The Ledger, Page 4 Nashville Banner, Monday, July 24, 1995


Few profiting from racial link

Most firms too small to compete


First of two parts

By Jennifer McMillion

Banner Staff Writer

Amid a bitter national debate over the fate of affirmative action programs, some Mid-state Black leaders say the fuss over reverse discrimination in contracting is misdirected.

In Tennessee government, they say the problem is not that minority businesses are profiting unfairly from government preferences, but that they are hardly profiting at all.

"Ideally, while we would all like to live in a color-blind society, the stark reality is that we don’t," says Cheri Henderson, director of the Tennessee Minority Purchasing Council. "We still don’t have parity in employment - much less procurement."

Less than 2 percent of the money from state purchases and less than 1 percent from Metro last year was awarded to African-American-owned companies, according to the best records available, which are incomplete.

"If we’re ever going to close the gap of income levels, we’ve got to do it through business," says Marilyn Robinson, project director for the Nashville Minority Business Development Center.

"When will it be our turn? If they look at who’s left out - if they give this segment an opportunity - it’s going to help everyone."

African-Americans, Tennessee’s largest minority, make up about 16 percent of the population statewide and 23.4 percent of the population of Davidson County, according to U.S. Census data.

However, they own only 4 percent of businesses in the state, and those are mostly small, with average receipts well below the national average.

"One of the problems we have with minority businesses is that they cannot buy in the quantity that would allow them to be competitive with other, larger businesses," says Melvin Gill, a local architect who is seeking a City Council seat in District 20.

"When they bid, they’re competing with the same companies they buy supplies from. That’s a no-win situation."

Arthur Overall, owner of Music City Telecom and member of the NAACP Fair Share Committee, says local government should do more to shepherd struggling minority firms along.

"As far as I’m concerned, it hasn’t happened for us," Overall says. "I’ve been in business for 10 years, I work every day to try to make dollars and stay in business.

"Doors don’t just open up for you because you’re minority. The perception is that African-Americans are getting all these contracts because the federal government mandates that X-Y-Z contracts go to minorities. That’s just not true."

Gov. Don Sundquist’s recent press conference on minority purchasing raised serious questions about the share of state money actually awarded to minority-owned companies in Tennessee, where there are no race-conscious set-aside programs for state contracts.

While Sundquist repeatedly used the figure "less than 1 percent," official records seemed to set it at close to 10 percent.

He endorsed a minority participation goal of 15 percent.

Currently, the state sets an overall goal for small business, but no separate goals for minority or women-owned businesses.

"I’m encouraged that the administration is paying attention to equal opportunity in procurement," Henderson says.

"Sundquist has indicated that everyone in the state deserves an equal opportunity to compete. So the jury’s out, but I’m encouraged."
Defining ‘minority’

At the heart of the confusion over figures at the governor’s recent press conference was Tennessee’s official definition of "minority business."

Currently, 36,307 vendors are registered with the state Department of General Services as small businesses.

Of these, 6,063 are identified as "minority owned." But this term officially includes women as well as ethnic and religious minorities considered socially disadvantaged.

The state has never officially broken these figures down according to gender and ethnicity, but it is required by legislative mandate to begin the process this month. Some initial tracking of black business participation has begun already.

The state sets a goal of 25 percent for small business participation. This year, the small-business share of General Services contracts was exactly that. "Minority" companies accounted for 9.8 percent of the total.

However, because the definition of "minority owned" includes women, minority leaders say the number looks inflated.

The statutes of states like Tennessee, which lump together women and ethnic minorities under one umbrella, can skew perceptions about how those states compare to others that use "minority owned" to refer to disadvantaged ethnic minorities.

In fact, of the $247 million in purchases handled through General Services last year, only $3.5 million - or 1.4 percent- went to those registered as African-American.

General Services officials say that figure, based on their own data, is highly misleading. Ethnicity figures are based on self-identification through questionnaires sent out by state.

Yet only about 14 percent of those registered as minorities indicated their ethnicity; about half of those were African-American. The real numbers could be much higher, officials say.

On the other hand, Robinson notes that total minority business in the state could be lower because so much purchasing activity is not tracked for minority participation, nor is there any method of verifying minority-ownership.

Haphazard records

The most commonly cited official state figures for minority contracting come from the Department of General Services. Yet only a fraction of all state business is conducted though General Services - about $247,000 in purchases.

Some other state bodies, including the Department of Transportation, the Board of Regents and the University of Tennessee, report minority participation figures to General Services, but these figures are tracked and calculated separately.

And the Office of Contracts Administration, which processes 2,700 contracts a year with a dollar value of about $1.28 billion, has no centralized tracking system at all to determine minority participation.

Included in this number are professional services - legal, architectural or consulting services, for example.

Marva Bradford, who was director of contracts until two weeks ago, says a tracking system is currently being discussed.

Some business leaders are angry nothing has been done yet to ensure compliance with federal equal opportunity laws.

"Why would you keep good records when you’re not in compliance?" Overall says. "They know what the deal is."

Comptroller of the Treasury Bill Snodgrass, who is responsible for auditing the operations of state agencies, responds that there is no conspiracy to hide information.

"He’s suggesting we’ve set up our purchasing operation to make obtaining the information difficult," Snodgrass says. "But it’s set up the best way to purchase goods and services."

Snodgrass concedes, however, that "there (do) need to be efforts made to obtain the information from these different points of view. I know there are currently efforts to do that."

A 1994 study of state agencies by Snodgrass’ office found that many agency officials were not even aware of their responsibilities under Title VI of 1964 Civil Rights Act.

Title VI requires all state agencies receiving federal money to ensure that recipients and sub-recipients of the funds are not discriminated against because of race, color or national origin.

A state law now requires all agencies receiving federal funds to submit a Title VI implementation plan to the comptroller’s office annually. And funds have been appropriated to deal with complaints.

Not only does the state have no official numbers on the total amount of minority participation in contracts, but it requires no certification process through General Services to establish whether businesses claiming to be minority really are.

"I’m in favor of a very thorough certification process," says Henderson, whose organization offers certification to ethnic minorities. She says such a process is necessary "to weed out false fronts."

The current verification system requires notarized applications, but no on-site visit or supporting evidence, officials say.

Debra Luter, small and minority business coordinator for General Services, is the only employee in charge of registering and tracking minority-owned businesses for that department..

She says she lacks the staff to check up on the more than 6,000 businesses registered as minority.

"There is no on-site confirmation," Luter says. "We accept (the self-identification) at face value."

Currently , only minority-owned businesses seeking contracts involving federal funding - such as Department of Transportation contracts - must go through more rigid certification process conducted by the state Office of Minority Business Enterprise.

"It would be counterproductive for us to make people get certified," Elsie Smith, assistant commissioner for purchasing management and general counsel for General Services.

"They wouldn’t gain anything since we have no set-asides or quotas....We wouldn’t be able to give them a prize for jumping through those hoops."

Minority support

General services does have some support programs designed to encourage minority companies to do business with them.

The most formalized is a computer search system designed to favor minority businesses in the procurement process.

General Services staff also meet with minority business representatives to discuss concerns. They offer special seminars to help familiarize them with the bid process.

Despite such efforts, a 1994 survey of minority business owners by a governor’s advisory committee reveals lingering concerns.

Some are problems that might be common to all businesses, including slow payment and excessive paperwork.

Others are specific to small or minority businesses, such as inability to compete with large suppliers or to meet bonding requirements. Many say they want the state to set specific ethnic goals or to institute a "true set-aside program."

Please see PARITY, page 5


Continued from page 4

Currently, the state has no quota system for minority contracts. Race and gender-based goals and incentive programs exist only with some contracts involving federal funds.

State officials point out that they cannot legally institute sheltered competition programs based solely on race because the Supreme Court ruled in 1989 that such programs are unconstitutional unless they can pass a "strict scrutiny" test, a standard the court just extended to federal programs last month.

Wake up call

Robinson says that if changes are going to occur, they will have to come from the top down.

Any good-faith effort, she says, should start with more minority representation in government leadership positions.

"The people in the policy-making positions - none of them look like us," Robinson says. "Why don’t we have some Black people in charge?"

She would like to see a disparity study followed by appropriate remediation programs.

A disparity study can provide documentation on specific local patterns of discrimination. Tennessee has never done one.

But local minority leaders concede that such an approach is unlikely in the current political atmosphere, especially with a conservative Supreme Court philosophically at odds with the concept of set-asides.

"I do think this (most recent) ruling is a wake up call," Overall says.

"It brings minorities in this country back to reality and lets them know exactly where they stand in relationship to government contracts....When the Supreme Court ruled the way it did, it made people open their eyes."

Supporting Black businesses is a more constructive way to improve the life of Black communities and the larger society than many other forms of government spending, Robinson says.

Overall says his company is a good example of this.

"If I receive a large contract, then I would hire people from my community and train them," Overall says.

"So that takes care of some of your poverty. It takes some of your people off welfare. And it’s a very positive cycle if it’s handled right."

Tuesday: A look at Metro government’s minority-purchasing practices.