Minnesota Lawyer
Viewed one way, it’s just a new path for state government to go about ordering supplies and services from more vendors. Viewed another way, it’s a potent pro-business initiative that could help lift disadvantaged communities out of poverty.
It will be years before we know whether the grander of those visions plays out for the state’s equity-in-procurement initiative passed during the last legislative session. But there are hints it is beginning to benefit businesses owned by minorities, women, military veterans and residents of poor Minnesota counties.
The legislation was originally authored in the House by Rep. Bob Dettmer, R-Forest Lake, with a companion Senate bill co-authored by Minneapolis Sens. Bobby Joe Champion and Jeff Hayden, co-chairs of the Senate Subcommittee on Equity. Gov. Mark Dayton signed it into law on May 22 as part of the omnibus supplemental budget bill.
One prong of the initiative allows state agencies to award no-bid contracts of up to $25,000 to certified minority-, women- and veteran-owned businesses, and to businesses located in economically disadvantaged, largely outstate counties. The previous no-bid cap was just $5,000. This program is known as Equity Select.
For larger, competitively bid projects, the legislation extends bid-scoring preferences that already are in place for targeted-groups — meaning women- and minority-owned businesses — to veteran-owned businesses and to employers in economically challenged Minnesota counties like Becker, Cass and Cottonwood.
Once they complete a state certification process, this part of the initiative gives eligible companies a six-point bonus on their bid scores, said Alice Roberts-Davis, the Minnesota Department of Administration’s assistant commissioner for property and purchasing.
“When vendors bid on a contract, there is a point-based system on which they are scored,” she explained. “It is a 100-point system.”
Incumbent and non-disadvantaged businesses can score a maximum of 100 points in bid reviews, Roberts-Davis said. The six-point advantage means that, conceivably, certified businesses can score 106 points.
“And of course, whoever has the highest number of points will secure the bid,” Roberts-Davis said.
Data revealed disparities
The Administration Department championed the equity initiative after data arrived through the Statewide Integrated Financial Tools system, a supply-chain management data warehouse, in October 2015. Those numbers revealed dramatic state-spending disparities.
Overall, Roberts-Davis said, the 24 Cabinet-level state agencies spent $2.2 billion in fiscal year 2015 procurements. Of that, just $73 million went to targeted groups, veteran-owned or economically disadvantaged companies.
“Once we saw what the actual spend was with a relatively clean lens,” she said, “we knew we had to do something.”
Department of Administration figures show that since the law was passed, a few groups are seeing greater contracting activity. Specifically, spending with black-owned businesses rose from $135,000 in fiscal year 2015 to $880,000 in fiscal year 2016. Contracts with veteran-owned businesses rose from $1.9 million in fiscal year 2015 to $3.9 million in fiscal year 2016, the department said.
Jake Seamans, an Administration Department spokesman, said state agencies are increasing engagement with all the groups, but spending data for most target groups are incomplete. He is confident spending will rise across the board once final numbers come in. “In six to eight months,” he said, “we will have the data to show significant improvement.”
Around the same time that Roberts-Davis was reviewing the Statewide Integrated Financial Tools data, Champion and Hayden were reviewing U.S. Census Bureau data with State Demographer Susan Brower.
Sen. Champion, DFL-Minneapolis, said those numbers showed that African-Americans’ income, between 2013 and 2014, dropped precipitously from $31,500 to $27,000 a year. Worse, he said, the data demonstrated that unemployment and poverty had become chronic in the black community.
“Roughly 38 percent of African-Americans were living in poverty,” he said. “For Somalis, it was 58 percent living in poverty. So we started looking at this seriously.”
Not a handout
Rather than solely focus on African-Americans, though, Hayden and Champion’s Senate Subcommittee on Equity broadened its scope. The duo invited outstate legislators to sit on their committee and expanded its mission to include veteran-owned businesses and economically depressed counties, they said.
They would work on rolling back poverty overall, Champion said. That was a strategic choice, said Sen. Hayden, DFL-Minneapolis.
“It was really important for us to recruit rural members so they could see the opportunity that this would have in their communities,” he said. “This wasn’t seen as some north or south Minneapolis, or Frogtown/St. Paul, giveaway. This is something that is really in the interest of the state as a whole. That got us the buy-in that we needed.”
The dynamic was similar for Dettmer, but his personal emphasis lay elsewhere. Dettmer, a retired U.S. Army chief warrant officer and chair of the House Veterans Affairs Division, saw the equity-in-procurement initiative as a way to help returning and retired veterans gain a toehold as government contractors. That might help them to grow businesses and reduce unemployment among other returning veterans, Dettmer said.
Even so, just like the Champion-Hayden bill, Dettmer’s House File 3109 championed the causes of targeted minority groups and economically disadvantaged counties as well as veterans.
Dettmer went one step further. He authored House File 141, which eventually got folded into and passed as part a separate omnibus government finance bill. It allows business owners to be certified locally as military veterans by the state Veterans Affairs and Administration departments. That eliminates bureaucratically fraught, time-consuming requirements to get certified by the U.S. Department of Veterans Affairs, and further eases veterans’ path to state contracts, Dettmer said.
Beyond the business groups it is intended to help, the initiative is also seen as a plus for agencies, several procurement professional indicated.
Kim Montgomery, contract coordinator for the state Department of Natural Resources said the legislation expands her palette of potential contractors, especially outstate. Because it also allows her agency to eliminate the request-for-proposal process for under-$25,000 projects, it also saves time. “So yeah, it was very beneficial of us, too,” she said.
Open the door
Dettmer saw the legislation as sorely needed, particularly among veterans. “They have spent a lot of their life serving their country,” he said. “They are not looking for a handout, they are just asking for a hand up.”
Though he is part of a different group, Naeem Qureshi has a similar view.
Qureshi is president of Brooklyn Center-based Progressive Consulting Engineers Inc. Because he is Indo-Pakistani, he said, his company is certified as a targeted group business. That recently won him a no-bid $13,500 Equity Select contract with the DNR to write a feasibility study on extending water services to new sites in Lake Vermilion State Park.
Unlike many Minnesota minority-owned companies, Progressive Consulting is a well-established business—built partly through state government contracts. Three years ago, for example, it secured a $580,000 government contract to study and design the initial build-out of water service at Lake Vermilion State Park. In doing so, he took advantage of the 6 percent contract-scoring preference that was then already in place for minority-owned businesses.
He parlayed his government connections into a $1.5 million contract with the Minnesota Army National Guard’s Department of Military Affairs, for which Qureshi last year conducted utility design and civil engineering work at Camp Ripley.
Qureshi sees himself as an example of what might be achieved if the equity-in-procurement initiative works. Minority and other targeted-group businesses tend to hire people belonging to the same ethnic and cultural groups as their owners, he said. Progressive Consulting is about to hire a new worker from India.
That means the economic benefits of state contracts could extend deeply within underserved communities, Qureshi said. In his case, he said, that already is happening. “We tend to hire minorities quite a bit,” he said.
For Champion, the equity-in-procurement program is nothing less than a means for using the levers of government to pull impoverished Minnesotans out of the social safety net snare. That could save the government a lot of money, he argues. More importantly, it could put underserved people on a path to better, more prosperous lives, he said.
Decades ago, Champion said, the singer James Brown got it exactly right. “I don’t want nobody to give me nothing,” the Godfather of Soul sang. “Open up the door. I’ll get it myself.”
