BACKGROUND: WHAT PRECEDED THE 2022-23 DISPARITY STUDY?
The City of Knoxville’s Purchasing Division is responsible for all purchases for the City and Knoxville Area Transit (KAT). This public spending – on average, roughly $110 million per year – can help local businesses grow and prosper.
Knoxville Mayor Indya Kincannon, City Council and City department heads agree: All businesses deserve to have a fair shot in competing for City contracts. The more reflective of the City’s demographic makeup, the better.
Part of that commitment to a level playing field for business owners is outreach to Disadvantaged Business Enterprises, or DBEs.
The City is committed to ensuring that businesses owned by minorities, women, service-disabled veterans, persons with disabilities, and small businesses have opportunities to compete for and participate in the City’s procurement of goods and services, professional services contracts, and construction contracts.
What barriers or hardships do DBEs face in trying to do business with the City?
Mayor Kincannon and City Council wanted to find out – and then take action to make it easier for DBEs to compete for City contracts.
In February 2022, the Mayor and Council hired Miller3 Consulting to do a top-to-bottom Disparity Study – the first such analysis in 25 years.
Miller3 met with almost 50 DBE owners, and another 3,284 DBE owners were asked to participate in surveys.
• View Miller3’s Report
HOW WE GOT HERE
The City has worked for 20 years to establish and grow a DBE outreach program.
The City’s Small Business and Diversity Outreach Office communicates with DBEs about contracts coming up for bid and offers assistance in preparing proposals. The office also recommends strategies to small businesses, such as pairing up with other companies to be able to better compete jointly for a large contract.
Goals for contracting with DBEs are set annually, and tracked, and publicly recognized, for each City department.
The City’s Small Business and Diversity Outreach Office (SBDOO) produces a quarterly newsletter with information on both upcoming bid opportunities and recently awarded contracts.
The SBDOO also provides direct assistance throughout the year by meeting individually with DBEs interested in doing business with the City and by attending numerous business outreach events hosted by both the City and other entities.
And at Purchasing’s annual Business Opportunities Breakfast, business owners can get a full look ahead of upcoming projects, and talk with department managers, to be better prepared to make a competitive bid for near-future contracts.
Over the years, the City has increased significantly the size of its contracts with minority-owned businesses. In Fiscal Year 2016, minority-owned companies had been awarded just 1.97 percent of City contracts. But by FY20, that number had grown to 5.71 percent.
WHAT A DISPARITY STUDY IS - AND ISN'T
Miller3 collected and developed data to determine the disparities, if any, between availability and utilization of small-, minority-, and women-owned business for contracts awarded by the City.
Following analysis of the data collected and After extensive engagement with business owners, Miller3 is recommending immediate and short-term actions to remove barriers for DBEs – such as increasing the training and technical assistance that City staff and partner agencies provide to DBEs. And better communicating to DBEs when small contracts are coming up for bid.
The City currently sets goals for doing business with DBEs for each City department. Miller3 is recommending that the City continue the practice and that department heads see the DBE contract award metrics earlier in the fiscal year and more often. The idea is to provide more opportunity for the departments to take additional steps if they are not meeting their DBE goals.
Miller3 was tasked only with analyzing the amount of business the City conducts with DBEs and correcting business disparities that may exist.
The Disparity Study does not address larger societal disparity issues that are beyond the scope of City of Knoxville government. For example, it doesn’t look at geographic distribution of retail stores or medical facilities.
Evaluating whether or not a disparity exists in awarding of public contracts can be complicated. It is not as simple as comparing demographic numbers with the percentage of contracts.
For example, how many women- or minority-owned companies operate that install commercial electric circuitry, or perform accounting services, or provide gasoline or office supplies? And of those, which have available capacity to take on the City contracts, and which are already at full capacity? The disparity study first determines the availability of DBE firms within the relevant market and then does an analysis on the utilization to determine disparities.
ARE THERE LEGAL LIMITATIONS?
State and federal law, and court rulings, generally limit what local governments can do.
A key landmark case was the U.S. Supreme Court’s 1989 City of Richmond v. J.A. Croson Co. decision. The court held that a Richmond program, giving preference in awarding contracts to minority-owned businesses, was unconstitutional.
Miller3’s study for the City of Knoxville complies within the parameters of the Croson ruling.
However, it has been argued that, if disparities are identified, cities may have more latitude in addressing those disparities.
The Miller3 report recommends initiating immediate and shorter-term practices, and closely monitoring the results.
If the initial actions do not result in more contracts with DBEs, then longer-range more intensive actions could be taken – requiring private prime contractors working on City projects to show proof of their good-faith efforts to privately hire DBE subcontractors, as one example.