Not long after a critical audit of the city's contracting equity program, Portland, Oregon's procurement chief, Lester Spitler, resigned from his job. Among the troubles noted in the audit was a set-aside component for prime contracts that the auditors claimed actually was "a barrier" to a more diverse mix of companies winning prime contracts.
A prominent city commission member blasted the city procurement department and its staff during an agency session on Oct. 22. "It is very disappointing to me that we continue to say one thing [but then] allow city resources to be gamed so that the same white major contractors resource all the benefit," said Commissioner Jo Ann Hardesty. Spitler, according to a local report, resigned about two weeks after the council session.
Neither Spitler nor other city officials responded to requests for comment. Minority-owned contractors did not individually return calls for comment, but their statewide association had much to say.
A review of the audit, which is dated September, and responses to it by the state chapter of the National Association of Minority Contractors casts the eight-year-old city program in a different light. NAMC-Oregon also "expressed its complete confidence" in Spitler, "who inherited a host of problems" and needs more resources.
Like the city's auditors, NAMC cited several milestones the program successfully met related to subcontracting goals and workforce diversity. But NAMC also cited failings, especially the ability of city departments to bundle contracts so that they could not be won by certified firms.
The media focus on the prime contractor development program is unfortunate, said Nate McCoy, NAMC Oregon executive director, in a letter to Portland Mayor Ted Wheeler. "We wish to express our overall disappointment at the disproportionate amount of attention," wrote McCoy.
The differing perspectives are interesting for several reasons. Since the nationwide demonstrations following the May 25 killing of George Floyd, a Black man, after he was stopped by police in Minneapolis, racism in the construction industry has been explored but efforts to redress disparities in public works contracting have received comparatively little public examination, some observers say.
Such efforts have been a key feature of public works since the late 1960s and early 1970s, with 38 state-wide programs as of 2016, according to the National Conference of State Legislatures (NCSL). Numerous city and county programs also exist in the U.S.
Harris County, Texas, is the latest created. Lawmakers there voted earlier this month to launch a program, although the city of Houston, located within the county, already has one. Washington D.C. and Puerto Rico have state-level minority-business enterprise (MBE) development programs involving certification for participation in public works procurement, independent of existing federal disadvantaged-business enterprise (DBE) development programs, according to NCSL.
California voters rejected a broad affirmative action referendum earlier this month that, had it passed, was seen as paving the way for a statewide program.
Portland's eight-year-old program has "vexed" city officials several times since its inception, according to OregonLive, a local news website. "The last three audits said the same thing," city Commissioner Hardesty noted.
In 2012, Portland established a contracting equity strategy to increase the numbers of minority-owned, women-owned and emerging small businesses in city contracting. By 2020, the strategy had five different initiatives that sought to create alternatives to low-bid contracting that would provide training, technical assistance and grants. They included subcontracting goals, awards based on best-value that include diversity goals and a prime contractor development program that offers training and technical assistance and limits competition for contracts of $1 million and under to participating firms. Certified companies included those owned by historically disadvantaged groups and veteran-owned and emerging small business, which could be owned by white men.
According to the audit report, Portland's program met or nearly met goals for minority subcontractors (15%), employment of apprentices (20%) and women (9%). The city surpassed its goal of 18% for minority group workers, reporting 30%.
The auditors described the program as "exceeding some goals and close to meeting others."
The audit also targeted flops.
Portland designed workforce and contractor diversity grant initiatives to set aside 1% of a project’s construction costs for grants to promote the development of a diverse pool of contractors and workers. The auditors wrote that this program was nonfunctional partly because projected city construction spending at the time it was created had failed to reach an anticipated $125 million a year. Also, construction projects "funded by bonds, utility, and gas tax revenues, were restricted by law and may be unavailable or impractical for use with the grants program," the auditors stated.
Auditors reserved most of their criticism for the prime contracting development program.
With about four out of 10 of the eligible prime contracts awarded to companies operated by white people, the auditors characterized the program as a barrier to minority contractor involvement rather than an expedient. The city's procurement department did not set goals or effectively monitor the program, opening the door to "gaming" of contract awards and the potential for bid-rigging and collusion, the auditors wrote.
"Our review of contracting data shows participants were awarded 133 program-eligible projects worth $56 million," the auditors wrote. "But bureaus awarded an additional $33.6 million in program-eligible contracts to firms outside the program, on the open market. Of these, bureaus awarded program-eligible contracts worth at least $18.2 million to open-market contractors without an exemption from the city's chief procurement officer. This violated City rules. It also potentially withheld opportunities for wealth generation from program participants."
Prime Contractor Development Program-eligible projects, the auditors added, had been dominated by "a few well-equipped firms."
Minority Contractors Cite City and Audit Flaws
McCoy and NAMC-Oregon also note problems in how the prime contractor development program was audited
One was auditors' failure to separate out city contract award data to reveal more detail on who benefitted.
"The Auditor's Office did not provide any disaggregation of this citywide data, which is crucial to be able to evaluate actual performance, nor of where and how those goals were being met," says the NAMC-Oregon letter. "Were they all in flagging, labor, final cleanup and other lower-paying trades or were they in mechanical, electrical, plumbing, operating engineers and the highest-paying trades?"
McCoy and NAMC-Oregon also asked why companies owned by women were lumped in with those owned by Black, indigenous or people of color. "The City needs to understand that the obstacles the BIPOC [Black, indigenous or people of color] businesses face are not always the same obstacles" for women-owned firms, especially those "with white males in leadership."
Assigning all the blame to Portland's procurement is also a mistake, the letter to the mayor claims.
The thrust of the McCoy-NAMC critique is reserved for the city transportation department and water and environmental agencies, which are blamed for "willfully dodging of the program," especially by bundling contracts.
According to the letter, auditors rightly assessed that "by the time a project is sent to procurement, most of the significant decisions regarding minority contracting impacts have already been made by bureaus with weak track records in this area." McCoy and NAMC-Oregon cited unauthorized contract exemptions from the equity program and urged a comprehensive investigation of bureau contracting practices.