Minority- and women-owned firms don't always get the business from prime contractors that state agencies are told they do, a prominent state lawmaker and an African-American contractor say.Indiana House Ways and Means Chairman William Crawford (D-Indianapolis) and Jimmy Beard of Indianapolis' J. Beard Management say prime contractors often increase their chances for state business by promising to provide sub-contract work to minority-owned business enterprises (MBEs) and women-owned business enterprises (WBEs), but routinely fail to deliver.
"I've been in business since 1977, and this kind of practice has existed all that time," Beard says. "I've found out many times that a contractor has put my name on a list as a minority sub-contractor, but I never got the business. They just put me on the list to get the benefit of appearing to use a minority sub-contractor."
To prove their point, in January, Crawford made inquiries about state agencies' MBE and WBE contracting, and then Beard and Crawford reviewed some of the responses. The reply that most concerned them was from the State Fair Commission, which relayed to Crawford statements of MBE/WBE participation by its construction manager, Charles C. Brandt Construction Company. Several of those claims were found to be inaccurate.
Two local minority-owned companies, Rouse Trucking and Thompson Distributing, were reported to have received $38,000 worth of business but actually received none. Another State Fair sub-contractor reported to be an MBE was actually a white-owned company, and several other vendors reported to be WBEs were not certified as such by the state.
State Fair Executive Director William Stinson says he was surprised and dismayed by the discrepancies. Stinson says he has taken steps to insure accurate future reporting and full certification of all MBE/WBE firms doing business with the fair. "This is the bell ringing to tell us to pay closer attention, and trust me, we can and will do that," Stinson says. "I expect this is pretty frustrating for all parties involved."
Indiana Department of Administration Commissioner David Perlini says his staff addresses the possibility of over-reporting of minority participation. The DOA staff reviews claims for MBE/WBE participation in state contracts and then notifies the minority companies that they have been awarded the business. Very few firms later complain they have not received the state business, Perlini says.
"I have no doubt that some prime contractors report a minority participation they do not intend to comply with, but more often the discrepancy is due to the needs of the contract changing," he says. Perlini notes that even though Crawford and Beard found that some MBE/WBE firms did not get the State Fair work reported, other minority firms got more Fair work than expected.
"All we need is one severe penalty"
Beard and Crawford are less willing than Perlini to chalk up over-statements of MBE/WBE participation to the vagaries of the construction business. "I think over-reporting of minority participation is a reflection of the culture, that instead of working within the MBE/WBE regulations, contractors try to go around it," Crawford says.
Such a practice would under-cut the goal of the state's MBE/WBE program, which encourages - but does not require - that 5 percent of the $1.3 billion annually spent on state contracts go to minority-owned and women-owned businesses.The intent is to counter-act the historic exclusion of such firms from government contracts. "Business is a relationship thing, and unfortunately, most minorities don't have the right relationships to get the work," Beard says. "When you look at these state contracting lists, you see the same names time and time again."
Beard and Crawford criticize the O'Bannon Administration for not enforcing existing state rules penalizing firms who over-state MBE/WBE participation. Although Indiana law allows for both civil and criminal penalties for a contractor making such false claims, there has only been one sanction - a decertification of a minority firm in 2000 - since O'Bannon took office.
The criminal offense for falsely claiming to sub-contract with a disadvantaged business is a Class D felony, and would have to be pursued by a county prosecutor, presumably after a referral from state officials. Beard and Crawford say the practice is widespread enough that more energetic enforcement is justified. "All we need is one severe penalty to send the message out that this won't be tolerated," Beard says.
Perlini and Crawford agree that the state MBE/WBE oversight will be significantly bolstered by a new administrative rule scheduled to go in effect in upcoming months. Two years ago, a Crawford-sponsored bill made Indiana the first state to adopt a statute ratifying its MBE/WBE program. The law paved the way for the new rule, which will require all state agencies to report their MBE/WBE participation. The rule will also modify the goal of MBE/WBE participation from 5 percent across the board to different percentages reflecting the minority and female ownership in different business categories.
The largest state agencies now report to the Department of Administration a MBE/WBE contract participation of 4.82 percent in fiscal year 2002 and 4.27 percent in fiscal year 2001. Setting out the participation goals in law and in the state's standard contracts should improve Indiana's performance by "leaps and bounds," Perlini says. "It is human as well as business nature to pay attention to that which you have to account for," he says.
And Crawford vows to make sure the accounts given are true. "Business as usual has been that you can put the name of a minority contractor on a piece of paper and no one will ever check it," he says. "Well, it's no longer business as usual."
Fran Quigley is a contributing editor to NUVO, where this article originally appeared - ...