpson and Councilman Chris Seelbach offered pointed questions about what more could be done at the prime contracting level to ensure a greater piece of that large pie goes to minority- and women-owned businesses.

The city usually awards prime contracts to companies, which then hire subcontractors. City Manager Harry Black pointed out that the city will make requirements for businesses winning prime bids as to the level of minority subcontractors they should hire. Businesses winning contracts with the city of more than $50,000 will be required to subcontract 17 percent black-owned businesses for construction work and 14 percent black-owned businesses for other services, and 14 and 16 percent businesses owned by women for those categories respectively.

One recommendation made by the Croson Study that the city has not yet considered is ending so-called master agreements, or contracts with companies that can be used by multiple city departments on separate projects and which can be subject to multi-year renewals without re-bidding.

“The city should eliminate the use of master agreements and follow the competitive bidding standards for all contracts,” the study states in its conclusion.

One point that every city official agrees upon, however, is that minority- and female-owned businesses are up to the task of doing more projects on taxpayers' behalf.

The study shows that black-owned businesses in the city have the capacity to take on up to 20 percent of the city’s contracts. Businesses owned by women see a similar capacity gap: The report shows female-owned businesses have the ability to tackle another 20 percent of the city’s contracts.

“To all my colleagues here, please do not use the word ‘capacity,’ " Smitherman said.

Though the report is clear, the details involved in increasing minority contracts awarded by the city are complex. Part of the complication comes from the legal realities around what the city can and can’t do to increase minority contracting.

The Croson Study gets its name from a U.S. Supreme Court case, City of Richmond v. J.A. Croson, in which the Virginia city was sued by a contractor over its contract diversity initiatives. The Supreme Court ruled Richmond’s setbacks of contracts for minority businesses unconstitutional and set a standard of strict scrutiny, the highest legal standard, for municipal contracting diversity programs.

That means that cities risk lawsuits if they don’t demonstrate a very clear need to enact gender- or race-specific contracting guidelines and cannot show that those guidelines are narrowly tailored to address disparities without discriminating against other businesses.

Cincinnati has already been through such a lawsuit in 2004, when Cleveland Construction Company unsuccessfully sued the city over its contracting diversity policies. The company claimed that the city’s Small Business Enterprise (SBE) program, which was used in part to score the bids from Cleveland and other companies, created unconstitutional racial and gender classifications and violated its rights to equal protection under the 14th Amendment. An initial decision from the Hamilton County Court of Common Pleas agreed with that claim, and the city amended the race- and gender-related parts of its SBE program. The case went all the way to the Ohio Supreme Court, which eventually ruled in favor of the city.

The Croson Study offers some protection from future lawsuits, say city officials and representatives from Mason Tillman Associates, which conducted the 338-page report. The report quantifies the extent of Cincinnati’s contracting diversity problems and puts forward recommendations, many poised to be passed by council, that are tailored to address them.

“It gives us a legal basis to do what we need to do to be a city that will work for everybody and not just for a few,” Cranley said.