Boston Indicators Email List

Follow us on Twitter

And LinkedIn

Business Equity: 
Eliminate Racial Disparities in Government Contracting

By Segun Idowu, President & CEO, Black Economic Council of Massachusetts and Trevor Mattos, Research Manager, Boston Indicators

March 12, 2021

Obtaining a government contract is one invaluable way for a business to build its customer base, increase revenue, and position itself for future growth. State and local governments operate at large scale and are uniquely reliable since they have the power of taxation and are here for the long haul. Successfully competing for public contracts doesn’t just increase the likelihood that a firm will get future government business, but it also gives that firm a track record and network that helps it compete in the private market. Thoughtfully leveraging the power of government contracting is especially important during crises like the current recession, which has hit Black, Latinx, and Asian-owned businesses hardest. With many of us now sharply focused on advancing racial justice, it is especially troubling to see a growing body of research showing how the City of Boston and the Commonwealth of Massachusetts have, for years, awarded only very small shares of government contracts to qualified businesses owned by people of color, especially Black- and Latinx-owned firms.

In fact, the problem appears to be getting worse.

At the state level, the share of contracts awarded to Black and Latinx businesses declined by 24 percent during the 2000s and 2010s, according to an analysis by reporters at GBH News. Prior to this, the State Division of Capital Asset Management commissioned a separate study, which discovered that between 2010 and 2015 African-American contractors received only one percent of design and construction spending by the state agency, having fallen from four percent between 1999 and 2004. Women-owned firms received only 11 percent of state spending on design and construction during the more recent period. The data make it very clear that despite the pronouncements, executive orders and legislation, the state has made little or no progress in equitably awarding state contracts.

In Boston, a rigorous new disparity study confirmed what many have long suspected: There are stark racial disparities in the awarding of city contracts and allocation of procurement dollars. According to the study, between 2014 and 2019 Black- and Latinx-owned firms received only 1.2 percent of 47,801 city contracts (that’s $24 million out of a total of $2.1 billion). Less than one half of one percent of these contracts ($9.4 million) went to Black businesses. The analysis found that the percentage of city contract and procurement dollars that went to Black- and Latinx-owned firms was much lower than the share of firms that were Black/Latinx and determined (by a survey) to be ready, willing and able to fulfill city contracts (see graph below). While Asian-owned and Native American–owned firms do not appear to have the same gap between “availability” and “utilization,” they nonetheless still received a very small share of contracts. The availability/utilization distinction detailed in the study is important to note, as a common refrain heard from municipal governments or private companies is that there are not enough Black- or Latinx-owned firms capable of taking on valuable contracting opportunities. Boston’s disparity study proves the opposite is true: Black and Latinx businesses have both the capacity and the desire to do the work, but they are still denied those opportunities. This is what structural racism looks like.

In response to growing evidence that the state has been awarding fewer contracts to minority—and especially Black-owned—firms, community organizations like the Black Economic Council of Massachusetts (BECMA), Amplify Latinx, LISC Boston, the Foundation for Business Equity, CommonWealth Kitchen, Massachusetts Association of CDC’s, and other organizations pressured state officials to make structural changes. In An Act to Elevate the Supplier Diversity Office to Ensure Equal Opportunity in State Contracting, the Baker Administration committed to, among other things, making the Supplier Diversity Office (SDO) an independent agency that will have more oversight and enforcement power, along with more staff and a larger budget to do the work.

Another key provision is the adoption of what’s known as the “Massport Model.”

The Massachusetts Port Authority (Massport) has been leading the way at the state level in demanding robust diversity of contractors for all bids. The quasi-state agency has done this by heavily weighting diversity and inclusion in the grading of bids for Massport projects, such that 25 percent of each bid’s grade is based on the diversity of the various businesses involved. Submissions that do not have substantial partnerships with minority-owned firms and minority investors throughout the proposal automatically receive a lower grade. The model has been widely acclaimed as successful, with The Omni Boston Hotel project, developed on a parcel owned by Massport, heralded as its first major achievement. There has been mounting pressure for more state agencies and local governments to use a similar or expanded approach.

Being part of such a visible project can be a game-changer for a company by opening a path for future growth. Here’s one example: Greg Janey, the President and CEO of Janey Construction Management, had long focused on developing smaller projects, mostly in the Roxbury area. But, his firm joined the bid for the Omni Hotel, and, after winning the bid, became a key contributor on the project. This helped Janey Construction—a Black-owned and managed firm—gain experience, grow its capacity and expand its network. This in turn led to its next major project, building offices for Fidelity in the Seaport neighborhood. Kenn Turner, then the Director of Diversity & Inclusion/Compliance at Massport, told GBH news, “This is not about crumbs on the floor. This is about really, truly building capacity…. You take a smaller firm and you expose that firm to all the technical information and experience that they’ll need so that when the next project comes along, they’ll be able to scale up and do a bigger project.”

The City of Boston has known about racial disparities in contracting for a long time. This is precisely why then-City Councilor Bruce C. Bolling led the effort to create the Minority and Women Business Enterprise (MWBE) program in 1978, which required city agencies to strive toward doing at least 15 percent of their business with Minority Business Enterprises (MBEs). Mayor Menino ended the program in 2003 after 25 years of operation due to a lawsuit alleging the city discriminated against a White-owned construction firm. The legal action led to a 2003 study of disparities in contracting, and then termination of the program. The report was deemed inconclusive, despite finding that 98 percent of contracts went to White, male-owned firms.

After the discontinuation of the MWBE program, even fewer business owners of color received city contracts. In response to numerous complaints by business owners and advocates that MBEs were being shut out of city contracts, the city would issue statements and executive orders with aspirational goals, but took no concrete steps toward rectifying the situation. Even after the Boston City Council passed a 2016 ordinance with specific targets for spending on minority-owned firms to help achieve equity in municipal contracts, the city lacked effective accountability mechanisms and continued to come up short (as evidenced by the disparity study).

Following years of insufficient action taken by the city in the face of blatant discrimination toward Black and Latinx firms, and equipped with new evidence, Lawyers for Civil Rights filed an administrative civil rights complaint against the Walsh Administration and the City of Boston on behalf of BECMA, Amplify Latinx and the Greater Boston Latino Network. In response, Mayor Walsh signed a third executive order outlining aspirational goals to increase contracts for minority- and women-owned businesses, calling for the creation of a supplier diversity program, and setting forth new reporting measures. To advocates, the executive order was more of the same, lacking detailed implementation and accountability plans. It did not go far enough.

Boston, and cities across the Commonwealth, must take action to detect and eliminate existing discriminatory practices in the awarding of public contracts and procurement dollars. While the state has taken several steps forward, it too can do more to ensure full equity in contracting. Among other strategies and actions to address these systemic inequities, the state and local governments should:

  • Set targets of 15–25 percent of public contracts to be awarded to minority-owned businesses. Rather than just considering the availability of existing firms, this pushes policymakers and community leaders to work simultaneously on unleashing the untapped entrepreneurial potential of new business leaders of color.
  • Establish an independent government agency to review contracting with minority-owned businesses and hold government officials to account for missing diversity targets. The Commonwealth of Massachusetts has done this. Now it is time for Boston and other municipalities to do the same.
  • Link performance evaluations, compensation, bonuses and future employment for all cabinet-level positions, department heads, procurement officers and other staff across departments to making a good faith effort and documenting substantial progress toward achieving equity and diversity contracting goals.
  • Direct all city departments and quasi-public agencies to unbundle large contracts that are set to become available in 2021 and beyond. While there may be some operational efficiencies to bundling contracts, the scale of the current contracting disparities requires us to take every opportunity to reevaluate contracting practices so that we can make more equitable decisions moving forward.
  • Waive union and project labor agreement requirements for minority-owned businesses on specific projects, as well as bonding and insurance fees. Construction contracts make up the bulk of city spending ($1.2 billion of the $2.1 billion Boston spent over a five-year period) and these requirements shut out not just minority-owned businesses, but all small businesses, from these opportunities. Union protections play an important role in safeguarding fair pay and benefits for workers, but must not be used to systematically lock smaller minority-owned firms out of larger public contracts.
  • Conduct regular disparity studies or similar research to ensure policies and practices are being implemented, staff are being held accountable, and methods are being enhanced according to the findings of said research.

There are many other important steps our state and city governments could and likely should take to end discriminatory practices in contracting and procurement. What matters most, however, is accountability. What separates good intentions from measurable progress is accountability, and this starts at the top. We now look to Governor Baker to provide sufficient budgetary resources and regulatory enforcement power to the state Supplier Diversity Office. With Mayor Walsh poised to join the Biden Administration, it is now left to the next mayor of Boston to prioritize racial equity in the allocation of city contracts to Black- and Latinx-owned businesses. Boston is not alone, however. We need cities across the Commonwealth to lead on this issue if we are to build a better and more equitable economy than existed prior to the COVID-19 pandemic.

Read more proposals in the Seizing the Moment series.