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CT Construction Contracts Leaving Out Minorities

By Brad Kane

October 22, 2012

The design and execution of Connecticut's affirmative action program to award a portion of construction contracts to minorities-owned businesses falls short of its goals.

"We're bumping up against a wall," said Derrick Diggs, vice president of Hartford firm Diggs Construction. "We have been pursuing this for five years and have gotten nowhere."

Under the state's set-aside program, minority-owned businesses are lumped in with woman-owned businesses and disadvantaged businesses in the same affirmative action category, so state agencies and general contractors can meet their requirements under the program without considering any work for minorities.

"There clearly has been some breakdown in this program," said Fred McKinney, president and chief executive officer of the Greater New England Minority Supplier Development Council. "It needs to be addressed."

In some instances, agencies and contractors skirt the law by selecting large businesses owned in women's names or by funneling funding through municipalities and certain agencies that don't have to meet set-aside requirements, even though the project may be state funded.

"Businesses have found ways to circumvent that by putting the businesses in their wives' names," said Alvin Bingham, affirmative action/contract compliance supervisor at the state's Commission on Human Rights and Opportunities, which enforces the set-aside law. "There are some bona fide women businesses here, but I don't think it is the majority of them."

In addition, the commission is limited in its ability to enforce whether agencies and general contractors are meeting their requirements, putting forth a good-faith effort to include minority firms in the solicitation process, or flat out lying in their reports about minority contracting.

"We are a regulatory agency, but we are not funded properly," Bingham said. "I'm limited from addressing these things due to staffing."

Connecticut's set-aside law says of the money allocated for public building projects, highway construction, and the purchase of goods and services, 25 percent must go to small businesses and another 6.25 percent must go to minority-owned businesses, women-owned businesses, or disadvantaged businesses with a net worth less than $750,000.

While problems with the program exist in all categories, construction contracts are particularly problematic because general contractors on state projects prefer to use subcontractors they already have an established relationship with. It is difficult for general contractors to know what minority-owned firms are available to do specialized work — electrical, plumbing, etc. — and how to properly solicit them for subcontracts.

"A stable, consistent team from project to project tends to be better because they don't have that learning curve," said James McManus, principal and chairman of Glastonbury design-build firm S/L/A/M Collaborative. "In some cases, we hire minority firms to do work that we would otherwise do on our own in order to meet these qualifications."

Because of these issues, less than 1 percent of state construction contract funding is awarded to minority firms, said Bingham.

"I don't think their efforts to seek diverse inclusion ever reach maximum potential," said Anthony Healis, president and CEO of Windsor material provider Woodview Construction Services LLC.

Earlier this year, the Connecticut General Assembly authorized a disparity study in state contracts, which is the first step in rewriting the set-aside program. The Connecticut Academy of Science and Engineering is leading the study and started work on Sept. 19.

The disparity study results are due in June, but the methodology requires the academy to review all state agency contracts to see how set-aside goals were addressed. If the agencies don't have all the information needed readily available, then the study could take longer while CASE tracks it down, said Richard Strauss, CASE executive director.

"We don't know where the data and information will lead us," Strauss said.

Diggs Construction, which works as a general contractor, never has been awarded a state contract, despite many attempts with the Department of Public Works, Diggs said. The firm moved from Kansas to Hartford 12 years ago to work as the city's school construction program manager, a duty it performed for 10 years.

"We have the knowledge and the expertise to do these projects for the state," Diggs said.

Diggs keeps running into problems getting qualified for state contracts, said Diggs, who believes state agencies don't make a sincere effort to meet their set-aside goals.

The commission has a difficult time tracking the set-aside efforts made by state agencies and general contractors because of its lack of funding, Bingham said. The commission only has the manpower to review paper submissions and cannot go into the field to check whether true efforts are being made.

"We need to verify what they are saying," Bingham said. "There needs to be a review."

Large swath sof state funding is funneled outside the CHRO's review.

The law exempts municipalities from the affirmative action goals, so state projects run through cities and towns don't have to meet any requirements. This means the more than $500 million for school construction projects funded by the state annually are exempt, as are the many other state-to-municipality funding mechanisms from the Department of Public Health, the Office of Policy & Management, the Department of Economic & Community Development, and the Department of Transportation, said Bingham.

Some of Connecticut's highest profile funded projects are exempt, including the "First Five" and "Next Five" programs awarding millions of economic incentives to entice companies to grow in Connecticut.

"The requirements follow the money," Bingham said. "When you are receiving public funds, the process needs to be transparent… The people who are paying the bills have the right to participate."

Woodview Construction Services was founded in 2009 to supply hardwood slabs for utility projects, namely for Northeast Utilities in Hartford and Boston and Central Maine Power. The firm has tried to obtain subcontracts to supply slabs and other products for construction projects, but Woodview never has been awarded a state contract despite competitive bids, Healis said.

An obvious step to help minority firms obtain more state contracts would be to put minority-owned businesses, women-owned businesses, and disadvantaged businesses in separate goal categories, rather than all in one, Healis said.

"It must clearly validate its reach to each of its intended targets," Healis said.

Another step would be to make contracts and subcontracts smaller. Most minority-owned firms are not as well off financially as non-minority firms, making it difficult for them to obtain the bonding necessary to pre-qualify for state contracts more than $500,000, Bingham said. Women-owned businesses can prequalify for these large projects because they have the assets, which lead to them getting a greater portion of state dollars, he argued.

"White-owned businesses have more financial resources than lowly minority-owned businesses," Bingham said.

To help general contractors meet affirmative action requirements, New York State provides a list of pre-qualified minority subcontractors and their specialty. That gives general contractors such as S/L/A/M confidence to select a firm capable of doing the work, even though they have not worked directly together previously, said McManus.

"That way you are approaching people that have at least worked with the state before," McManus said.

Minority firms and organizations such as the Greater New England Minority Supplier Development Council are working with Connecticut legislators such as State Sen. Toni Nathaniel Harp (D-New Haven) and Rep. Toni Walker (D-New Haven) to address the issues in the set-aside program.

Despite the progress with the disparity study, change has been difficult, McKinney said. Modifying the law means construction dollars will be taken away from non-minority firms at a time the entire industry is struggling to return to pre-recession levels.

"This is going to be hard on some people," McKinney said.

Reprinted with permission of the Hartford Business Journal. To view other stories on this topic, search the Hartford Business Journal Archives at http://www.hartfordbusiness.com/archives.php.
| Last update: September 25, 2012 |
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