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diggPhoenix minority business ride waves of change
Some small businesses advocates are critical of program modification
Fearful of lawsuits, the City of
At the same time, a new report from a
Some Valley minority business owners and advocates are criticizing the changes because they allows all small business - regardless of race or gender - to compete for construction and service contracts previously targeted for minorities.
One change removes the bid incentive for minorities and women on specific city contracts. The incentives are now offered to all certified small businesses.
Another alteration creates a $750,000 personal net worth ceiling for women and minorities, preventing larger minority companies from being certified.
Minority business owners and advocates say that the stakes are high for
Changes in city government's Minority- and Women-owned Business Enterprise Certification Program are the result of a consultant's recommendations. Carole Coles Henry, director of the city's Equal Opportunity Department, which administers the programs, says the changes took effect in early July and resulted from Florida-based consultant MGT of America's recommendations to make the program more defensible in court. Recent lawsuits across the country challenging quota and race specific goals made the changes necessary, she adds.
George Flores, deputy city manager, says that when programs get challenged, the courts may want to stop the entire program. Most of the challenges spring from the 2003 Supreme Court decision that the University of Michigan could not use race-based quotas in its admissions policy.
'The recommendations all flow from case law. We had to be concerned with that,' says Flores, who has supervised the business program for the past seven years. He cited a need for even more studies to gather data to defend the programs.
'We will continue modify the program; turn some parts up higher, or throttle others down, if participation in the MBE program participation begins to go down,' Flores says.
However, critics worry that leveling the playing field for all small businesses has eliminated the minority business support in all but name. 'It's a generic small-business program now,' said Cody Williams, former city councilmember and president and CEO of the Greater Phoenix Black Chamber of Commerce. He also is part owner of Java Vida coffee house.
The city created the program to remedy past discrimination against minority businesses, Williams says, and any progress made could be slowed down.
One national study bucks the legal trend by concluding city governments are short-sighted when intimidated by possible legal action against diversity programs.
Instead, the study emphasizes, the city should view small and medium size minority business growth as a key to its future economic development. Diversity programs need to be made stronger, not weaker, the study concludes.
'Past and current efforts - while successful in making broad gains - will prove inadequate in resolving the remaining disparity and in achieving future progress,' notes the report titled 'The New Agenda for Minority Business Development.'
The Boston Consulting Group prepared the report and released the results in June. The international consulting group has 50 offices across the globe and specializes in cross-cultural, international business.
'Since the 1980s, with support from expanded government and corporate supplier diversity programs as well as other initiatives, minority firms as a whole have seen their revenue rise by about 10 percent, have created 23 percent more jobs, and have enjoyed an overall growth rate three times higher than that of traditional businesses, ' the report states.
It adds that although minority businesses have grown, their percentages and proportions don't reflect the growing size and economic power of minority communities in the
Righting wrongs
The city's MBE program resulted from a 1993 disparity study of city contracts and was mandated by courts to rectify past discrimination and lack of access to city projects by minority and women-owned firms.
The city program also certified women- and minority-owned businesses so they could collaborate with bigger companies and allow the large corporations to meet diversity goals on city construction projects.
Over the years, statistics and studies show that the program has achieved modest success. However, MGT of America concludes that disparities still exist.
Harry Garewal, president/CEO of the Arizona Hispanic Chamber of Commerce, said the Chamber is taking a 'wait-and-see attitude with the new changes.'
'Anytime you make an adjustment, it's going to have an impact,' he says. 'We have to wonder what the impact will be, especially on Latino businesses.'
Garewal adds that the City of
New program
Midsize minority owned companies revenues at about $17 million annually have complained in the past that the revenue caps squeezed them out of the minority small business program and crippled their growth. They were still too small to compete with the construction giants like the Texas-based Austin Commercial and Denver-based Hunt-Russell-Alvarado companies, which are working on projects such as the $160 million rental car facility and $458 million civic plaza renewal.
Martin Alvarez, president of the Sun Eagle Corp., and others have complained that once a firm reaches the cap, it not only loses its bid opportunities, but it also loses its edge on subcontracting with larger companies that are rewarded in the bidding process for selecting businesses in the MBE program.
'We've had some real success with some companies graduating out of the program, and we don't want to lose relationships with them, says
'We are proposing establishing an alumni program. Staff will develop the proposal over the summer break, and then bring back some recommendations in the fall.'
Alvarez says that middle size firms would be glad to see a program that gives them a boost to grow to sizes to be able to complete with non-minority owned big companies.
'I'm glad the city is considering it and hope it comes to pass,' he says.
