Barriers Facing Minority- and Women-Owned Businesses in Pennsylvania
Chapter 1
Minority- and Women-Owned Business Participation in State and Philadelphia Contracts
Participation Rates in State Contracts
The Bureau of Contract Administration and Business Development (BCABD) (an agency within the Pennsylvania Department of General Services) is the designated monitoring agency of state contracts. In 1993, it began tracking state agency contracts to minority- and women-owned business enterprises (M/WBEs) and firms located in areas designated as enterprise zones.[1] BCABD measures contracting activity in commitments (referring to contracts entered into by state agencies during a given calendar year) and payments (actual dollar amounts paid by agencies to firms under existing contracts).[2]
The Advisory Committee notes the following limitations about BCABD data:
Precise contracting figures cannot be produced.[3] Although most state agencies are required to report to BCABD, currently only 21 of the state's 35 agencies report.[4] Some independent agencies are exempt from this reporting requirement and do not report data to BCABD.[5] In addition, many agencies are late in reporting by one to three quarters, making it difficult for BCABD to provide accurate analyses of contract activity for any given period.[6]
Agencies only report payments made to M/WBEs that are prime contractors, even though M/WBEs, being mostly small firms, participate in state contracts most often as subcontractors.[7]
BCABD collects no information on contracts to nonminority firms, making comparative analyses impossible.
Set forth below are two charts. Figure 1 shows trends in state contract commitments to minority-owned business enterprises (MBEs) and women-owned business enterprises (WBEs) from 1993 to 1998. Figure 2 shows trends for approximately the same period (1994 1998) in payments made to such businesses.
For 1993 1998, MBEs received only $8.13 million in commitments in 1993 and significantly less in all succeeding years. In 1996, they received a mere $1.6 million. Total commitments to MBEs over this six-year period amounted to $26.64 million. Over this period, commitments to WBEs far exceeded that of MBEs, totaling $95.1 million.[8] Every year, except in 1993, WBEs received far greater commitments than MBEs, sometimes as much as 10 times more, as in 1998. The year 1996 was exceptional in that there were hardly any commitments to MBEs or WBEs, reasons for which remain unclear.[9]
Although the commitment and payment charts are not intended to match dollar for dollar, figure 2 shows that payments to WBEs rose sharply, reaching a high of $7.4 million in 1998. Payments to MBEs remained relatively constant (under $1.1 million) through 1997. Both groups saw a sharp rise in payments in 1998.[10]
Several important facts are submerged in these data. For example:
State agency purchases from MBEs and WBEs are a minuscule share of state business. These agencies purchase billions of dollars of goods and services annually approximately $4.5 billion in fiscal 1995.[11] However, as reflected in figure 1, combined actual state commitments to M/WBEs were a mere $16.1 million in 1995 and $1.37 million in 1996. By comparison, figures 3 and 4 show that the city of Philadelphia provided over twice that amount ($43.5 million) to M/WBEs're presenting 18.9 percent of the city s total contracting dollars in 1995.
A comparison of figures 1 and 2 shows that commitments do not match payments. For example, in 1997 over $50 million in commitments were made to MBEs and WBEs. Yet, payment amounts were much lower (only $7.28 million in 1997 and $9.92 million in 1998). While payments for previous years commitments can be spread out over multiple years, it may also be possible that commitments, once made, can be scaled down or cancelled. Therefore, commitments might be a misleading measure of contracting to M/WBEs as opposed to payments. It is therefore necessary to determine whether this discrepancy between commitments and payments is due to poor data tracking or the cancellation of contracts to M/WBEs.
State-prepared reports are conflicting and unreconciled. For example, appendix 2, which reflects agency by agency the specific number of contracts and amount paid to M/WBEs, conflicts with the report of combined agency payments to M/WBEs in figure 2. For example, appendix 2 shows over $77 million paid to M/WBEs in 1997; however, figure 2 shows under $8 million paid to M/WBEs for the same year.[12] Thus, the information provided by BCABD is incomplete, unclear, and subject to misleading interpretation.
FIGURE
1
Commitments to MBEs and WBEs by State Agencies, 1993 98 (in millions of
dollars)
Source: Bureau of Contract Administration and Business Development, quarterly report totals since inception of tracking system.
FIGURE
2
Payments to MBEs and WBEs by State Agencies, 1994 98 (in millions of
dollars)
Source: Bureau of Contract Administration and Business Development, quarterly report totals since inception of tracking system.
Participation Rates in City of Philadelphia Contracts
The Minority Business Enterprise Council, an agency within the Philadelphia Department of Finance (see chapter 2), tracks all city contracts to firms owned by minorities and women that provide supplies, services, and equipment (SSE); public works (PW); and personnel and professional services.[13] Figures 3 and 4 show total SSE and PW bid dollars to MBEs and WBEs for fiscal years 1992 1998.
As shown in figure 3, during this period total SSE bid dollars to WBEs remained under $5 million, except in 1993 ($6.8 million) and 1998 ($10.6 million). Comparatively, MBEs received higher amounts during this same period, ranging from roughly $9 million in 1992 and 1994 to $11 million in 1993 and 1995. Combined, MBEs and WBEs received 12.07 percent of the total SSE bid dollars ($939.2 million) awarded by the city during this period.
For public works contracts (figure 4), both MBEs and WBEs faired slightly better. Bid dollars to MBEs rose steadily between 1992 and 1994 (from $14.3 million in 1992 to $21.5 million in 1993 to $30.4 million in 1994). MBEs saw their largest allotment in 1996 with $40.8 million. In 1997 and 1998, however, bid dollars to MBEs remained under $12 million.
A similar trend was reported for WBEs. Bid dollars to this group rose steadily during 1992 ($13.3 million), 1993 ($15.1 million), and 1994 ($17.7 million), but dropped off during 1995 to $12.5 million. In 1996, WBEs received $16.5 million in bid dollars but saw a decline in 1997 and 1998 from $7.4 million to $4.2 million, respectively. As shown, MBEs received a higher percentage of public works bid dollars than WBEs.
Between 1992 and 1998, M/WBEs received 12 percent of all SSE contracts and 18 percent of all PW contracts. See table 1.
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TABLE 1 Total SSE and PW Bid Dollars to M/WBEs by Philadelphia Agencies, Compared with Total, FY 1992 98 (in millions) |
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Percentage of M/WBE bid dollars |
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|
Total SSE bid dollars |
MBE SSE bid dollars |
WBE SSE bid dollars |
|
|
$939.2 |
$77.0 |
$36.4
|
12% |
|
Total PW bid dollars |
MBE PW bid dollars |
WBE PW bid dollars |
|
|
$1,305.6 |
$145.9 |
$86.7 |
18% |
|
|
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Sources: City of Philadelphia, Minority Business Enterprise Council, Summary of Contract Activity Comparables for Six Years, FY 1992 97; City of Philadelphia, Five-Year Financial Plan (FY 2000 2004), Jan. 26, 1999, pp. 367 68. |
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FIGURE 3
Supplies, Services, and Equipment Bid Dollars to MBEs and WBEs by
Philadelphia Agencies, FY 1992 98
(in millions)
Source: City of Philadelphia, Five-Year Financial Plan (FY 2000 2004), Jan. 26, 1999, pp. 367 68.
FIGURE 4
Public Works Bid Dollars to MBEs and WBEs by Philadelphia
Agencies, FY 1992 98 (in millions)
Source: City of Philadelphia, Five-Year Financial Plan (FY 2000 2004), Jan. 26, 1999, pp. 367 68.
[1] Enterprise zones are areas
designated by the Pennsylvania Department of Community and Economic
Development as financially disadvantaged communities. Enterprise zones
receive grants to disperse to businesses as seed money and for public sector
investment. Zones also receive priority consideration for state resources
used for business investment and job creation. The Enterprise Zone Program
was merged with the Main Street Program and is known as the Pennsylvania New
Communities Program. David Messner, program manager, Pennsylvania Department
of Community and Economic Development, Office of Community Development,
Enterprise Zone Program, explanatory letter to interested persons, n.d.
See also David Messner, e-mail to Marc Pentino, Eastern Regional Office,
U.S. Commission on Civil Rights (USCCR), Oct. 15, 2001.
[2] Some agencies that are not
under the governor's jurisdiction may prepare their own contracting
report. These agencies are not required to submit their report to the Bureau
of Contract Administration and Business Development (BCABD). Gary N. Lee,
director, BCABD, letter to Marc Pentino, Eastern Regional Office, USCCR,
Oct. 11, 2001, in response to affected agency review request.
[3] The Committee recently
learned that the state plans to implement an enterprise resource planning
system to establish an integrated administrative system to support
procurement, personnel, payroll, accounting, and budgeting. When the new
system is complete, statistical reports mentioned above will be available.
Ibid.
[4] Betty Miller, BCABD,
telephone interview with Marc Pentino, Eastern Regional Office, USCCR, Apr.
15, 1999. The process of affected agency review by government agencies
resulted in written communications between the Advisory Committee and Gary
N. Lee, director, BCABD, regarding the accuracy of statements made by BCABD
staff and attribution thereto. The reader can reconstruct the nature of this
exchange by referring to appendices 5 and 6. Subsequent to this exchange the
Eastern Regional Office received in March 2002 Mr. Lee's response dated
Dec. 17, 2001. The factual clarifications provided in this letter have been
incorporated, but the letter is not appended in this report.
[5] Zara Waters, BCABD,
telephone interview with Marc Pentino, Eastern Regional Office, USCCR, Mar.
31, 1999.
[6] Ibid.
[7] BCABD, Agency
Contracting Activity Report for Years 1995 1997.
[8] Commitments to firms
located in areas designated as enterprise zones over this six-year period
totaled $24.84 million ($8.01 million in 1993, $.45 million in 1994, $11.72
million in 1995, $.23 million in 1996, $1.56 million in 1997, and $2.87
million in 1998).
[9] None of the official
documents examined in preparation of this report reveals why commitments are
low for these categories.
[10] Payments to firms located
in areas designated as enterprise zones remained under $1.1 million for all
five years, reaching a low of $.11 million in 1996.
[11] See Gary E.
Crowell and Gary F. Ankabrandt, Pennsylvania Department of General Services,
Commonwealth Procurement Code: Statutory Blueprint for Modernizing and
Streamlining the Commonwealth's Purchasing Practices, 1998, p. 4.
[12] A cautionary note should
be made in interpreting payments to M/WBEs. The increase in the dollar
amount alone does not necessarily mean an increase in the percentage share
of state spending.
[13] The agency also tracks contracts to firms owned by persons with disabilities; however, participation rates for these firms were not provided. The office refers to minority-, women-, and disabled-owned disadvantaged business enterprises as M/W/Ds-DBEs. However, in this report M/W/Ds-DBEs will be referenced as MBE, WBE, or DBE where appropriate.