Why most of Lexington’s ‘minority business’ contracts go to white-owned businesses.
This year, 20 percent of Lexington city contracts went to minority businesses, double the stated goal of 10 percent.
But more than half of the $8,694,771 that went to minority-owned businesses were white-owned companies, according to city data. Approximately, 11 percent of that 20 percent went to white-owned businesses.
Less than 1 percent went to black-owned businesses, city data showed. Only Hispanic-owned businesses received less with about 0.49 percent. Asian American-owned businesses received the second most with 2.1 percent followed by Native American-owned businesses with 1.7 percent.
In 2019, $4,051,105.98 in city contracts went to minority-owned businesses. That’s 15.8 percent of the city’s spending on personal service and other private contracts. But the majority — 13.1 percent of the 15.8 percent — went to white-owned businesses. Less than 1 percent of the $4 million went to black-owned businesses and Hispanic-owned businesses.
That’s largely because women-owned and veteran-owned businesses are included in the city’s minority business enterprise program, city officials said.
City spending on minority-owned business contracts was questioned recently by a group of black faith leaders who asked the city and various community leaders to address long-standing racial disparities in Lexington.
Among other requests, black leaders asked the city to consider raising its minority contracting goal to 15 percent.
Sherita Miller, the city’s minority business enterprise liaison, said the city has worked hard to increase the number of minority-owned businesses that contract with the city.
But a lot of work still needs to be done.
“We have improvements to make with our race and ethnic categories,” Miller said.
Miller told a Lexington-Fayette Urban County Council committee on Tuesday that the city has held various outreach events to locate and encourage minority-owned businesses to bid on city projects. She has also held networking events so construction contractors can meet more minority- and women-owned subcontractors.
Miller said one hurdle is bonding. Construction companies are asked to post a bond — that typically ensures bills are paid — in case something goes wrong with a project. Many minority-owned businesses don’t have the ability to bond or can’t bond enough to bid on certain projects, she said. To address that issue, Miller has partnered with other organizations to hold online training sessions to walk contractors through the bonding process.
Some businesses are not certified as minority- and women-owned, which is required to participate in the program.
“I have also conducted training on how to become certified as a minority- or women-owned business,” Miller told the council’s Budget, Finance and Economic Development committee.
Councilwoman Jennifer Reynolds questioned during Tuesday’s meeting if many Hispanic-owned businesses had attended the outreach events. Miller said the majority of businesses that attend are black-owned.
Miller said she is working on outreach to the city’s Hispanic business community.
Todd Slatin, director of purchasing for the city, said the city also invested in a new contracting system that allows the city to better track minority business contracts and connect with minority business contractors.
Prior to the implementation of the new software in January 2019, the city did not have a unified system to track all minority contractors. All minority contractors most register in that system, Miller said.
“Unfortunately, it made it very hard to track subcontractors,” Slatin said.
The city has increased the total percentage spent on minority business contracts — women-, veteran- and minority-owned businesses — since 2015, according to data provided by the city. In 2015, 8.7 percent of the city’s total contracts went to minority-owned businesses compared to 20 percent in 2020.
Miller said the city can do more to increase the amount of city money spent on minority-owned businesses. But to do so, there needs to be further study, she said.
An availability study will determine how many women-owned, minority-owned and veteran-owned businesses are in the area and able to bid on city contracts. That type of study would cost about $50,000 and take a year to complete. Two years ago, the Fayette County Public School system conducted such an analysis, Miller said.
A disparity study would go much deeper and would take a year to two years to complete, Miller said. In addition to locating minority-owned businesses, the study would look at whether the city’s procurement policies are a barrier to minority-owned businesses bidding on city contracts. A disparity study would continue to analyze city minority contract spending after the study is completed. That disparity study would cost a minimum of $400,000, she said.
Councilman James Brown said during Tuesday’s meeting he was disappointed the participation for black- and Hispanic-owned businesses were both less than 1 percent and questioned if the city could set goals for the program based on race and ethnicity.
But if the city set specific targets based on race or ethnicity, it must first conduct an availability or disparity study to survive a legal challenge in court, Miller said.
“I think it would be a very important investment,” Brown said of either study. “I think it’s a misleading to say that we are exceeding our goal, we are, but we have an opportunity to do better in specific categories.”
Mayor Linda Gorton has appointed a committee to look at racial disparities across government, education, health care and other sectors. It’s possible that committee could look at the issue of minority contracting and recommend a disparity study be conducted, he said.
This story was originally published June 23, 2020 at 5:18 PM.
