Milwaukee Could Add Race, Gender To Contracting Requirements

Milwaukee City Hall. Photo by Jeramey Jannene.

Millions of dollars could soon be explicitly directed to minority-owned businesses, if the City of Milwaukee follows the recommendations of a long-awaited study to alter its race and gender-neutral contracting practices.

The study, publicly discussed for the first time Monday, provides the statistical basis for the city to target opportunities for Black, Hispanic, Native American, Asian and women-owned businesses.

“If we do this, we definitely will be a changed city, more progressive, more inclusive,” said Alderman Russell W. Stamper, II after the council’s Community and Economic Development Committee spent more than two hours discussing the matter.

Atlanta-based firm Griffin & Strong won a competitive request-for-proposals process to produce a disparity study for the city.

Subgroup-by-subgroup, the firm found that minority or women-owned businesses (MWBEs) were underutilized to a statistically significant level in city contracts for construction, architecture & engineering, professional services, goods and other services with two exceptions. Native American-owned firms are properly represented in construction contracts and African American-owned firms are properly represented in goods contracts.

Now, the council must decide what to do. Griffin & Strong made a series of recommendations.

The firm recommends maintaining the broad neutral practice towards race and gender, but adding subcontracting goals based on MWBE capacity. An example given by Griffin partner David Maher, who presented the report, was that the material hauling component of a larger contract could have a target MWBE participation rate based on documented contractor capacity.

Griffin also suggests Milwaukee could implement MWBE-only contracts that are for $50,000 or less to create a pathway for firms to grow their capacity.

In addition, Maher presented recommendations that the city make several changes to better track specific aspects of its spending and make it easier for small firms to participate in city contracting.

“Our firm has never had one of our studies challenged in court,” said Maher. The firm has completed more than 100 similar studies. The dozens of studies were triggered by a 1989 U.S. Supreme Court decision that established legally defensible guidelines for minority contracting requirements.

The city’s Chief Equity Officer Bernadette Karanja and purchasing director Rhonda Kelsey largely agreed with the findings and said they were already looking at how some of the recommendations could be implemented.

That includes adjustments to the city’s Small Business Enterprise (SBE) certification process. Firms currently must have one year of business experience to be certified.

Common Council President José G. Pérez said the this makes it difficult for new firms to enter the market. Karanja called it “almost a catch 22.” Other council members said they had heard informally that it was an obstacle.

“Obviously, that’s the point of conducting the disparity study, to analyze the market,” said Kelsey.

Assistant city attorney Kathryn Block said the one-year benchmark isn’t “a legal standard set in stone.” Karanja said discussions were already underway with Griffin & Strong on how to best modify it.

Another suggestion on the table is to combine certification programs with other government entities. The idea was also floated in a new Wisconsin Policy Forum study that examines how the city and county could better work together.

Additional tweaks to support smaller firms include raising the threshold at which a bidding firm must have an apprenticeship program, waiving bonding requirements in select cases, and better communicating bid availability.

“We would like to build our efforts in this area,” said Kelsey of the marketing.

Supportive services, including accounting training and explicit payment standards, are also recommended.

Griffin is also recommending the city establish internal goals by subcategory for MWBE participation and engage with firms to build their capacity. “You’re setting a culture,” said Maher. “You say to your contractors, ‘how can you help us reach those goals?'”

Maher said the city deserves to be commended for its SBE revolving loan fund, socially-responsible contractor scoring bonus, record keeping and publication of a five-year buying plan.

The 288-page study examined city contracts between 2015 and 2019 and relevant firms in the census-defined Milwaukee metropolitan statistical area, which includes Milwaukee, Waukesha, Ozaukee and Washington counties.

“You’ve been really thorough. You’ve made it really plain for us. Thank you for that,” said Ald. Khalif Rainey.

But any change will require Common Council action.

Attorney Roy B. Evans, the former independent monitor of a race-based state program, said what is recommended is a good start, but only a start.

“I was sitting here. listening to the recommendations and my head was just spinning,” Evans told the committee. “This is a good opportunity to bring about some level of change.”

He said his legal practice is primarily focused on minority-owned firms and he has repeatedly seen the “heart-wrenching” difficulties firms encounter.

Potential State Challenge

Act 12, the sales tax and shared revenue bill, could alter what the city ultimately does because of a little-discussed provision embedded within the new state law.

“Unless required to secure federal aid, no political subdivision may discriminate against, or grant preferential treatment on the basis of, race, color, ancestry, national origin, or sexual orientation in making employment decisions regarding employees of a political subdivision or contracting for public works,” says the statute.

But Maher said he has seen similar provisions elsewhere and cautioned the city not to view it as a blanket ban.

“I think it’s a little early to know exactly how Act 12 is going to be administered,” said Maher.

Past Effort Failed

The city has tried this before.

In 2010 a disparity study was completed that found statistically-significant underutilization of MWBEs. But after the city implemented racial targets in its hiring requirements in 2012, the Hispanic Chamber of Commerce of Wisconsin and American Indian Chamber of Commerce of Wisconsin sued, arguing that the study was flawed. The city repealed its ordinance and settled the case in 2013, with study preparer D. Wilson Consulting Group and its insurer agreeing to reimburse the city for much of the study’s cost.

The 2012 change divided the blanket 25% SBE requirement in many city contracts into specific race or gender amounts based on the 2010 study.

The latest process has involved up-front engagement with the minority-focused chambers of commerce and other stakeholders. Karanja, who was promoted to her role mid-study following the resignation of Nikki Purvis, said of the 13 groups invited to participate in 2019, 12 accepted.

“The resulting feedback created a finalized [request for proposals] with invaluable cross-sectional input,” said Karanja. Griffin & Strong was selected from a pool of eight bidders.

The current process dates to 2016, when Stamper introduced a $500,000 budget amendment to fund half of the study. He successfully fought off a budget veto from then-mayor Tom Barrett, and then led the push for another $500,000 amendment in 2017.

In 2017, he gave an impassioned speech on the council floor in favor of the study. Before detailing how he doesn’t want his son to grow up in a city that is regarded as the worst in the country for African Americans, Stamper told the council to “stop complaining and let’s work together to get things done in this city.”

Related Legislation: File 231200