Government contracts can mean big dollars for minority- and women-owned firms — if they get them.
Yet there’s often a wide disparity between the number of minority- and women-owned businesses available for government contracts and the number awarded those contracts. But before municipalities can pursue programs to close that gap, they need to commission a disparity study to prove the gap exists.
Each year, municipalities across the country commission consulting firms to conduct disparity studies, to show whether the municipality has been awarding contracts to minority- and women-owned businesses at inequitable rates. Those studies often are costly, take years to produce and are lengthy. That also means they’re ripe for journalistic investigation.
One recent example of a disparity study comes from Cuyahoga County, Ohio. In October 2020, an Atlanta-based firm commissioned by the county released its more than 200-page disparity study. From 2014 to 2018, Cuyahoga awarded 0.59% of its $1.1 billion in contracts to minority-owned businesses, according to the study. In the construction industry alone, about 21% of available firms in the area were minority-owned, but those firms received just over 1% of county construction contracts.
The 2020 study was a follow-up to a 2014 study, more than 400 pages long, that came to a similar conclusion: minority-owned businesses represented 9% of available firms in greater Cleveland from 2009 to 2012, but 0.9% of prime contracts awarded.
Prime contractors are responsible for carrying out work, which can include hiring and managing subcontractors. Last month, the Cuyahoga County executive signed several orders aimed at increasing the rate of minority- and women-owned businesses awarded county contracts.
But disparity studies don’t always mean a municipality will address systemic discrimination that caused procurement disparities in the first place, says Christopher Atkinson, assistant professor of administration and law at the University of West Florida and lead author of, “The Best Disparity, or Lack Thereof, That Money Can Buy,” published in November 2020 in The Review of Black Political Economy.
“When you’re buying [a disparity study], it’s a legal basis for having a race-conscious program,” says Atkinson, who spent nearly two decades working in Florida county government, including serving as a program manager for a disparity study.
Disparity studies were born out of a 1989 U.S. Supreme Court case, City of Richmond v. J. A. Croson Company. In 1983, Richmond, Virginia, required that prime construction contractors set aside 30% of their subcontracting dollars for firms that were at least 51% minority-owned. Six of the nine justices struck down the Richmond ordinance. Governments couldn’t apply a remedy to a harm they hadn’t explicitly proved existed, the court reasoned.
“This program was found to be counter to the Equal Protection clause of the Fourteenth Amendment to the U.S. Constitution because it afforded certain groups access to opportunity solely based on race, without regard to evidence of specific instances of discrimination,” write Atkinson and his co-authors, Clifford McCue and Jesse Saginor of Florida Atlantic University.
Several key court rulings later and disparity studies emerged as the way for municipalities to prove procurement inequity. Each disparity study typically costs around $1 million, and the price tag can swell if a municipality has poor quality data that the study firm has to improve or reproduce, Atkinson says.
Once completed, municipalities are sometimes not immediately forthcoming with study results. Findings from studies in Boston and San Francisco only recently were revealed because of an investigation from WGBH reporter Chris Burrell and Bay Area business leaders speaking out.
Anatomy of a disparity study
MGT of America Consulting, National Economic Research Associates and Mason Tillman Associates are among the bigger players in the disparity study “cottage industry,” write Atkinson, McCue and Saginor.
Disparity studies are complex but often formulaic, even when they’re produced for communities that are widely different from each other, culturally and economically. Atkinson and his co-authors document the typical major sections of a disparity study:
- Legal review and analysis — including requirements from the Croson decision, such as showing active government contracting discrimination, or passive discrimination due to systemic economic inequality.
- Review of procurement regulation and policy, including applicable federal, state and local laws.
- Establishment of market areas — the geographic regions covered in the study.
- Analysis of contractors that get municipal work.
- Analysis of contractors that are locally available.
- Disparity analysis showing how often the government awards contracts to minority- and women-owned businesses.
- Anecdotal evidence, including interviews with local business owners.
- Regression analysis showing links, if any, between discrimination and contracting opportunities.
- Recommendations, including legal and programmatic changes.
Recommendations are non-binding. That means the firm that did the disparity study may offer suggestions to implement or alter certain programs and policies, but it’s up to the municipality to follow through.
Furthermore, “solutions that work for communities tend to come from within the community — not from an outside consultant,” Atkinson says. To that point, recommendations themselves are sometimes boilerplate.
“It would be good if recommendations weren’t simply grafted onto a community,” Atkinson says. He notes that when a municipality signs a consultant to produce a disparity study, they’re not just paying for the study — they’re often paying the consultant to defend the municipality’s race-conscious programs in court. That specific expertise comes with years of experience, meaning there are a limited number of consultancies that can both produce a 400-page disparity study and defend it in under oath.
But the big takeaway for Atkinson and his co-authors is that wholesale change in municipal procurement takes more than simply commissioning a disparity study. Those studies alone do not spur big changes in hiring minority- and women-owned firms, Atkinson says.
“Firms that got the work before are probably going to get work again,” he says, adding that many firms that win municipal contracts are large organizations not based in the community. “They’re multinational corporations that know how the system works and know how to create their proposals. There’s a learning curve. In practice, it seems like [disparity studies] become a last step or destination. They’re really not. ”
What’s required, according to Atkinson, is “a complete change as to how governments do business. I don’t think that’s what they’re signing up for — it’s not been my experience. Otherwise, we wouldn’t have disparity studies. We wouldn’t have discrimination.”
Covering a disparity study: 9 questions worth asking
For journalists covering disparity studies, it’s worth considering this fundamental question: Is the study a first step toward equitable procurement, or is it a destination unto itself?
Here are nine more questions to extract valuable insight on why local government leaders commissioned a disparity study:
1. Does the municipality have a history of commissioning disparity studies?
2. If procurement inequity is already a proven problem, what have government leaders done — or failed to do — to address the problem?
3. After a disparity study is completed, did the municipality set specific goals to achieve institutional change?
4. Has the disparity study consultant provided recommendations that are largely similar to those it has made to other municipalities?
5. If the final price tag for the disparity study was higher than expected, why?
6. How much did taxpayers spend on the study relative to subsequent investments to reduce inequality in procurement?
7. If a municipality aims to award more contract dollars to minority- and women-owned businesses, what does the data show in subsequent years? Has the municipality met its goals for reducing contracting disparities?
8. If the municipality has longstanding contracts with a few firms, would it have a hard time transitioning away from those relationships?
9. Did the consultant, in preparing the study, ask women and racial and ethnic minorities who own businesses in the community for ideas on how to reduce procurement inequity? If so, what were their responses and were they included in the study? If not, why?
Check out our research roundup on economic impact studies, with key questions journalists should ask when covering them.