Critics Cry Foul at State's Minority Set-Aside Program


By Wayne Jebian

Some Latino business owners are convinced that the system the state uses to steer contract work to minority-owned business is broken and needs an overhaul. They say that the current set-aside quotas are meaninglessly small and structured in a way that doesn’t help minority-owned businesses win government contracts. Members of a trade organization called the Greater New England Minority Supplier Development Council have been leading the latest round of criticism.
“The system is fundamentally flawed,” said member Ed Rodriguez, president of Penmar Industries in Norwalk, a manufacturer of tape, labels and other packaging products. Rodriguez has tried and failed to secure state contracts through the existing certification process, and he says of his prospects: “I never have, and I never will. The hurdle is extraordinarily high.”
Rodriguez, who is also a commissioner on the Latino & Puerto Rican Affairs Commission, says that small and minority-owned businesses in Connecticut have to compete directly with out-of-state businesses that don’t have to pay in-state sales taxes or the higher labor and energy costs of in-state contractors. However, the bigger problem is that the percentage of the set-aside is way too small. “The 6.25% quota is miniscule,” he says. “[Former Hartford Mayor]Eddie Perez and other mayors enforced higher minority contract quotas, and behold, they found the minority-owned companies that could do the work. They’re out there.”
Andrea Keilty, legal counsel and legislative liaison for the state Department of Administrative Services (DAS) explained how the 6.25% figure came into being under current laws. “(One quarter) of our discretionary spending has to be set aside for small businesses, and then 25% of that amount, 6.25% of the total, goes to MBE’s, Minority Business Enterprises.”
What has drawn the most fire is the fact that the category “Minority Business Enterprises” also includes women-owned businesses, putting women and minorities in direct competition for a 6.25% slice of the pie. Fred McKinney, president of Greater New England Minority Supplier Development Council, rails against this formula: “Twenty-five percent of the set-aside for small businesses is supposed to go to minority-owned or women-owned, and the key word here is ‘or.’ It can go entirely or largely to women-owned businesses, with very little of it going to minority businesses. And that’s what has happened.”
McKinney points to data from the Commission on Human Rights and Opportunities (CHRO) that shows minority-owned businesses lagging way behind women-owned businesses in overall share of the set-aside contract quota. “Not only is the proportion of business going to minorities low, it’s been declining, the proportion and the value in dollars. We have a problem that’s not getting better; it’s getting worse.”
Because of irregularities in the data, it is difficult to say firmly whether McKinney is correct about the “getting worse” part, but what the numbers do show is a kind of statistician’s riddle: 25% of state discretionary contracts set aside for small businesses, 25% of which are set aside for women and minorities to compete over, with the portion actually going to minority-owned companies hovering at approximately 25% What is 25% of 25% of 25%? Around 1.56% of state discretionary contracts go to minority-owned business under the set-asides, and this is completely allowable under the current law.
Bidding on government contracts is an arduous process, and Latino business owners say they find competing for such a thin sliver of the pie to be discouraging. Tony Rodriguez, president of business consulting firm Daniel Penn Associates in West Hartford, said, “Going after government work is not easy for smaller firms. It’s demanding both in terms of effort and time to respond to these Requests For Proposals (RFPs), and, in many cases, we don’t get a debriefing as to why we didn’t make the cut.”
State Rep. Andres Ayala (D-Bridgeport), who has had past experience with set-aside programs in Bridgeport, is quick to point out that an effective minority contracting is more than just quota numbers. “We can set aside and make quotas and do whatever we want to do,” he said, “but if we don’t have anyone tracking this and following up, and guiding these contractors through the process of state contracting, which can sometimes be arduous, it gets lost in the equation.”
The simplest solution, according to McKinney and others in his group, would be to create more opportunities for minority-owned businesses by separating the quotas for women-owned and minority-owned businesses, enlarging the set-asides by carving them out of the larger whole rather than at the expense of women business owners. However, even the simple solution is not so simple. The biggest obstacle on this course is constitutional law.
“There’s lots of case law that says that the government cannot make decisions or policies – such as who should get state contract awards – based on race, national origin or alienage, unless the government can show that it has a compelling interest in doing so and that the policy is narrowly tailored to achieve that compelling goal or interest,” said Keilty, the DAS legal counsel.
One way to show a compelling interest in government policies that support race-based set-asides in contracting is to demonstrate that the government body at issue has awarded its contracts in a discriminatory fashion or has underutilized available minority-owned businesses when awarding its contracts. Last year, the Connecticut legislature directed the Connecticut Academy of Science and Engineering to conduct such a disparity study to determine whether such conditions exist. There has been some wrangling between the governor and the legislature over funding for the study, but it is moving forward.
McKinney says that he wants to see this money, time and effort yield meaningful change. “Compare the performance of our neighbors in Massachusetts to what is going on here in Connecticut,” he said. “They have a much better record – by a factor of ten or twenty – than Connecticut, even factoring in the greater size of Massachusetts.”