PORTSMOUTH — A citywide study of businesses awarded city contracts in Portsmouth revealed minority- and women-owned businesses continue to receive significantly fewer public contracts than non-minority-owned firms.
Last year, the city tapped Florida-based MGT Consulting Group to conduct a study determining whether city contracts were being awarded to qualified and willing minority- and women-owned business enterprises at the same rate as other businesses. Vernetta Mitchell, director of MGT Consulting, told City Council members last week that of the $515 million spent on contracts between July 2016 and June 2021, minority-owned businesses received around 2% of that money while non-minority woman-owned businesses received about 6%.
The study examined data related to transactions within the city, including contracts for bids, requests for proposals and purchases. It also asked business leaders about barriers they faced in competing for contracts and whether they think discrimination played a part. The industries studied include construction, architecture and engineering, professional and non-professional services, and goods and equipment.
The study showed Portsmouth spent about 70% of its dollars on firms or businesses located in the Hampton Roads region, which was defined as the seven major Hampton Roads cities and several surrounding cities and counties. About 93% of the $39 million the city spent on architecture and engineering services was paid to businesses in the Hampton Roads region. Meanwhile about 78% of the $243 million spent on construction services went to Hampton Roads businesses.
The study also contrasted that data with the available minority- and women-owned businesses in the regional market, which totaled about 12% for minorities — with African American-owned businesses comprising about half of that — and about 9% for non-minority women-owned firms.
A similar study was conducted in 2015, which also identified significant disparities.
The latest study revealed only 1.43% of that $515 million was spent with African American contractors, which council member Mark Whitaker called “highly troubling and disturbing” in a city with a majority Black population. The 1.43% figure is also down from the previous study that found 1.73% of the city’s money had been spent with African American contractors.
“This is egregious discrimination that this data is showing,” Whitaker said, adding the city has intentionally ignored findings from the previous study. “This is intentional. It’s not like this is happening just by happenstance.”
Similar conditions were discovered when evaluating the private market, with the study finding that minority- and women-owned firms earn less and are less likely to be self-employed due to their race, ethnicity and gender, according to data provided by the U.S. Census Bureau.
Mitchell said 238 business owners and representatives were also surveyed about their experiences as part of the study. One Hispanic woman said she didn’t initially experience racial discrimination when getting started but has since opening her business. Two African American business owners described a “good ole boy” network that has prevented them from networking and being able to do business in the city.
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Suggestions for improving diversity
Interim City Manager Mimi Terry and City Attorney Lavonda Graham-Williams told council members some progress is being made to address the disparities, like the adoption of a minority- and women-owned business enterprise program, an updated website with more information about purchasing practices with the city and the creation of a liaison position to focus on such issues.
Mitchell laid out several recommendations based on the findings, including the addition of an audit clause to all contracts requiring subcontractor data, along with a compliance clause that establishes penalties to hold contractors accountable.
Mitchell also recommended compiling a database of all firms interested in working with the city and sharing it with all staff so they can reach out to those firms for bidding opportunities. She also said it’s worth exploring whether the city could partner with other agencies to carry out goals if it can’t afford to stand up its own program. More education for business owners about what services the city procures is also helpful.
Terry said the city has been working on a database of vetted businesses and vendors that also allows staff to see which contracts various firms have been granted. Graham-Williams also said audit clauses are being added to new and renewed contracts, including the contract with Rivers Casino Portsmouth.
Whitaker also said making the permitting process available online to business owners helps.
City leaders said a minority- and women-owned businesses policy to address both studies’ findings is being worked on. Graham-Williams anticipates a report with next steps for City Council after the start of the new year.
Council member Vernon Tillage said he would like to see a standalone office of business inclusion that can serve as sort of a one-stop shop for all the city departments that firms would normally need to meet and work with in order to do business with the city.
Mitchell also explained the study’s economic impact analysis, which found that the use of minority- and women-owned businesses created 175 jobs with a labor income of $8.8 million. She explained that if the city added 25% to its annual purchasing budget to focus on minority- and women-owned businesses, it would realize a return on investment of more than 200%. For example, if the city’s purchasing budget was $1 million and the city added $250,000 solely for minority- and women-owned firms, it would take less than two years for the city to see that investment returned.
Mitchell also said a long-term procurement forecast could help some firms know far enough in advance about purchasing and projects that are available for solicitation. Any race- and gender-specific business programs must be narrowly tailored to where those disparities exist, she explained, and added that such programs must have a sunset so that they can be reevaluated several years later.
The study also suggested setting an annual aspirational goal, such as spending 10% of the city’s purchasing dollars with minority- and women-owned firms.
Natalie Anderson, 757-732-1133, natalie.anderson@virginiamedia.com