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The City of Charlotte Update Disparity Study Presented to the Economic Development Committee Submitted by: FINAL REPORT PRESENTATION October 11, 2011.

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Presentation on theme: "The City of Charlotte Update Disparity Study Presented to the Economic Development Committee Submitted by: FINAL REPORT PRESENTATION October 11, 2011."— Presentation transcript:

1 The City of Charlotte Update Disparity Study Presented to the Economic Development Committee Submitted by: FINAL REPORT PRESENTATION October 11, 2011

2  Croson  Strict Scrutiny Standard of Review  There must be a compelling interest, such as remedying the present effects of past discrimination  Compelling interest can be found in private sector discrimination if linked to the public sector  Under Narrow Tailoring an Agency  Must employ and evaluate race neutral efforts first  Limit the burden on third parties  Set goals related to availability  Ensure program flexibility

3 In H.B. Rowe Decision (2010) Fourth Circuit accepted MGT’s approach on: (involved NCDOT)  Focused on subcontracting disparity because there was no prime contracting M/WBE program  Anecdotal: The survey in the 2004 study exposed an informal, racially exclusive network that systematically disadvantaged minority subcontractors  Program suspension: the fall in M/WBE subcontractor utilization of 38 percent when SBE program substituted for M/WBE program is evidence of discrimination

4  To implement a race- and gender-based program, a City must demonstrate: 1.Statistical data showing disparity 2.Anecdotal evidence of discrimination 3.Race and gender neutral program not effective  This study shows: 1.Statistical disparity in City contracting 2.Insufficient anecdotal evidence 3.SBO Program has been effective

5 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$11,619,9315.41%11.73% 46.11 (Substantial Disparity) Construction (Prime)$10,136,2000.99%9.95% 9.94 (Substantial Disparity) A & E (Sub)$386,9062.63%10.94% 24.07 (Substantial Disparity) A & E (Prime)$2,549,1851.38%2.25% 61.20 (Substantial Disparity) Professional Services$3,478,5092.25% 100.24 (Overutilization) Other Services$12,555,5226.04%3.11% 194.03 (Overutilization) Goods & Supplies$739,3700.36%1.50% 23.83 (Substantial Disparity)

6 Total of 168 African American Respondents – 41% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program – 33.4% of firms stated that there is an informal network that excluded their firms – 25% of firms were included for good faith efforts then dropped after contract award – 3.6% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects – 7.7% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

7 2003 $2003 %2011 $2011 % Construction (Sub)$9,736,8113.24%$11,619,9315.41% Construction (Prime)$38,200,3583.38%$10,136,2000.99% A & E (Sub)$60,1101.20%$386,9062.63% A & E (Prime)$99,7020.10%$2,549,1851.38% Professional Services$984,7571.08%$3,478,5092.25% Other Services$10,695,9402.59%$12,555,5226.04% Goods & Supplies$4,874,8092.22%$736,3700.36%

8 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$1,487,9880.69%0.56% 123.99 (Overutilization) Construction (Prime)$57,096,3225.57%0.50% 1,119.48 (Overutilization) A & E (Sub)$303,6202.07%1.56% 132.20 (Overutilization) A & E (Prime)$9,214,5344.98%2.35% 211.69 (Overutilization) Professional Services$85,2430.06%2.35% 2.35 (Substantial Disparity) Other Services$957,9250.46%3.86% 11.93 (Substantial Disparity) Goods & Supplies$20,0030.01%5.36% 0.18 (Substantial Disparity)

9 Total of 49 Asian American Respondents – 26.5% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program – 14.2% of firms stated that there is an informal network that excluded their firms – 10.2% of firms were included for good faith efforts then dropped after contract award – 4.1% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects – 4.1% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

10 2003 $2003 %2011 $2011 % Construction (Sub)$126,5800.04%$1,487,9880.69% Construction (Prime)$49,912,2034.41%$57,096,3225.57% A & E (Sub)$78,2751.56%$303,6202.07% A & E (Prime)$1,310,0171.25%$9,214,5344.98% Professional Services$3,649,2273.99%$85,2430.06% Other Services$5,876,2711.42%$957,9250.46% Goods & Supplies$4,043,2461.84%$20,0030.01%

11 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$4,188,4501.95%7.82% 24.93 ( Substantial Disparity ) Construction (Prime)$4,644,2370.45%6.97% 6.50 (Substantial Disparity) A & E (Sub)$952,7366.48%1.56% 414.84 (Overutilization) A & E (Prime)$376,2360.20%1.10% 18.48 (Substantial Disparity) Professional Services$3,564,8062.31%1.10% 210.20 (Overutilization) Other Services$800,5280.38%1.47% 26.25 (Substantial Disparity) Goods & Supplies$552,6040.27%0.20% 136.19 (Overutilization)

12 Total of 49 Hispanic American Respondents – 28.6% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program – 20.4% of firms stated that there is an informal network that excluded their firms – 16.3% of firms were included for good faith efforts then dropped after contract award – 0% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects – 2.0% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

13 2003 $2003 %2011 $2011 % Construction (Sub)$1,377,5980.46%$4,188,4501.95% Construction (Prime)$581,0100.05%$4,644,2370.45% A & E (Sub)$560,33111.15%$952,7366.48% A & E (Prime)$425,3390.41%$376,2360.20% Professional Services$626,2310.68%$3,564,8062.31% Other Services$3,495,4660.85%$800,5280.38% Goods & Supplies$708,6640.32%$552,6040.27%

14 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$2,465,6511.15%1.68% 68.48 (Substantial Disparity) Construction (Prime)$2,533,1200.25%1.99% 12.42 (Substantial Disparity) A & E (Sub)$89,8600.61%0.00%*N/A A & E (Prime)$45,0770.02%0.17% 14.39 (Substantial Disparity) Professional Services$1,935,4661.25%0.17% 741.80 (Overutilization) Other Services$1,209,7050.39% 147.86 (Overutilization) Goods & Supplies$3,530,2311.71%0.06% 2,958.01 (Overutilization) *Using custom census measure of availability

15 Total of 19 Native American Respondents – 31.6% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program – 15.8% of firms stated that there is an informal network that excluded their firms – 15.8% of firms were included for good faith efforts then dropped after contract award – 0% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects – 0% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

16 2003 $2003 %2011 $2011 % Construction (Sub)$569,9110.19%$2,465,6511.15% Construction (Prime)$3,140,2910.28%$2,533,1200.25% A & E (Sub)$0.000.00%$89,8600.61% A & E (Prime)$2,653,9762.54%$45,0770.02% Professional Services$1,417,2931.55%$1,935,4661.25% Other Services$4,473,5241.08%$1,209,7050.39% Goods & Supplies$81,6550.04%$3,530,2311.71%

17 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$42,342,77519.7118.44 106.92 (Overutilization) Construction (Prime)$105,135,48910.2614.93 68.71 (Substantial Disparity) A & E (Sub)$3,118,74921.2218.75 113.16 (Overutilization) A & E (Prime)$8,257,8684.469.29 48.02 (Substantial Disparity) Professional Services$10,962,0947.119.29 76.51 (Substantial Disparity) Other Services$17,008,0718.1811.01 74.28 (Substantial Disparity) Goods & Supplies$10,250,2424.967.62 65.08 (Substantial Disparity)

18 Total of 117 Nonminority Women Respondents – 27.3% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program – 23.1% of firms stated that there is an informal network that excluded their firms – 15.4% of firms were included for good faith efforts then dropped after contract award – 3.4% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects – 5.1% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

19 2003 $2003 %2011 $2011 % Construction (Sub)$11,485,4513.82%$42,342,77519.71% Construction (Prime)$76,044,3696.72%$105,135,48910.26% A & E (Sub)$1,426,98328.39%$3,118,74921.22% A & E (Prime)$5,994,9945.74%$8,257,8684.46% Professional Services$8,004,4538.75%$10,962,0947.11% Other Services$24,731,1435.99%$17,008,0718.18% Goods & Supplies$5,749,2462.62%$10,250,2424.96%

20  Spending with M/WBE construction subcontractors increased from $23.2 million to $62.1 million, a 166.5 percent increase.  WBE construction subcontractor utilization increased 268.6 percent.  MBE construction subcontractor utilization increased 67.5 percent.  M/WBE construction subcontracting as a percentage of the total prime contracts tripled.  The percentage of construction subcontract dollars received by M/WBEs increased from 7.7 percent to 28.9 percent  The number of M/WBE construction subcontractors increased 27.2 percent.  Spending with WBE A&E subcontractors increased 118.5 percent.  MBE A&E subcontractor utilization increased 148.0 percent.  The number of M/WBE A&E subconsultants utilized increased 82.0 percent.

21 Overutilization = > 100.00 Substantial Disparity = < 80.00

22 Overutilization = > 100.00 Substantial Disparity = < 80.00

23 WBE  WBE construction subcontractor utilization increased 268.6%  WBE A&E subconsultant utilization increased 118.5% MBE  MBE construction subcontractor utilization increased 67.5%  MBE A&E subconsultant utilization increased 148.0%  M/WBE construction subcontracting as a percentage of the total prime contracts tripled

24  MBE subcontractors were issued permits for projects totaling $22.2 million (1.20%).  WBE subcontractors received $33.5 million in subcontracting projects (1.82 %).  This lack of use of M/WBE subcontractors in the absence of SBE subcontracting goals was consistent with what M/WBEs stated in the survey.

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26 Substantial Disparity = < 80.00 Overutilization = > 100.00

27 Substantial Disparity = < 80.00 Overutilization = > 100.00

28 Substantial Disparity = < 80.00 Overutilization = > 100.00

29 Substantial Disparity = < 80.00 Overutilization = > 100.00

30 This study finds disparity in City contracting. However, evidence does not support the restoration of race- and gender-conscious subcontracting goals because: SBO Program has been more effective in M/WBE utilization than the previous M/WBE Program SBO Program as effective as other M/WBE programs in the Charlotte area The anecdotal evidence of racial exclusion was less in this study than the evidence in the H.B. Rowe case

31 Options to Consider:  Raise the informal threshold for construction  Vendor rotation  Mandatory joint ventures on large construction projects  Include SBE subcontracting goals in categories other than construction and A&E  Include RFP provision requiring proposers to report prior M/WBE utilization and future strategy  Raise the personal net worth threshold

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