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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, %11.73% (Substantial Disparity) Construction (Prime)$10,136, %9.95% 9.94 (Substantial Disparity) A & E (Sub)$386, %10.94% (Substantial Disparity) A & E (Prime)$2,549, %2.25% (Substantial Disparity) Professional Services$3,478, % (Overutilization) Other Services$12,555, %3.11% (Overutilization) Goods & Supplies$739, %1.50% (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, %$11,619, % Construction (Prime)$38,200, %$10,136, % A & E (Sub)$60, %$386, % A & E (Prime)$99, %$2,549, % Professional Services$984, %$3,478, % Other Services$10,695, %$12,555, % Goods & Supplies$4,874, %$736, %

8 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$1,487, %0.56% (Overutilization) Construction (Prime)$57,096, %0.50% 1, (Overutilization) A & E (Sub)$303, %1.56% (Overutilization) A & E (Prime)$9,214, %2.35% (Overutilization) Professional Services$85, %2.35% 2.35 (Substantial Disparity) Other Services$957, %3.86% (Substantial Disparity) Goods & Supplies$20, %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, %$1,487, % Construction (Prime)$49,912, %$57,096, % A & E (Sub)$78, %$303, % A & E (Prime)$1,310, %$9,214, % Professional Services$3,649, %$85, % Other Services$5,876, %$957, % Goods & Supplies$4,043, %$20, %

11 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$4,188, %7.82% ( Substantial Disparity ) Construction (Prime)$4,644, %6.97% 6.50 (Substantial Disparity) A & E (Sub)$952, %1.56% (Overutilization) A & E (Prime)$376, %1.10% (Substantial Disparity) Professional Services$3,564, %1.10% (Overutilization) Other Services$800, %1.47% (Substantial Disparity) Goods & Supplies$552, %0.20% (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, %$4,188, % Construction (Prime)$581, %$4,644, % A & E (Sub)$560, %$952, % A & E (Prime)$425, %$376, % Professional Services$626, %$3,564, % Other Services$3,495, %$800, % Goods & Supplies$708, %$552, %

14 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$2,465, %1.68% (Substantial Disparity) Construction (Prime)$2,533, %1.99% (Substantial Disparity) A & E (Sub)$89, %0.00%*N/A A & E (Prime)$45, %0.17% (Substantial Disparity) Professional Services$1,935, %0.17% (Overutilization) Other Services$1,209, % (Overutilization) Goods & Supplies$3,530, %0.06% 2, (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, %$2,465, % Construction (Prime)$3,140, %$2,533, % A & E (Sub)$ %$89, % A & E (Prime)$2,653, %$45, % Professional Services$1,417, %$1,935, % Other Services$4,473, %$1,209, % Goods & Supplies$81, %$3,530, %

17 Utilization $Utilization %Availability %Disparity Index Construction (Sub)$42,342, (Overutilization) Construction (Prime)$105,135, (Substantial Disparity) A & E (Sub)$3,118, (Overutilization) A & E (Prime)$8,257, (Substantial Disparity) Professional Services$10,962, (Substantial Disparity) Other Services$17,008, (Substantial Disparity) Goods & Supplies$10,250, (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, %$42,342, % Construction (Prime)$76,044, %$105,135, % A & E (Sub)$1,426, %$3,118, % A & E (Prime)$5,994, %$8,257, % Professional Services$8,004, %$10,962, % Other Services$24,731, %$17,008, % Goods & Supplies$5,749, %$10,250, %

20  Spending with M/WBE construction subcontractors increased from $23.2 million to $62.1 million, a percent increase.  WBE construction subcontractor utilization increased 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 percent.  MBE A&E subcontractor utilization increased percent.  The number of M/WBE A&E subconsultants utilized increased 82.0 percent.

21 Overutilization = > Substantial Disparity = < 80.00

22 Overutilization = > 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.

25

26 Substantial Disparity = < Overutilization = >

27 Substantial Disparity = < Overutilization = >

28 Substantial Disparity = < Overutilization = >

29 Substantial Disparity = < Overutilization = >

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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