Small subcontractors reported as doing better

December 16, 2011
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Minority- and women-owned construction companies collected 36.7 percent of subcontracting dollars from public projects funded by the city of Grand Rapids in 2006. That total fell with a resounding thud to 6 percent the following year.

What caused the drastic change? One, the economy worsened in 2007 as the sub-prime mortgage crisis made itself felt that year. But more importantly, Michigan voters approved Proposal 2 in November 2006 and that ballot measure banned affirmative action in the state’s public sector and caused the city to rethink the Business Enterprise Program it established in 2004 for subcontracting firms owned by minorities and women.

In 2009, the city unveiled its Micro-Local Business Enterprises program, which includes small firms owned by military veterans, minorities and women. Minorities and women grabbed 8.6 percent of the subcontracting dollars in that inaugural year, and last year the number rose to 14.1 percent.

“What is encouraging for us is we see that (percentage) increasing this year,” said Alexander Thomas Jr., business developer for the city’s Office of Diversity and Inclusion, formerly the Equal Opportunity Department.

The city’s policy offers contractors who bid on projects discounts from their bids for including firms registered with the Micro-LBE program in their construction plans. The more discount points a contractor has, the bigger discount the company receives on its bid. “Those discounts have been very effective. We will continue to recruit small businesses for the program,” said Thomas.

“What’s really important is the program has grown by word of mouth,” he added. “We’re looking to talk with the public schools about the program.”

A local private sector group consisting of five highly active and well-known construction companies released its data concerning minority- and women-owned subcontracting firms at the same time the city revealed its numbers. According to the Monday Group, the total combined dollar value of minority and women subcontracts was $20.5 million in 2009. The group said that figure represented slightly more than 5 percent of the total dollar value of private-sector subcontracts recorded that year.

“We’re hoping to use this as a baseline and look at 2010,” said T.J Ackert of the Miller Johnson law firm, which helped compile the results. “We’re trying to look at the ROI for bringing minorities on.” Ackert said the Monday Group is hoping that project owners, other contractors and financial companies will understand the value of having minorities involved in construction activities. “We’re working on the 2010 numbers,” said Ackert.

The Monday Group number was the first it filed with the city and its percentage differs from the 8.6 percent the city cited. The Christman Companies, Owen-Ames-Kimball, Pioneer Construction, Rockford Construction and Triangle Associates are the Monday Group’s private-sector partners. Deputy City Manager Eric DeLong said Grand Valley State University is a charter member of the group.

Thomas said the MBEs and the WMBEs haven’t done as well as the current crop of Micro-LBEs since Proposal 2 passed. From 2004-2006, those firms averaged $3 million annually in subcontracting dollars. But from 2007 through last year, that average was $985,000. Thomas said many of those companies are too big to qualify from the Micro program, which costs the city $8,000 a year to operate.

“What this actually means is jobs for our people. It does really put people who live in the city to work,” said Commissioner Dave Schaffer.

“This shows that people who live in the city are benefitting from their tax dollars,” said Commissioner Elias Lumpkins.

The U.S. Court of Appeals for the Sixth Circuit overturned Proposal 2 last July because it placed special burdens on minority interests. Michigan Attorney General Bill Schuette plans to appeal the court’s ruling.

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