Philly’s Black-owned businesses are still decades behind despite affirmative action

It’s been about 60 years since the Civil Rights Act was signed into law by then president Lyndon Johnson that banned discrimination and outlawed segregation — so why does affirmative action for businesses in government contracting still exist?

In short, advocates say because economic disparity still exists. During National Black Business month, WHYY explores why these programs were created.

Even in major cities where there’s policies to improve equity and benchmarks to ensure a more level playing field like Philadelphia.

About 80% of city and quasi-public entity contracts were awarded to white non-Hispanic men in fiscal year 2021, according to the city’s most recent economic disparity study. Or about $560 million in local government contracts for public works, professional services, supplies, services and equipment.

The remaining 20% of contracts totaling $296 million were split among women, minority and disabled businesses.

That’s a step back from just five years ago when the split of 70% white non-Hispanic men and 30 percent everyone else.

Sharmain Matlock Turner, CEO of the Urban Affairs Coalition, remembers a demonstration in the early 1980s when protestors gathered on North Broad Street where Temple University was constructing a dental school.

“People in the community said why am I not working that job? I don’t see anybody working on this job who looks like me,” Matlock Turner said.

So why doesn’t the city enforce a quota system to enforce more equity in how tax dollars are spent? The short answer is — it’s illegal and the highest court in the nation ruled it’s unconstitutional.

For example, the city of Richmond, Virginia tried to use quotas about 40 years ago requiring that prime construction contractors allocate 30% of subcontracting money for projects to minority-owned businesses in a city with a population that was 50% Black.

But the U.S. Supreme Court struck down that city ordinance in 1989 after a lawsuit was filed by a construction company that lost the Richmond city contract because it was the sole bidder and was denied a waiver after arguing there were no minority-owned businesses available for subcontracting the project.

The court argued that general assertions of past racial discrimination could not justify such programs and that instead ‘strong evidence’ of disparity must be proven then specific narrowly tailored goals could be pursued.

“At that point, the idea was in order to effectively establish goals that were going to stand up in court,” Matlock Turner said. “So if 30% of the electricians in Philadelphia were people of color you could establish that as a goal because it’s based on real data. So that’s how we ultimately were able to create a legal system in Philadelphia.”

But advocates argue that despite race and gender conscious policies, women and minority-owned businesses are decades behind their peers in business.

For example, many construction companies were founded after WWII during the construction boom when white veterans had GI bill benefits to afford home mortgages.

“Many of them were started at the beginning of the construction of the suburbs. So you had all of this new construction. It was a great time to start companies,” said Kenyatta James, director of PAGE at the Economy League of Greater Philadelphia “It was also an extremely difficult time for minority businesses to get capital to get support. To get any sort of financing, you couldn’t really compete with these other people because you were openly discriminated against many times without any real legal repercussions.”

For decades, Black veterans had a difficult time accessing GI bill benefits of home mortgages due to discriminatory practices like prohibiting Black residents from buying homes in suburbs like Levittown, New York.

Likewise, it wasn’t until 1974 when the Equal Credit Opportunity Act was passed which granted women the right to obtain credit cards in their own name without explicit permission from their husband. 

Then the second generation of construction companies in the 1970s– when companies started adding the phrase ‘and sons’ to their name – there still wasn’t equity in the market, James said. Even after laws were changed litigation lingered for years over affirmative action efforts.

“These structures were ironed out in the 90s and early 2000s,” he said. “So they had some opportunity to get on projects and to grow. But there’s relatively few of them and they are not the dominant players in the industry. I think that’s one of the reasons why you see an industry that’s not as equitable as it should be. I don’t think that’s just true in construction but across all industries.”

Carlos Jones, executive project manager for economic development projects at the Urban Affairs Coalition says the long history of racism and systemic inequality meant minorities and women were shut out of wealth generation and they still haven’t caught up.

“You would be hard pressed to say there is an African American group in the city of Philadelphia that’s doing – independently — a billion dollar project – but there’s several going on in this region,” Jones said.

Instead, what’s more common are joint ventures or even subcontracting for minority and women-owned businesses. Government agencies and even large institutions often have what’s called set aside contracts, usually smaller projects or service agreements that don’t even require the bidding process to encourage participation from historically disadvantaged businesses. To compete for government contracts or even diverse supplier programs, business owners are encouraged to get certified.

“The goals are great but you almost have to say we need a banking and capitalization component which means access to capital,” Jones said.

Beyond that, minority and women-owned companies need a pipeline of incrementally larger contracts so they can scale up operations and eventually employ thousands of workers, he said.

“If you haven’t afforded the people a chance to work on $200,000 or $300,000 projects and think they’re magically going to be capable of doing $2 billion — it’s illogical,” he said. “You have to build a pathway for success.”

Even so, a minority-owned business doesn’t necessarily mean it’s a small company. Philadelphia-based PRWT Services has about 1,500 employees and was founded about 35 years ago.

Brandon Kelley, vice president of corporate strategy at PRWT Services says that their biggest challenge these days is their size.

“In a lot of ways, we’re considered too big,” Kelley said about any minority and small business development support. “We don’t get to participate in procurements that have a set aside or points associated with being a minority business. On the flip side, we’re a lot smaller than the publicly traded billion-dollar players that we compete against. So I think the biggest challenge for us is figuring out how to be creative and show clients that we’re able to deliver just like anybody else.”

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