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HomeMy WebLinkAbout09-03-19 MBE/WBE MBE/WBE Utilization Board Meeting September 3rd, 2019 5:00 p.m. Board Members Present: Takesha McClane, Bilijah Williams, Dr. Janet Evelyn, Jas Alexander(late) Board Members Absent: Cheryl Ashe, Kareemah Fowler, Breanna Allen Others Present: Michael Schmidt,Christina Brooks, Karen White,Tim Scott Councilmember Karen White called to order the MBE/WBE Utilization Board meeting at 5:01 p.m. Councilmember White provided an overview of the previous board meeting. She stated, The goal is to have the amended version of the ordinance ready for first (1St) reading by the second (2nd) Council meeting in September, September 23rd, 2019, and take action at the first (1St) meeting in October, October 14th, 2019. The Clerk's Office was looking at the appointments to the board to make sure that membership is at the correct level. The Chamber of Commerce also has the opportunity to appoint one (1) member. The previous meeting also dealt with questions on the Disparity Study, when it was going to be approved, and whether it was going to be shared. Christina Brooks, Diversity Inclusion Officer for the City of South Bend with offices located on the 14th floor of the County-City Building,stated,Right now we are gathering questions that people have in terms of some of the phrasing and terminology to make sure we have a clear understanding of what's actually spelled out in the study. We'll be able to answer the questions that people in the community may have with accuracy. She continued, In 1987, there was an ordinance that had a lot of hopes and dreams attached to it. A Supreme Court Case in 1989 scared public entities into doing away with their minority and women programs. The case however, did not strike down all MBE/WBE programs. It said you can't just use the general discrimination of a population to support a program that is specific to contracting and procurement. It is subject to strict legal scrutiny and you have to have very narrowly tailored remedies for the discrimination that has to be identified through thorough analysis. In 2011, the City of South Bend's ordinance was amended, and this board was a part of that process going forward,reviewing the work that was being done in procurement and contracts for purchasing. The outcome since 1987 with race and gender-neutral measures has been minimal to say the least. We were probably tracking pretty similarly to what we're tracking currently, usually less than one percent (1%). The calculations between an annual study and this diversity report are two (2) different calculations. She went on, Under Mayor Buttigieg, we've asked the question: How can we use City resources to make sure we are doing everything we can to jumpstart the economy? My position was created in 2016 and I stepped into some ongoing conversations regarding this. Collecting data in the City is a real challenge. In 2015, we did a better job of making sure that contract and procurement data was being collected so we would have the information we need. We found that we are doing business far outside of the South Bend City limits. How many MBE/WBE businesses there are and how many we actually use creates the disparity analysis ratio, and that is what really lays the foundation for any program. She continued, The Disparity Study matters because it provides litigation defense. If there is a challenge to a City,they aren't challenging the study,they're challenging the program.That means it is really important for us to move forward and establish one (1). We're doing the things that we say we are doing on paper and that we are equitable across the board. There are no special under- the-table considerations for anyone and we're following the laws and regulations. Boardmember Dr. Janet Evelyn asked, What would be an example of someone who would challenge a program? Ms. Brooks replied, The most obvious example would be the Supreme Court case in Richmond. In that case, there was a contractor who was deemed non-responsive because of lack of good faith efforts, and he challenged the program itself, calling it reverse discrimination. When they really looked into the program, they had used information that was population-wide to establish discrimination and it wasn't narrowly tailored to the specific contractor procurement, and that is why the program was struck down,because it wasn't narrowly tailored. Boardmember Jas Alexander asked,When will the final results be ready? Ms. Brooks replied, I should have it in the next week or so and you should be able to access the full thing. That is really up to how many questions come out of our internal Administration and how long it is going to take to answer those questions and clarify the language. She continued, We want to do a better job monitoring and collecting information, especially as it impacts people right here in this community. Boardmember Takesha McClane asked, Will you be pulling the contracts from the IDOA's website that they post yearly? Ms. Brooks replied, That is part of the narrowly tailored language. If you have a program that is based on State goals, that is not necessarily the City of South Bend because it is based on our geographic marketplace. It could be different from the State. We will have a City-wide goal, but the best recommendation is to set goals contract by contract so we know exactly what the available pool of contractors looks like for that particular project. It is much more nuanced. She continued,The program that is created has to reflect the evidence that we have collected. Any of the programs that result from inadequate legal or economic analysis are the ones that end up going to the court level. Properly supported and narrowly tailored programs based on expert testimony will survive. She went on, The findings were broken up into different categories. There were one hundred ten (110) individual stakeholders that were interviewed. Minority and women owners continue to encounter discriminatory attitudes, stereotypes and negative perceptions. They were in unanimous agreement that race and gender-neutral measures are not enough and that we need to do something more to actually level the playing field. Access to information and networks is particularly challenging as they felt excluded from those networks. The contracting process and requirements are cumbersome. Contract size is a m large impediment. We have these large contracts that small p minority and women contractors can't participate in because they haven't built the capacity to do so yet. We need to improve our outreach to small certified firms and make sure they are aware of contracts coming up. It is also important to do capacity building here, making sure our businesses here are supported so they can build up to become prime contractors. She continued, All of the contracts that were analyzed were over $50,000 and they were for contract year 2015, 2016, and 2017, and they were worth about$103 million. Of the two hundred seventy-eight (278) contracts, three hundred twenty-seven (327) subcontracts were valued at a little over$25 million over the three(3) years. That is the dataset that produced the analysis. She went on, In determining our geographic marketplace,the industry standard is to look at where seventy-five percent(75%) of the contracts are coming from. It is determined by zip code and it is collapsed into metropolitan statistical areas. Eighty-one percent (81%) of our spending went to Indiana companies. They identified three (3) counties outside of the State, two (2) in Illinois and one (1) in Michigan, where our other business goes. This means that the whole State of Indiana, and three(3)counties outside of Indiana makes up our geographic marketplace.The list of certified businesses that we've put together, specific to the City of South Bend, has the local MBEs listed. She continued, There are two (2) different topics here. One (1) is building capacity of MBE's locally, and the other is utilizing them for City-funded projects. The two (2) activities ultimately support each other, but there are two (2) different projects. Creating more MBE's here locally is an activity all by itself. A certified MBE means that they have been vetted and found to be a bona fide minority or woman owned business,meaning, if a woman is claiming to own a company, it is actually her that runs it day to day and not her husband, and the same is true for MBEs. They have a very rigorous financial vetting process to make sure they won't go belly up in the middle of a project. There are other local minority owned businesses that we are tracking in the City. This doesn't mean that they can't become certified, but they aren't certified yet. Ms. Brooks explained that some certification agencies require a fee and have a more rigorous process than other agencies that are free. She then summarized the geographic location where the City has been doing business and discussed the high level of specificity of the study. Ms. Brooks stated, The aggregated weighted availability for our geographic marketplace is three point two five percent (3.25%) for Black, point five seven percent (.57%) for Hispanic, one point zero one percent (1.01%) for Asian, point nine two percent(.92) for Native American, nine point one seven percent(9.17%) for white women, and if you collapsed all of these,that's when you get the MWBE, and that is where you get the fourteen point nine one percent (14.91%). For non- MWBE's it is eighty-five-point zero nine percent(85.09%). She continued, The disparity ratio for MBE's is seventy-two point three eight(72.38), eighty-five point one eight (85.18) for white women, eighty point two five (80.25) for MWBE's, non- MWBE's, one hundred three point four six (103.46). In order for these numbers to be significant, they have to be at least eighty percent(80%), anything below that is substantively significant.This means that they have found that there is no other explanation for that number except for discriminatory practices. Anything eighty percent (80%) and above, there might be some other reasons in there that could explain it. Michael Schmidt, Purchasing Director for the City of South Bend with offices located on the 12th floor of the County-City Building, asked, How did you get above one hundred percent (100%)? Ms. Brooks replied, That signifies over-utilization. All things being equal, we are using them at a much higher rate.The utilization of MWBE's based on the three(3)years of the final contract data was eleven-point nine seven percent (11.97%). The weighted availability is fourteen-point nine one percent (14.91%). Then we move into the economy-wide rates and gender disparities in the City market. They pulled together census data to determine what the rest of the market looks like. Is this just for City contracts, or is this happening in other businesses in the City or geographic marketplace? What the City determined is that there is disparate treatment in the marketplace, disparities in access to business capital, and disparities in access to human capital in our marketplace. This wasn't just specific to what we do, it is happening throughout our geographic marketplace. In most cases,MWBE's were underutilized in all industry levels.Wages and business earnings were lower for these groups compared to white men. Non-white and white women are less likely to form some of these types of businesses compared to similarly situated white men. It paints a picture of systemic and endemic inequalities for MWBE's and their ability to actually get a business off the ground. She continued, The next portion shows what the people are actually experiencing. One hundred ten (110) different people participated across all ethnic and gender groups through four (4) stakeholder meetings. A lot of people say they do not market that they are an MBE. If they market it, sometimes they don't get the work. Others felt like the City staff didn't want them to have the job,not because they are not the best at their job,because they are,it was just that they would say, you don't need that much money, you're just a little black girl, you don't need that much money. Unanimously, they all said we need to do more than just race and gender-neutral activities. Black owned construction companies can't get contracts with the City. They have to build their business with only small ones, and it is hard to maintain a cash flow that way. Boardmember Bilijah Williams asked, Do the people in the City that make those decisions have any minority training? Ms. Brooks replied, It is spread out. We've been working on trying to shrink the number of City buyers. We had over one hundred and fifty (150) City buyers that had their own way of making purchases. We are trying to centralize them and have them go through a central point to make sure they are following the policy that we develop. We plan to make sure they have sufficient training and understand what the expectations are and how to make sure that they are more inclusive in the process. Boardmember Williams followed up, Will there also be a check and balance somewhere, if it is another person or another group? Ms. Brooks replied, There are a couple of stopping points. A department or a City buyer can determine, based on the amount of the contract itself, if there is more leeway and the contract is under $25,000 because it does not have to go before the Board of Public Works. There are still guidelines, but if it is over $25,000, it has to be reviewed and approved by the Board of Public Works, which is made up of community members that were appointed. Boardmember Williams then asked, Is that board diverse? Ms. Brooks replied, If you're talking about racial diversity, no. It does have gender diversity. Mr. Schmidt explained, Once you get to the Board of Public Works level, you have to issue to the lowest bidder.You don't really have a choice yet.They are just approving the lowest bidder.When it is under$25,000, that is where more education for the buyer comes in and where centralization of the purchasing can be more effective. The board continued to discuss State law and how it affects the process of the City. Boardmember Alexander asked, Is there any data about doing business with minority owned businesses that are not certified? Ms. Brooks replied, We've been collecting that over the past couple of years on the annual purchasing report. There are a lot-much more than are certified. In some cases,they don't see the value in certification and, in some cases, they feel like if they certify they won't get the business they have right now. The board then discussed the City structure regarding procurement, the education process and the City policy regarding diversity in purchasing, how the City chooses vendors, as well as preferred vendors and how they are designated. Ms. Brooks explained, The City is trying to move away from services like janitorial where MBE contracting usually is, and move toward where the real money is, in construction. Mr. Schmidt stated, That is where the life changing money comes from. Ms. Brooks stated, It changes the economy when you are hiring people who have never had their foot in the door before. We aren't going to be shifting anything by just continuing to give all of the janitorial contracts to minorities. She continued, In conclusion,women and minorities still continue to suffer discriminatory barriers to fair access to South Bend contracts and subcontracts.There are a lot of sources of the registration information. Businesses have to register with the Building Department if they want to do any construction in the City. We partnered with them to look at that list and do some outreach to determine how many of those were actually women or minority owned businesses that we did not seem to appear on a certified list. That is where we hit the jackpot. There are a lot more than what would be accounted for in an annual report because they are not certified. But they are registered to do construction work here in the City. They update that list on a quarterly basis, so we are able to continue to do outreach to that list. She went on,With the process for vendor registration with the City,the goal is to make that a more robust registration process in the future. When we can ask the owner if they are a minority owner, and if they are a certified minority business, that is two (2) sets of data, whereas right now people conflate the two (2). We should be able to push a button and see all of the minority-owned businesses, and then another one (1) to see all of the certified minority-owned businesses. If you were just looking at the list of certified businesses, you would think that minority-owned construction businesses do not exist here. They do exist, they just aren't showing up on any lists. You would never know that unless you go looking for them, like I did. Boardmember Alexander asked, So who is going to create the plan? Ms. Brooks replied, Part of the responsibility of this board is to provide feedback and make recommendations for final policy changes and final amendments to the ordinance. She continued, The study's results support the City's interest in implementing a new race and gender conscious MWBE program. One (1) of the recommendations is to continue to do race and gender-neutral measures, but really beef up and have some type of electronic contracting data collection and monitoring notification system. The City is in the process of upgrading our City- wide system and our accounting system has a procurement module.There are some things that this study recommends that we will have to incorporate into the system we are adopting so we can do it well. Also, we want to provide resources to implement the program. The recommendation is to have personnel that specializes in not only contract compliance but also in labor compliance. Then also focusing on reducing barriers to MWBE prime contract awards, so unbundling where it is appropriate and within the scope of State law, and also review experience requirements. Sometimes some of the language in our bid packages require that they have X number of years of experience which cuts out anyone who is just getting started. Then we want to review the bonding and insurance requirements because some of the bid packages have requirements for insurance that don't exist. It is definitely not intentional. It is a matter of using the bid package language that was on the last contract without reviewing the insurance language. MWBEs will look at that and work for three (3) weeks trying to find insurance, but people who have already worked with the City already know to ignore it, and then they submit their bids. She went on,Adopting a small business enterprise target market is where,to your point earlier,we look at what we can do for the City of South Bend. We know what our target marketplace is, but how can we support businesses right here within our City? We could establish a small business enterprise target market, which would include all small businesses, race and gender neutral. An example would be for professional service contracts under $50,000 that are subject to informal procurement policies. We could be better at increasing vendor communication and outreach and create matchmaking sessions. Contract forecasting is something that we have been doing for the last couple of years in our annual report. That is forecasting, by department, how much each department is going to spend, and then being specific as far as what exactly the money will be spent on.This will give emerging businesses in the City a heads up on projects that will be bid out. Also, offering debriefings after bid awards, that is something I do now. So,when smaller MWBEs go through the process for the first (Pt) time, they can find that they were way out of their league when the bid is read and they look at all of the stuff and what was included, and they didn't know anything about it. This is happening, but not at the rate that it could be. We could also offer more training, possibly online. She continued, Partnering with agencies and local organizations is also something that we are currently doing, working closely with the South Bend Elkhart Regional Partnership, West Side Small Business Resource Center, SBARC, Latin American Chamber,North Central Indiana Small Business Resource Center, and then also providing internal training for City staff connected to contract procurement responsibilities.The City's goal of fourteen-point nine one percent(14.91%) is not a blanket goal for every contract. Every contract needs to have its own specific goal based on what is available in its own particular area. We need a system that will calculate that for us. The recommendation is also to bid some contracts without goals,just to see what happens when we don't have our thumb on the scale. Are people going to use MWBEs at the same rate, or will they default? Collecting that information will be key for the next time we do a study. She went on,We also want to establish program eligibility, so, all disadvantaged racial and ethnic groups and white women within the City's geographic marketplace. Then, compliance and monitoring policies. Adopting contract awards and performance standards, and this is what you find in a program plan, not necessarily in an ordinance because it is too specific and you don't want to have to go and change an ordinance every time you want to make an adjustment, so we want to keep the ordinance as general as appropriate and leave the flexibility of the details in the program. She continued, We should be conducting a full and thorough review of the evidentiary basis for the continuation of the MWBE program every five (5) to seven(7) years. These programs have to have a sunset date, and then we need to have a timeline in place so that this thorough and fair review happens before the sunset date. Usually between eighteen (18) and twenty-four (24) months. Boardmember Williams asked, Is there an internal audit that will be evaluated and give recommendations so we can improve before we get the outside review? Ms. Brooks replied, Once we have software in place, I can print out a quarterly report so we can click a button and see if we are moving in the right direction and zero in on deficiencies. Council President Tim Scott stated, I would highly suggest this board be part of that process and ask questions on a regular basis. Ms. Brooks stated, The standards and review would typically be in the ordinance, it is broad language. Boardmember Dr. Evelyn asked, Is there a way to give people an incentive to do the training? Educating people and helping them set goals to get to their first(1St) contract? Ms. Brooks replied, I think those are things that could be part of a program plan. Incentivizing certification. There are a couple of different ways we could probably do that, but we are going back and forth with the consultant and our legal team on how to address these issues to make sure they are legal and doable. We already have a target on our backs because we live in South Bend, we have a very famous Mayor, and I have gotten some very direct emails from national organizations encouraging us not to move forward with any of this. I would recommend that we not use any language that could be a trigger word. There are other words we can use to accomplish the same thing without setting off any flares. Councilmember White thanked Ms. Brooks and stated that the next steps are for her to let the board know when she has the community meeting to go over the Disparity Study. Ms. Brooks announced that the meeting has to be established by September 13th, 2019. With no further business, Councilmember White adjourned the MBE/WBE Utilization Board meeting at 6:50 p.m. Respectfully, .Cc..tvn,. y'G Karen L. White, Councilmember