Austin @ Large: Austin at Large

Let's put it this way: "Questions raised about city minority contracting program" is not exactly a man-bites-dog headline. We live in the Intractable Public Debate Capital of the World, and the city's M/WBE ("minority/women's business enterprise") program -- focusing as it does all of Austin's neuroses about race and equity, economic growth, and good government -- has been the subject of such debate for at least a decade.

The recent news of a criminal probe into the city's Department of Small and Minority Business Resources, which oversees the program, is unlikely to make M/WBE any less controversial. "It's just a really tough program to manage," says Council Member Betty Dunkerley, who in her previous life as city finance director played a key role in Austin's M/WBE saga. "Expectations are so high, and it's always political."

As city leaders are quick to point out, despite a leaked federal search warrant full of ugly implications, nobody, and particularly not SMBR director Lino Rivera -- a 25-year veteran of city government -- has been charged with any crime. The probe (involving both local and federal authorities) has already gone on for months and may last for more months and may turn up nothing. Then again, it could turn up a passel of scandals, which would be novel for a City Hall with a reputation for relatively clean, well-lighted government.

But even if there is no fire, there has been heat and smoke and fog and noise around the M/WBE program for years. "This is a mess, and you hear about this shit on a daily basis, and people pretend it doesn't happen," says landscaper James Harper, longtime president of Austin's Black Contractors Association. "People think Austin is clean, that because we've got the river running through it we can do no wrong. I don't understand that. Greed will make people do anything."

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Life After Set-Asides

The current probe centers on allegations that city staff have pressured (Anglo) prime contractors on behalf of certain Hispanic subcontractors, and thus to the detriment of other minority subs, Hispanic or otherwise. The playing of favorites among the subs, if true, is certainly unsavory and potentially illegal. But in a way, pressuring Anglo contractors is SMBR's whole reason for existence.

Austin's M/WBE ordinance does not require that one dime of city spending find its way into the pockets of minorities or women. It requires that bidders on city contracts make certain, carefully defined, good-faith efforts to secure M/WBE participation, and it establishes goals -- which vary both by type of contract and for each targeted group -- for M/WBE participation on each contract and for city contracting as a whole.

The job of SMBR is to help those goals get met -- by hook or by crook, as they say. The department ensures, or is supposed to ensure, compliance with the good-faith requirements (which in practice, too often, means a prime contractor makes a lot of phone calls to a long list of minority subs and hires none of them). It also aims to improve subcontractors' chances for access and success with technical assistance, and intervenes in disputes between subs and primes. "We all want to be aggressive in our advocacy for small businesses," says Council Member Raul Alvarez, who chairs the City Council's M/WBE subcommittee. "But there are our limitations under the law that we have to respect."

It was simpler back when Austin passed its first M/WBE ordinance in 1987, back when cities could legally establish good old-fashioned quotas and set-asides. The U.S. Supreme Court threw those into the tank in 1989 -- the toilet tanks and urinals of the Richmond, Va., jail, to be precise, the contract at issue in the landmark Croson v. Richmond case. In Croson, the court ruled M/WBE programs must be narrowly tailored to remedy documented effects of past discrimination -- that they are subject to "strict scrutiny," in Supreme-speak.

The ruling gave birth to a whole new genre of civic enterprise -- the disparity study -- to document just how badly minorities and women in each city were getting screwed out of their share of the public-contracts pie, so that new-model M/WBE ordinances could be crafted accordingly. Dozens of U.S. cities overhauled their M/WBE programs in Croson's wake. This being Austin, it took us several years, two disparity studies, three outside consultants, more than one lawsuit, many draft ordinances, and lots of bruised feelings before the City Council adopted the more-or-less current version in 1996.

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Coming Up Short

It only took six months, though, for the new ordinance to prove so unworkable that Dunkerley shut down city purchasing for weeks until she could fix it. It has been tinkered with several times since, punctuated by flaps over contracts for the airport, the convention center, even the Zilker Park kiddie train. But the goals established in 1996 -- which minority subs, and particularly the black contractors, thought were too low then and still do -- have never been met, despite the wave of new city projects spawned of the boom and the billion-dollar 1998 bond program. (The ordinance's overall target for African-American participation in city contracts is only 2.6%, but the best black contractors have done in one fiscal year is 2.3% of the available dollars. In 1993, the BCA had sued to force the city to establish a 10% target.)

This proves to some observers that the city is not complying with its own ordinance, to others that the ordinance is itself the problem. "It's been very difficult," notes Dunkerley, "to ensure that we've got the right goals that we have some hope of reaching."

Now, Austin's M/WBE program has underperformed across the board -- neither black, nor Hispanic, nor women's businesses have won their targeted share of city spending. (The goals for the number of contracts have been met, which is a not-too-meaningful statistic.) Given this fact, the players tend to downplay incipient rivalries between different M/WBE groups, certainly in light of cases like the current SMBR probe, with its overtones of ethnic favoritism. But black-on-brown acrimony and special pleading have been part of the M/WBE story for a long time -- since at least 1993, when the respective contractors' groups had a nasty set-to in front of the City Council over the (black-owned) firm hired to do the city's first disparity study.

Perhaps such tensions shouldn't be there, since everybody's in the same leaky boat, but they are, and SMBR cannot long be blind to them. "There is a temptation to favor the groups that are most vocal," says African-American contractor and former City Planning Commissioner Cloteal Davis Haynes. "If one group is chomping at your butt, you'll pay more attention there. So it's a difficult management challenge to meet all these goals while working with your project managers and all the stakeholders involved."

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Carrots and Sticks

The challenge for SMBR, and ultimately for the council when it awards these contracts, is to placate not just the prime contractors and each group of subs, but also the project managers in departments like Public Works, and the citizens and stakeholders who want those new parks, roads, libraries, and police stations now -- not down the road a bit when the city finds bidders that meet the M/WBE goals. There are plenty of incentives to do naught but give lip service to the goals, especially when the city is juggling an infrastructure program the size of the 1998 bonds. And while the current SMBR probe may prove fruitless or groundless, it's certainly plausible, hypothetically, that the department gets insufficient oversight in a City Hall that's been so often burned by M/WBE issues and has so many other balls in the air, and that mischief can be made as a result.

It takes more fortitude to, say, toss out all the bids for a major construction project with a powerful constituency because none of the proposals come close to meeting the city's M/WBE goals. Yet since Gus Garcia became mayor, he, Alvarez, and Danny Thomas -- and now Dunkerley -- have led the City Council to do just that on several occasions, most notably with the $15 million contract for the Central East police substation and forensics lab. "If they simply reject all the bids and rebid, people get the message," says Haynes. "On some projects, staff people who want to see the projects go forward aren't too happy when people talk like this. But when you make it clear that meeting the goals is as important as the budget and schedule, you get the message across. They wouldn't accept a bid that said the project would run two years behind schedule. But they'll accept a bid that doesn't meet the goals."

That's as much of a stick as the city can really wield in the post-Croson era. As for carrots, Alvarez says that "We've done a lot over the last two years to improve the process by which we issue the contracts for large projects, [because] there's a greater possibility with a multimillion-dollar project to improve the numbers. We've been focusing on some of these problems ever since I've been on the council." He adds that under current state law (SB 510, authored by Ken Armbrister, D-Victoria, and passed in 2001), cities can award contracts to the lowest bidder "or to the bidder who provides goods or services at the best value for the municipality." The SB 510 criteria for "best value" can include a city's goals for M/WBE participation (though not, of course, quotas or set-asides) as well as its past experience doing business with a firm.

The new City Hall will be Austin's first major contract under the SB 510 guidelines. "That's how we've done professional services for a long time," Alvarez notes, "and we've been successful there at ensuring participation for diverse groups in the community." However, as a testament to how hard making M/WBE work can be, Alvarez's colleagues Daryl Slusher and Will Wynn voted against using SB 510 rules for the new City Hall for fear it would slow down the project, despite the strong imprecations of both black and Hispanic contractors.

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Changing the Right Things

In an ideal world, there might not need to be an M/WBE ordinance and there almost certainly would not need to be an SMBR, which has dozens of employees and spends more than $1 million a year just on its compliance functions. "Once minority contractors actually have relationships with the primes," says Haynes, "the need for the program goes away. That's why these programs are important; they force the prime contractors to seek out those companies and build those relationships. But it takes more than an ordinance to make that so. There needs to be a desire from the primes to open those doors. Some have done well, and others have gone through the motions. And that's all the ordinance requires."

The rest of SMBR's budget goes to programs, generally in partnership with nonprofits, to make small businesses better prepared to compete for city contracts. Alvarez would like to see even more energy devoted in this direction -- noting that supporting small business is a key plank of Dunkerley and Wynn's embryonic city economic policy. Of course, if SMBR is crippled by an ongoing investigation and any ensuing criminal charges, those additional energies may be stifled by the lack of a place to go. So the city M/WBE program is probably in wait-and-see mode. "We need to be cautious," says Dunkerley. "We don't want to change anything unless we know we're changing the right things."