Diana Ramirez, executive director of the DEEO, presented results from the annual M/WBE utilization report to Commissioners Court on June 28. In 2020, county commissioners established both the DEEO and the M/WBE program—which the DEEO administers—in response to the county’s study, which aimed to determine whether businesses had equal access to contracts funded by the county.
'A great start'
Derek Holmes, assistant director of vendor diversity for the DEEO and head of the M/WBE program, told Community Impact Newspaper he was excited about the report, but he believes there is still a long journey ahead to fully achieve the program’s goals.
“It’s a great start. I think it really shows the impact of M/WBE programs,” Holmes said. “However, we don’t really have historical data, so we need more time to evaluate trends.”
The county’s overall 30% M/WBE participation goal for contracts is “aspirational”, according to the county’s M/WBE policy. Strict quotas for M/WBE programs are illegal per the Supreme Court’s ruling in City of Richmond v. J.A. Croson, which held that the Virginia city's 30% quota for public contracts violated the Equal Protection Clause.
For every county contract worth over $50,000, the DEEO sets a participation goal that takes into account M/WBE availability and the county’s progress toward meeting the annual aspirational goal. A contract could have a participation goal above or below 30% depending on those and other factors.
Jack Thomas, director of inclusive procurements for the DEEO, said the messaging around M/WBE programs is driving the increase in contract awards.
“A lot of it is the fact that we’ve been stressing that the county is open for business,” Thomas said. “We value all relationships we have with our businesses, but we are particularly pushing for minority [and] women business involvement. What we’re really after is trying to develop M/WBE businesses that are sustainable and elite.”
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Thomas pointed to the city of Houston’s M/WBE program as having laid the foundation for the county’s efforts. Going forward, Thomas said more aggressive advocacy, more outreach and an increasingly knowledgeable DEEO staff will improve the county’s program.
“The [M/WBE] firms’ success breeds more success. As people start to hear... that some of [their] competitors, some of [their] colleagues, some of [their] friends are doing business with Harris County, [they’re] going to want in on that action too,” Thomas said.
Holmes added that the feedback from businesses has been really positive.
“Most businesses are excited about the program because they felt they weren’t involved in county contracts. They are happy to have someone advocating for them, and we’re happy to do so," he said.
Origins of the M/WBE program
County commissioners approved $600,000 to fund a countywide disparity study back in July 2018 from a request by Precinct 1 Commissioner Rodney Ellis. Conducted by the consulting firm Colette Holt & Associates, the study analyzed contract data from fiscal year 2016 through the first quarter of FY 2019.
In a June 2020 presentation to the court, Colette Holt, head of the firm, reported M/WBEs received only 9.1% of the $1.26 billion awarded to prime contractors by the county, compared to their 28.4% availability to perform work. Non-M/WBEs, which include publicly-traded firms and large companies whose ownership is not practically categorized by ethnicity, received 90.9% of county dollars.
This yielded a 32% disparity ratio for M/WBEs and a 126.8% disparity ratio for non-M/WBEs—in other words, M/WBEs made 32 cents on the dollar to the non-M/WBEs’ 126.8 cents, according to Holt. She said that civil courts consider a disparity ratio below 80% sufficient to argue a case of possible discrimination.
Based on these findings, Holt recommended the county adopt an M/WBE program.
“No one’s talking about handouts. Nobody’s talking about giveaways. Firms have to be qualified and capable,” Holt explained to commissioners. “But there are many, many qualified and capable minority- and women-owned firms in the Houston market area that are not doing work for you who probably could.”
Disparity studies across Houston
The city of Houston’s 2006 disparity study analyzed M/WBE utilization from July 2003-June 2006 and separated contracts by project type and dollar amount. For contracts under $500,000, the study found that M/WBEs were underutilized as prime contractors in construction, professional services, and goods and other services, with disparity ratios of 41%, 60% and 25%, respectively. A contract for an updated city disparity study is scheduled to begin Aug. 21.
Other Houston-area entities have conducted their own disparity studies in recent years: Port of Houston Authority, Harris Health System and METRO Houston relayed results to Commissioners Court in April 2021, May 2022 and June 2022, respectively. Port of Houston had an overall M/WBE utilization rate of 7.29%, while Harris Health reported a rate of 7.9%. METRO divided its contracts into three categories and found a 35% rate for construction, 28% for professional services and 14% for goods.
Notably, Harris Health awarded 0% of its contracts to Black-owned businesses from 2018 through 2019, the period analyzed by the Colette Holt & Associates study. Holt said at the meeting she had never seen a 0% utilization rate for Black-owned businesses before.
Esmaeil Porsa, president and CEO of Harris Health, said the disparity study was a first step towards improvement.
“I am bothered by the findings,” Porsa said. “I pledge to my board and I am pledging here to the Commissioners Court that we are going to be taking steps to remedy this, starting with creating the policy that is going to be the basis of the program that we’re going to implement.”
Ellis has been a proponent of disparity studies across the county. In November 2021, he pushed for the creation of a fund for community colleges and independent school districts to launch their own disparity studies. Commissioners voted 3-2 on June 28 to allocate $2 million to the DEEO for implementation and administration of the fund; Precinct 3 Commissioner Tom Ramsey and Precinct 4 Commissioner Jack Cagle opposed.
Twenty-five school districts and four community colleges were eligible for funding; a letter of intent was due to the DEEO by June 30. The invitation-only application opens July 29, with the project set to begin in November.
