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DMBE + RRHA = A Bad Idea

According to one recent editorial in the May 14–16 issue of this newspaper, the
Richmond Redevelopment and Housing Authority (RRHA) has enlisted the assistance of
the Virginia Department of Minority Business Enterprise (DMBE) through a
Memorandum of Understanding (MOU) to increase contract opportunities for Small,
Women and Minority (SWaM) and Section 3 firms serving the RRHA.

We would hope that the intent of this MOU would be to enhance the effectiveness and
efficiency of the procurement process at RRHA, while at the same time expanding the
diversity of suppliers available to the Authority. This MOU as currently constituted is
fatally flawed in these respects.

We applaud RRHA for their efforts to become more competitive and more inclusive with
respect to its constituents and the marketplace. However, the historical experience and
accumulated data of efforts to support minority contracting in the State of Virginia cause
us to respectfully suggest a more thoughtful, reasonable and balanced approach to
implementing municipal procurement, if in fact, greater effectiveness, efficiency and
participation are the Authority’s objectives.

It is a matter of public record that when the SWaM program at the Virginia DMBE was
established, it intentionally added in small business enterprises which under current rules
include any firm regardless of ownership, including those owned by white males, with
fewer than 250 employees, OR with revenues of less than $10 million. A $50 million
firm, therefore, could make the cut as a small business as long as it has less than 250
employees. Data from the May 2009 Virginia Employment Commission reports that
99% of all Virginia businesses meet these state requirements for a SWaM eligible firm.
We do not believe that so broad a definition for participation in a program designed to
level the playing field due to historical disadvantage was the intent of the SWaM
program.

However, when a former state employee attempted to challenge this approach and its
likely implications for the SWaM program’s vision, he was unceremoniously forced to
resign.

By contrast, the U.S. Housing and Urban Development encourages grantees and subgrantees
(who include Virginia’s RRHA) to use the services and assistance of the U.S.
Small Business Administration (SBA) and the Minority Business Development Agency
of the U.S. Department of Commerce. The SBA’s certification guidelines for small,
minority and women business enterprises are more targeted than those of the Virginia
SWaM program to achieve the desired objectives.

For example, the SBA considers a general construction firm grossing under $33.5 million
annually or a specialty contractor grossing $14 million annually or less, to be small
business enterprises -- regardless of their numbers of employees.

These size standards are far more appropriate than those of Virginia’s SWaM program
which allows a “small business” to gross any level of annual revenue, as long as the
number of employees does not exceed 250.

HUD also permits “grantees and sub grantees to use their own procurement procedures
which reflect applicable state and local laws and regulations, provided they conform to
applicable Federal law and the standards...” Did DMBE make changes to its size
standards with expectation that the SWaM program would increase the competitiveness
of bid solicitations and widen the pool of eligible diverse bidders?

There is no question, public entities have an obligation to prudently leverage taxpayers’
dollars in a fair and equitable manner, but should they do so at the risk of prohibiting all
citizens an equal opportunity to participate and win work?

Governor Tim Kaine, in response to pressure pledged his support to black businesses
leading up to his 2006 election. He subsequently issued Executive Order 33 which was
intended to lead the way in creating mechanisms to make it easier for black firms to win
state contracts. But, what has Executive Order 33 achieved? As of April, 2009, the
DMBE reports on its website that only 1.24% of the state’s $3.9 billion in discretionary
spending was contracted with black firms.

The Department of General Services (DGS) established a contract for SWaM firms in
June of 2007, intended to enable participating firms to competitively negotiate for state
contracts. Two years later, the majority of the approximately 45 participating contractors
have yet to receive a contract. Yet, DGS is now re-advertising the contract to other
SWaM firms. The Kaine administration should be embarrassed and ashamed to allow
DGS to continue to promote this sham.

It should also be noted that Executive Order 33 was contested from the outset by current
Attorney General Bob McDonnell, whose office issued a letter of “clarification” directing
that Executive Order 33 was illegal, and that any Agency head following the Order would
not fall under the protection of the State government.

Based on available facts and statistical data, the state’s efforts to achieve diversity in its
supply chain have failed. It begs the question, why any entity would want to advance
Virginia’s SWaM program, which across the board has proven to be useless, ineffective
and totally non-beneficial -- particularly for black businesses.

One may ask why supplier diversity is important to Virginia state and local economies?
It is important, because black business people represent citizens and entities that
contribute to the tax base of local, state and Federal governments, and therefore deserve
to participate fairly and equally in State funded commerce.

The public sector setting aside and competing businesses opportunities among truly
qualified socio and economic disadvantaged businesses, is fair, reasonable, and fiscally
prudent. Black businesses are more likely to hire black employees in key management
positions, spend with other black subcontractors and suppliers, and use black
professionals, architects, engineers, lawyers and accountants. This “multiplier effect”
helps to enhance and sustain urban, inner-city communities, where the majority of blacks
in Virginia live and work. This spending and investment creates a double bottom-line
return to black communities, lessening dependence on social programs and government
aid services.

Successful supplier diversity initiatives require public servants to evolve and progress
from the comfortable, familiar old ways of doing business. The SWaM program is a
textbook example of bureaucratic ineptitude and economic injustice, which should no
longer be tolerated in this state.

Virginia has a long and embarrassingly sad history of denying blacks equal opportunities
– socially, economically and politically. These conditions were perpetuated for many
years by housing authorities and their suppressive public housing policies, which
contributed to the erosion of black families and the depression of black community and
economic development. What is astonishing, however, is not the number of black
citizens who the system failed, but those who overcame the odds through
entrepreneurship and other self-sufficiency efforts.

The time for change is now. Will the RRHA embark on a new era of economic inclusion,
parity and equality? Providing a more equitable ceiling to qualify as a small business
would greatly level the competitive playing field between majority and disadvantaged
firms seeking to do business with RRHA. That would be a good start.


John W. Boyd, Jr.
Lobbyist
Black Business Alliance of Virginia