Follow Up Report on City of Charlotte Disparity Study

Follow Up Report on City of Charlotte Follow Up Report on City of Charlotte Disparity StudyDisparity Study

City of Charlotte, NCCity of Charlotte, NCEconomic Development CommitteeEconomic Development Committee

City CouncilCity CouncilMay 17, 2012May 17, 2012

3:00 P.M.3:00 P.M.

Franklin M. LeeFranklin M. LeePartner, Law Firm of Partner, Law Firm of

Tydings & Rosenberg LLPTydings & Rosenberg LLPBaltimore, MDBaltimore, MD

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BackgroundBackgroundIn October 2010 the City retained MGT of In October 2010 the City retained MGT of America, Inc. (MGT), to conduct a Disparity America, Inc. (MGT), to conduct a Disparity Study comparing use and availability of minority Study comparing use and availability of minority and women owned business enterprises and women owned business enterprises (MWBEs) on City contracts. (MWBEs) on City contracts.

The 2010 Disparity Study covered City spending The 2010 Disparity Study covered City spending from July 1, 2005 through June 30, 2010, from July 1, 2005 through June 30, 2010, updating the City’s 2003 Disparity Study (also updating the City’s 2003 Disparity Study (also conducted by MGT). conducted by MGT).

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MGT presented findings and recommendations to City MGT presented findings and recommendations to City Council in September, 2011.Council in September, 2011.

MGT concluded that while some evidence may support MGT concluded that while some evidence may support the restoration of race and gender conscious the restoration of race and gender conscious subcontracting goals for certain minority groups, the subcontracting goals for certain minority groups, the study’s cumulative evidence did not support a legally study’s cumulative evidence did not support a legally defensible race and gender conscious contracting defensible race and gender conscious contracting program. program.

On February 13, 2012, following review of the Disparity On February 13, 2012, following review of the Disparity Study by the Economic Development Committee and the Study by the Economic Development Committee and the Disparity Study Advisory Committee, City Council voted Disparity Study Advisory Committee, City Council voted to retain Tydings & Rosenberg LLP to review MGT’s to retain Tydings & Rosenberg LLP to review MGT’s findings and recommendations.findings and recommendations.

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CORE ISSUECORE ISSUE

Considering the totality of the evidence Considering the totality of the evidence presented, does the City of Charlotte have presented, does the City of Charlotte have a strong basis in evidence for considering a strong basis in evidence for considering the use of narrowly tailored race / gender-the use of narrowly tailored race / gender-conscious remedial policies to more fully conscious remedial policies to more fully remedy the ongoing effects of marketplace remedy the ongoing effects of marketplace discrimination upon its contracting?discrimination upon its contracting?

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CORE ISSUECORE ISSUE

ANSWER: ANSWER: YESYES Particularly in the context of the inability Particularly in the context of the inability

of an aggressive small business enterprise of an aggressive small business enterprise program over an 8-year period to fully program over an 8-year period to fully eliminate significant disparities in the eliminate significant disparities in the utilization of ready, willing, and able utilization of ready, willing, and able M/WBE firms.M/WBE firms.

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MGT Conclusion DiffersMGT Conclusion Differs

– No “strong basis in evidence” for No “strong basis in evidence” for following reasons:following reasons:

1.Existing statistically significant disparities in part due to larger M/WBE availability in recent years.

2.Increased utilization of M/WBE subcontractors in absolute dollars and percentage participation since SBO Program was adopted in 2003.

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3.Percentage of total contract dollars going to M/WBE construction subcontractors tripled since 2003.

4.Increased utilization of M/WBE subcontractors in absolute dollars and percentage participation since SBO Program was adopted in 2003.

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5.The SBO Program has been a more effective remedy than Charlotte’s former M/WBE Program

6.The Charlotte SBO Program is apparently as effective as other M/WBE programs in Charlotte area

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7.Anecdotal evidence is weak.

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Alternative View of Same EvidenceAlternative View of Same Evidence

1. MGT admits that ALL of its measures of availability reflect larger M/WBE availability for this study period.

“Custom Census” approach used in Study Update has been upheld repeatedly in most recent court cases

“Custom Census” methodology more accurately reflects full universe of available firms

MGT is right to rely upon it in latest study

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2.2. Utilization numerators in disparity Utilization numerators in disparity ratios from two different time frames ratios from two different time frames are not interchangeable: are not interchangeable:

For Example: Assume a 1/2 disparity For Example: Assume a 1/2 disparity ratio in 2003 as compared to 5/10 ratio in 2003 as compared to 5/10 disparity ratio in 2010disparity ratio in 2010

Misleading to conclude that SBO Program Misleading to conclude that SBO Program is successful simply because utilization is successful simply because utilization numerator is five times as big in 2010… numerator is five times as big in 2010… disparity disparity ratiosratios remain the same. remain the same.

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3. Undisputed evidence reflects that SBO Program did not fully eliminate disparities:

Size of disparities in 2003 have been reduced somewhat

But substantial and statistically significant disparities remain

4. After 8 years of race-neutral SBO Program policy, it is time to consider the use of more aggressive race- conscious remedial policies on a narrowly tailored basis.

Persistent Substantial Underutilization in Charlotte Persistent Substantial Underutilization in Charlotte Contracting (FY 2006 thru FY 2010)Contracting (FY 2006 thru FY 2010)

Industry Segments

AfricanAmerican

Hispanic Asian NativeAm.

Non-Minority Women

ConstructionPrime

Yes Yes No Yes Yes

ConstructionSubcontracts

Yes** Yes** No Yes** No

A&E PrimeContracts

Yes Yes No Yes Yes

A&ESubcontracts

Yes** No No No No

Prof. Services No No Yes No Yes

Other Serv. No Yes Yes No Yes

Goods Yes No Yes No Yes 1313

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Alternative View of Same EvidenceAlternative View of Same Evidence5. Presumed superiority of SBO Program as compared

to past City M/WBE Program and current nearby M/WBE programs is not necessarily valid, as all M/WBE Programs are not created equal. MGT has not demonstrated that those M/WBE Programs are in keeping with today’s “best practices” such as:

Effective and narrowly-tailored outreach

Strong monitoring

Contract-specific goal-setting

Enforcement through sanctions

Adequate staff and resources

Automated bidder registration, and automation in tracking of availability and actual payment data

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Alternative View of Same EvidenceAlternative View of Same Evidence6. Because marketplace discrimination often occurs

outside the presence of those affected, there is low probability for victims to have direct knowledge:

Yet, anecdotal evidence is quite robust (over 100 particularized accounts / affirmations of discrimination, w/ four different methodologies)

Anecdotal evidence bolsters conclusion that discrimination occurs in many forms

Discrimination likely occurs in much more than a few isolated instances.

7. Combined with widespread statistical disparities, anecdotal evidence supports class-based remedies.

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POLICY RECOMMENDATIONSPOLICY RECOMMENDATIONS

Hybrid SBO / M/WBE Program with Hybrid SBO / M/WBE Program with following features:following features:

Contract-specific determinations for the application Contract-specific determinations for the application of SBO or M/WBE program features based on of SBO or M/WBE program features based on clear criteriaclear criteria

SBE or M/WBE subcontracting goals with good SBE or M/WBE subcontracting goals with good faith effortsfaith efforts

Vendor rotation on informal contractsVendor rotation on informal contracts

Increase formal bid threshold to $500,000 Increase formal bid threshold to $500,000 on construction contractson construction contracts

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Automated Mandatory Centralized Bidder Automated Mandatory Centralized Bidder Registration: The BenefitsRegistration: The Benefits– Enhances targeted automated outreachEnhances targeted automated outreach– Greatly reduces administrative burden for: Greatly reduces administrative burden for:

satisfying good faith efforts requirementssatisfying good faith efforts requirements

contract-specific goal setting contract-specific goal setting

tracking and reporting of M/WBE utilization thru tracking and reporting of M/WBE utilization thru payments payments

providing transparency in payments for better providing transparency in payments for better enforcement of prompt payment provisionsenforcement of prompt payment provisions

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Automated Mandatory Centralized Bidder Automated Mandatory Centralized Bidder System Models:System Models:– Washington Suburban Sanitary Commission Washington Suburban Sanitary Commission

(developed in-house)(developed in-house)– The Metropolitan District (Hartford, CT) off-The Metropolitan District (Hartford, CT) off-

the-shelf software product the-shelf software product – DFW Airport (off-the-shelf software product)DFW Airport (off-the-shelf software product)– City of Columbia, SC (developed in-house)City of Columbia, SC (developed in-house)

Best Practices in Race-Neutral RemediesBest Practices in Race-Neutral Remedies

Vendor Rotation OptionsVendor Rotation Options– Bid Solicitations on informal contracts require Bid Solicitations on informal contracts require

at least one or two out of three firms to be at least one or two out of three firms to be contacted for quotes are SBEscontacted for quotes are SBEs

– Job Order Contracting (multiple prequalified Job Order Contracting (multiple prequalified firms selected on formal contracts) with firms selected on formal contracts) with rotation of assignments of repetitive tasksrotation of assignments of repetitive tasks

Increase informal dollar threshold on Increase informal dollar threshold on construction contracts to $500,000 and reserve construction contracts to $500,000 and reserve bidding for SBE primes.bidding for SBE primes.

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Best Practices in Race-Conscious RemediesBest Practices in Race-Conscious Remedies

Hybrid SBO / M/WBE ProgramsHybrid SBO / M/WBE Programs– City of San Antonio ModelCity of San Antonio Model– Washington Suburban Sanitary Commission Washington Suburban Sanitary Commission

ModelModel

Contract-by-contract determinations of when to Contract-by-contract determinations of when to apply SBE goals vs. M/WBE goals based upon apply SBE goals vs. M/WBE goals based upon clearly stated criteria, and size of goalsclearly stated criteria, and size of goals

Goal setting committee(s) functions as check Goal setting committee(s) functions as check and balance in applying race-conscious and balance in applying race-conscious remediesremedies

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Best Practices in Race-Conscious RemediesBest Practices in Race-Conscious Remedies

Benefits of Hybrid SBO / M/WBE Programs:Benefits of Hybrid SBO / M/WBE Programs:– Most “narrowly tailored” form of race-Most “narrowly tailored” form of race-

conscious programconscious program– Reduces legal risks from constitutional Reduces legal risks from constitutional

challengeschallenges– Typically reduces the need for waivers that Typically reduces the need for waivers that

can delay procurement process and can delay procurement process and encourage bid protests / lawsuitsencourage bid protests / lawsuits

– Maximum flexibility for varying the Maximum flexibility for varying the aggressiveness of remedies to get best aggressiveness of remedies to get best resultsresults

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QUESTIONS???QUESTIONS???

Franklin M. Lee, Esq.Franklin M. Lee, Esq.PartnerPartnerTydings & Rosenberg LLPTydings & Rosenberg LLP100 E. Pratt Street, 26100 E. Pratt Street, 26thth Fl. Fl.Baltimore, MD 21202Baltimore, MD 21202(410) 752-9734(410) 752-9734E-mail: [email protected]: [email protected]

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Documents

Follow Up Report on City of Charlotte Disparity Study