Office of Business Opportunity releases disparity study findings and recommends expanding small-business category amid public pushback

The Office of Business Opportunity (OBO) presented the city'commissioned disparity study and outlined draft ordinance changes intended to align the city's minority and women-owned business enterprise (MWBE) program with the study's findings. The presentation prompted an extended question-and-answer session with council members and a lengthy public-comment period in which business groups and contractors raised concerns about outreach, data, implementation and the potential consequences of changing program categories.

Study and legal background: Director Celenthea Hord told the committee the city began the study in April 2023 and contracted MGT Consulting to analyze five years of city spend data pulled from SAP and to conduct qualitative outreach. Hord summarized the legal rationale for disparity studies, citing the U.S. Supreme Court's Croson decision as the precedent establishing the methodology: ''The legal premise for disparity studies '' 'is that they provide actionable results that can be used to narrowly tailor a supplier diversity program,'' she said.

Key quantitative findings: Hord said MGT found statistically significant disparities for MWBEs overall across procurement categories. She summarized subgroup results: statistically significant disparities were found for Black-owned firms across construction, professional services, other services and goods; for Asian- and Hispanic-owned firms disparities varied by category (construction, goods and other services showed disparities in several cases); for Native American-owned firms disparities appeared across categories. OBO presented aggregated five-year spend figures and disparity-index calculations for each procurement category; MGT recommended remedies that included improved data collection, advertising informal procurement opportunities, contract compliance for indefinite-delivery work, discouraging exclusivity agreements between primes and subs, strengthening graduation processes and expanding a small-business enterprise (SBE) category into additional procurement categories.

Proposed program changes: The presentation flagged several specific proposed changes to Chapter 15 (the city's MWBE ordinance): create a veteran-owned small-business and a service-disabled veteran-owned small-business category; move some 'presumptive' groups (those without current statistical disparity in certain categories) into a new SBE category; expand the SBE program beyond construction; remove the 4% cap on the construction SBE category and create migration phases for moving categories into SBE; adopt a mentor-protege program, a small-business rotation and a small-business reserve program; and adopt a defined sunset and graduation process for program participants. OBO recommended an ordinance update in March/April, departmental training through summer and a phased migration for construction and other categories over the year.

Council Q&A and legal context: Council members pressed OBO on participation and sampling. Council Member Pollock asked which group has the most certifications; staff said the certification division could provide a breakdown. Council Member Martinez pressed for the 2016/2019 study file; the city's counsel said a prior 2016 study had not been adopted and had been excluded from court evidence, but counsel noted a federal court set a schedule that gives the city until April to decide whether it will adopt the new study (if adopted, the trial would proceed using the newer study). Council members asked about low response to qualitative surveys (OBO said roughly 687 online survey responses plus other interviews and focus groups yielded ~800 participants total for the qualitative components), and MGT explained that the disparity analysis itself is based on comprehensive spend data (a five-year SAP pull that MGT said included approximately $7.6 billion in city spend for the study period) while the qualitative portion is intended to add context about business experience and barriers.

Public comments: More than two dozen public commenters and representatives of business groups—including the Houston Hispanic Chamber of Commerce, Houston Minority Supplier Development Council, National Association of Minority Contractors (NAMC), large local contractors and many individual minority- and women-owned business owners—spoke during an extended public-comment session. Common themes: - Outreach and participation concerns: many speakers said they learned of the study only recently despite widespread community networks and questioned the reach and adequacy of the qualitative outreach (postcards, email blasts, B2G Now platform and other channels were used). Several groups asked OBO to provide more targeted in-person engagement before adoption. - Data and concentration concerns: multiple speakers noted the study shows a concentration of spend with relatively few firms in each subgroup and asked for additional raw data and transparency to see whether the disparity conclusions were driven by a handful of large awards. - Transition and capacity concerns: many contractors urged the city to avoid abrupt changes that would remove existing firms from certification or reduce opportunities; several recommended phased transitions, robust graduation rules and programs to grow capacity (bonding, insurance, timely payment and access to capital were repeatedly cited as practical barriers). Some heavy-civil contractors and trade associations warned that removing groups from particular categories could reduce the pool of firms able to meet large, federally mandated projects on tight schedules.

OBO's rationale and next steps: Hord and MGT representatives said the study's quantitative spend analysis demonstrates statistically significant disparities that justify narrowly tailored remedies and that a contemporaneous, adopted study would strengthen the city's legal position in the pending federal challenge. They recommended expanding the SBE construct, adding veteran categories and operational changes (advertising, compliance, mentor-protege, graduation rules) to both broaden opportunities and preserve constitutional defensibility. Hord requested stakeholder collaboration on drafting ordinance language and emphasized that without an adopted, updated study the city risks a legal setback that could jeopardize the program.

Ending: Committee members asked for more detail and for raw or breakdown data to be made available to stakeholders; members of the public and trade groups requested additional outreach and a careful, phased implementation to avoid harming firms that currently rely on city contracting. No ordinance was adopted during the meeting; staff said it would return with ordinance text, implementation timelines and additional data as requested.