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In 2011, the City overhauled its Small Business Economic Development Advocacy (SBEDA) program, created 26 years ago by an ordinance meant to even the playing field for local small, minority, and women-owned business enterprises bidding on city contracts.
Last year, the largest spend to date – almost $246 million – was paid to 503 small businesses owned by minorities and women, according to the Small Business Annual Report. The amount represents 49 percent of the City’s spending on contracts in which the SBEDA program applied.
The progress toward parity that SBEDA was designed for is especially evident in the architecture and engineering sector of the program, where goals for using local small, minority, and women-owned business enterprises (S/M/WBEs) on City contracts mostly have been met or exceeded.
Now as the City’s Economic Development Department (EDD) evaluates the program for compliance with federal and state rules, it is recommending revisions to the preference point tool that some fear could scale back the number of contracts going to firms that design City parks, construct buildings, work on drainage projects, even assess the condition of City-owned structures such as the Tower of Americas, and more.
In mid-November, the department that oversees the SBEDA program sent a letter to several professional groups, including local chapters of the Professional Engineers in Private Practice and the American Institute of Architects, asking them to inform members of the coming changes.
The letter stated that due to the percentage of payments to women- and minority-owned business enterprises in those fields having exceeded their availability in the San Antonio metro area, the Goal Setting Committee would no longer add prime preference points on architecture and engineering solicitations. Subcontracting goals and mentorship requirements of the program, however, would remain.
The letter also said that if the changes result in a negative impact on the numbers in the coming months, the committee would reinstate the program’s preference points. It offered to hold meetings for the groups’ members by request.
Michael Sindon, assistant director of the City’s Economic Development Department, also outlined the changes at the Small Business Advocacy Committee (SBAC) meeting Nov. 30. His team of City staffers evaluates around 350 solicitations a year before they go out as Requests For Proposals. Contracts are given preference points based on the bidder’s qualifications, proposed plan, and available SBEDA points.
Small businesses make up 97 percent of employer firms in the metro area. But, in 1992, when the SBEDA ordinance was authorized, a disparity study showed only 10 percent of City purchases were going to minority- and women-owned businesses. By 2010, that number had increased to just 16 percent. Soon after, SBEDA was overhauled, and in 2015, 23 percent of City contracting dollars were paid out to those businesses.
Of the changes made to SBEDA in 2011, one, in particular, involved applying preference points for some architecture and engineering bids despite a state law prohibiting it. But because a 1989 Supreme Court decision in City of Richmond v. J.A. Croson ruled that applying the preference points is acceptable as long as a municipality proves there’s actual disparity occurring and then narrowly applies the tool, the City of San Antonio was able to admit the preference points in its SBEDA program.
“But in 2014, we started to see a lack of disparity in the architecture and engineering industry, both at the overall level, meaning prime and subcontracts combined, and also at the prime level,” Sindon said, with the trend continuing upward through 2017, when it reached 62 percent. “We started to see that minority- and women-owned businesses were winning contracts at a far greater rate than their availability in the marketplace.”
That availability in the marketplace (those on the Central Vendor Registry) is currently at 31 percent in the architecture and engineering field, but overall utilization of M/WBEs is at 62 percent. Utilization is highest (28 percent) in the women-owned business category, but utilization exceeds availability in every category (African-American, Hispanic-American, and Asian-American) except Native American.
Sindon said his office tracks and measures utilization in real time to see how S/M/WBEs are doing in relation to their numbers in the marketplace and recommends adjustments when necessary.
“As part of our recommendations to the [Goal Setting Committee], we showed them the data and recommended moving forward. Based on state law, there’s no evidence of disparity in 2018 and they should not be recommending points at this time,” he said.
“With that being said, we are going to measure what happens on these projects obviously. If we find out there’s a negative impact toward minority- and women-owned businesses, we would recommend – and they would probably be in agreement – that we dial the points back up and reapply to them to a solicitation,” Sindon added.
“If that happens, we have the evidence we need to say, ‘Look, while we were experiencing a disparity, as soon as we took the points away … this is why we should continue to apply the points.’”
But in fact, he said, the EDD staff ran the data through a scenario applied to the 2014-17 awards for architecture and engineering contracts and found that, without the preference points added, the 62 percent utilization would have declined by only 2.9 percent.
“That means they are qualifying and winning without the points,” Sindon explained. “Because our analysis showed if we reduced [the points] to zero … we would have seen a more dramatic drop than a 2.9-percent utilization. That might not be how this plays out, maybe more non-minority- and women-owned businesses start bidding on the contracts. But if negative consequences do occur, we have all the justification we need to dial the program back up and reapply the points.”
At the SBAC meeting, Elisa Chan, a former city councilwoman and president and CEO of Unintech Consulting Engineers, said, “I think our goal is the same: to try to help small- and minority-owned businesses so that we can compete without being preferential. … However, I do have some questions about data.”
Chan asked the City to share the raw data with all stakeholders, to “slow down a little bit” to get community feedback before implementing the change, and then monitor the effect of changes that are put into place. Discussion followed among SBAC members and local business owners about how enterprises are certified by the South Central Texas Regional Certification Agency, and how that affects the data for tracking and reporting.
In a conversation with the Rivard Report on Dec. 19, Chan said her firm does not benefit from SBEDA because Unintech is already well-established. She sees the program as a way to help small, minority- and women-owned businesses compete for prime consulting projects that will enable them to get the experience they need to compete successfully for future projects, and then “graduate.”
“In the architecture and engineering world, it is not about pricing, it is qualification-based,” Chan said. “You have to go in with that proposal first. [But] you will not even get to that point if you’re never a prime consultant. It’s a chicken-and-egg thing. If you don’t have it, you never have it.”
During the SBAC meeting, Brenda Vickrey Johnson, president and CEO of the engineering services firm Vickrey & Associates, voiced concern over the proposed changes and the validity of the data. Vickrey & Associates is certified as woman-owned, small business, and disadvantaged business. As a local contractor, Vickrey bids on civil engineering projects for the City and, for instance, served as the design consultant for the 2012 Callaghan Road project.
“I just feel like the City has not even talked to the M/WBEs, and has not allowed them to respond, that being the worst violation,” Johnson said. “I just ask that as we move forward, the data be provided.”
Rene Dominguez, director of the City’s Economic Development Department, assured the SBAC that his office would work to provide the data and answer the committee’s questions for the next meeting.
“This is a new phenomenon,” Dominguez said. “These are all great suggestions that we think would benefit the SBAC and the program as a whole, and I haven’t heard anything here that concerns me. … We need to do a better job communicating and have a process in place. We’re all for that. Process improvement is how we operate.”
There are no plans to dial back preference points in other industries, Sindon told the Rivard Report. For one thing, no other industry has achieved the same level of parity in utilization as architecture and engineering. In addition, the SBEDA tools are applied differently in each industry due to the nature of the product or service.
“We’re probably going back to the drawing board next year and think about, conceptually, what dial-back plans in each industry would look like if we were to ever get there,” Sindon said. “Architecture and engineering is very unique in that there’s that state law. There’s not that kind of stuff in some of these other industries.”