Minorities Plan Failing

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The Wall Street Journal
By: Jacob Gershman
August 1, 2011

A Bloomberg administration initiative intended to help minority- and women-owned companies secure more public contracts has steered little money to black-owned firms, according to city data.

In the last year and a half, about three-quarters of city dollars paid to contractors participating in the program went to companies owned by either Asian Americans or white women. Businesses run by Latinos received 15% of that pool of money.

The smallest share, 7%, went to black-run firms.

"It's a shockingly paltry amount," said city Comptroller John Liu, a first-term Democrat.

The program has been a magnet for criticism since Mayor Michael Bloomberg and the City Council approved a law in 2005 that set voluntary goals for awarding a certain percentage of contracts to businesses registered as owned by minorities or women.

But even supporters say the program has fallen far short of its goals and produced little change in the wider distribution of billions of procurement dollars.

Stung by the complaints, the Bloomberg administration is now considering expanding the program to include more and bigger contracts.

Overall, of the $28 billion paid to prime contractors since January 2010, less than 3% went to companies registered as minority or women-owned, according to the comptroller's office. Within that 3%--a pool of $700 million --40% went to firms certified as Asian American. And about 35% of that went to firms owned by white women.

A Long Island staffing agency with $5 million in contracts in 2010 was the black-owned certified company with the highest amount, according to comptroller figures. The company ranked 20th among participating minority or women prime contractors, including a security firm whose identity wasn't disclosed.

Bloomberg aides say the data are misleading, noting that the figures don't account for hundreds of millions going to minority subcontractors or firms that did not register with the program.

The figures also don't account for contracts to nonprofits.

City officials say black-run businesses have secured a larger and increasing share of sub-contract dollars. In 2010, black-certified firms won 20% of subcontract dollars awarded to firms participating in the program, Bloomberg officials said.

"Our data show that each ethnicity, including black-owned firms, has been awarded a higher value of contracts each year since 2007," said Anne Rascon, deputy commissioner for the city Department of Small Business Services, which oversees the program.

The debate over racial and gender preferences has long been a flash point in city politics. As mayor, David Dinkins instructed his agencies to steer 20% of contracts to minority and women-owned firms. Rudy Giuliani scrapped most of the program, calling it "bad social policy."

The Bloomberg system was seen as a compromise. It didn't resurrect the more explicit directives from the Dinkins era but set goals based on a 2005 study on racial disparities within the contracting arena. The city adopted targets that applied to contracts under $1 million and varied by race, gender and industry. For goods purchases, for instance, agencies were expected to award 5% of dollars to Asian-run companies, 7.5% to black-run firms, 5% to Hispanics and 18% to women.

The goals were generally higher for women and blacks. And while Asians--encompassing a swath of ethnicity from Indian to Korean--were allowed to participate in the program, the group wasn't included in most targets.

Changing the program now could re-open a debate that flared when lawmakers first drafted the policy.

"In our desire to be fair, we are absolutely being unfair. In our desire to be egalitarian and not focus on any community, we are focusing on certain communities," said City Councilman James Sanders, the main sponsor of the 2005 bill. "If you don't find ways to radically change your implementation, all you do is allow white women and Asians to compete for higher contracts without bringing in African-Americans and Latinos."

Others say the city can achieve more of a balance by focusing more on the results and less on registration paperwork.

"Too much emphasis was placed on certification," said John Wang, president of the Asian American Business Development Center. "People spend enormous amount of time to get certified, but it doesn't guarantee anything."

Write to Jacob Gershman at jacob.gershman@wsj.com

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