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 sub-grantees (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
