Disparity study finds significant underutilization of minority-owned firms in Richmond contracting

The Richmond City Finance Committee heard a presentation from MGT Consulting on a disparity study showing minority- and woman-owned firms (NDE/MBE) were substantially underutilized by the city during fiscal years 2017–2021.

The study found NDE firms received 3.43% of total dollars spent by the city during the period while NDE firms represented about 17% of firms available in the defined regional marketplace. MGT said Hispanic-owned firms accounted for 1.77% of city spending and African American–owned firms 1.43% during the study window.

MGT project director Bernetta Mitchell said the team used quantitative and qualitative methods, assigning NAICS codes to city procurements, surveying and interviewing businesses, and testing disparity indices. ‘‘If that ratio is less than 80 … that is substantial underutilization,’’ Mitchell said, explaining the disparity-index threshold the study used. The team reported statistically significant disparities across most procurement categories and also found private-sector revenue gaps for MBE firms when controlling for firm age and other factors.

The study’s qualitative analysis documented examples of market barriers: firms reporting limited outreach from prime contractors when projects had no subcontracting goals, direct on-site harassment reported more often by African American–owned firms, and common capital and bonding barriers that limit competitive bidding.

MGT also provided an economic-impact snapshot using city data: NDE firms the study identified supported about 476 jobs, paid roughly $33 million in labor income, generated about $49 million in value added, and contributed approximately $9 million in combined local, state and federal taxes over the study period.

Based on its findings, MGT recommended several remedies, including adoption of an anti-discrimination ordinance, improved procurement data collection and management, expanded contract-specific subcontracting goals, a contract audit clause, departmental subcontracting goals and liaisons, increased staffing for the city’s minority-business office, and time-limited (sunset) program features tied to measurable goals.

Office staff described limited internal capacity to implement recommendations. The Office of Minority Business and compliance functions currently operate with six staff (an administrator, three compliance staff, one technical-assistance staffer, and the director), and staff said past ARPA funding was used for pilot programs such as an office-manager training program and initial capital/loan fund planning. Staff said the loan fund has been authorized but implementation was delayed while the office absorbed other priorities tied to the city’s water-related work.

Committee members voiced support for moving from study to action. Chair Robertson said staff will draft legislation for council consideration to receive and adopt the study and to include its recommendations with an implementation strategy and budget. Councilwoman Stephanie Lynch and other committee members discussed capital access as a key barrier; members urged convening regional capital providers and adjusting city policy and underwriting where legally possible to expand nontraditional lending and technical assistance.

The presentation was a briefing; the committee did not vote on the study itself but directed staff to prepare draft legislation and implementation planning for future council action.

The committee said the draft legislation will be circulated to the minority-business office and committee members for input before introduction to the full council.