State of Black business – Boosting the bottom line

Harris County Black businesses see increases in government contracts.

In Houston, the Black population is 18.59%, with Black businesses comprising 3.3% of local firms. Increasing the bottom line through public and private contracts is key to their growth.

The timing for minority and women-owned businesses (MWBEs) to get a piece of the government contract pie could not be better, according to Harris County Commissioner Rodney Ellis, an outspoken advocate of economic equality.

“Metro will spend $7 billion-plus,” Ellis said. “The county has a record amount of federal money coming in. We haven’t had this much money since [former President Lyndon B. Johnson’s] Great Society. The county did a $2.5 billion flooding bond issue. We put another $1.2 billion on the ballot.

“The city has substantial infrastructure needs it is investing in,” Ellis said. “There is additional money that the federal government is making available on a competitive basis. Harris Health [has a] $2.5 billion bond issue to replace a couple of hospitals they desperately need. Minorities and women also desperately need these business opportunities.”

Ellis is a firm believer in a disparity study as a tool to reveal the public sector’s government spending with businesses owned by people of color and women. Ellis has promoted disparity studies to allow government and quasi-government entities to be transparent and determine if inequities exist in public procurement and contracting.

By 2022, Ellis and his colleagues on Commissioners Court secured commitments for Harris County, Metro, the Port of Houston and Harris Health to conduct disparity studies in order to implement MWBE programs. The July report by the Harris County Department of Economic Equity and Opportunities revealed that between October 2022 and March 2023, about 25% of the $377 million awarded in contracts went to MWBEs. Ellis drilled down on the progress being made.

“A big part of the success that we’ve had so far in Harris County comes from transparency, knowing where we were doing the disparity study, making it public and then monitoring what we do,” he said.

“It sent a signal to people that we were serious about it. We have unbundled some projects to make them a bit smaller. We don’t delay projects but make it easier for some of our smaller vendors, which tend to be a minority…African American numbers went from 0.5% to 5.3%, a significant increase. At Harris Health, which had the worst number of all, it went from zero for African Americans to about 7%,” Ellis said.

Tip of the iceberg: More studies needed

Considering that the City of Houston conducted its first disparity study over 10 years ago, the Harris County Commissioners Court, under Republican leadership, was slow to use the disparity study tool, claiming higher MWBE procurement numbers. When the two-year study results were presented in 2020 to the court, the numbers showed 9.1% minority and women-owned businesses compared to a 28.4% market share.

“When they weren’t collecting the data, they were assuming the numbers were higher than they are,” Ellis said. “I hope that they decide to go ahead and set up a race and gender-based program. It’s a goal,not a quota because all the experts I’ve talked to say the only way it really works is if you focus on what the problem is.”

On a mission, Ellis encourages others to conduct disparity studies despite resistance from those who continue to hide behind unsubstantiated numbers.

“The ones who won’t do a disparity study don’t want to know, and for one simple reason: they can buy a banquet table from some group that gives them an award [for business]. They don’t know what their numbers are.”

Ellis added that, “People are afraid of transparency. They know their numbers are not what they think they are because they don’t collect the data…and they’ll say, ‘We have a program.’”

In a good faith move, the Harris County Commissioners Court approved a $2M fund that provides seed money for community colleges and school districts to conduct multi-jurisdictional disparity studies to determine whether MWBEs fairly participate in the procurement process. Only Lone Star College, Aldine ISD, Alief ISD, Spring ISD and Fort Bend County have agreed to conduct a disparity study, leaving over 27 government entities that have chosen not to learn their real numbers.

Accountability: If you can’t measure it, you can’t manage it

Other cities have implemented programs to monitor and report annually on the progress of their

MWBEs. For the last eight years, New York City has produced a report card with recommendations for improvements listing the top 50 companies receiving the most city dollars, featuring a breakdown of total dollars spent and MWBE subcontractor dollars spent.

Ellis suggested that advocacy, civic and business organizations could join forces to demand a similar report card to monitor the progress of Houston-area MWBEs.

A lack of local Black businesses with capacity

The limited number of Houston African American businesses with the capacity to service public

contracts is a concern. Recognizing that there are fewer African American-owned businesses than white or Hispanic-owned businesses in the Houston area, Ellis shared his perspective.

“It’s a twofold process to make sure that African Americans are getting an equitable share,” he said. “Number one, we need more African Americans to set up businesses. We must also stop African American [Houstonians] and others from being afraid of people coming from Atlanta, New York, Detroit, Chicago and Dallas,” Ellis added.

“It’s an uphill climb for me to push both to open the door for minority women-owned businesses and then say, just the ones who are here,” he said. “For African Americans in particular, there are very few who are here. And when they get the opportunity to perform, the worst thing they can do is mess it up. If they mess it up, they don’t just mess it up for themselves. They mess it up for a whole host of people because whether we like it or not, we tend to be judged by others who look like us or are similar to us.”

Potential impact of Blum’s anti-DEI campaign

Conservative activist Ed Blum, who fought against establishing a City of Houston MWBE affirmative action program in the 1990s, recently won a U.S. Supreme Court decision banning race-conscious admissions in colleges and universities. There are concerns that Blum will refocus on MWBEs next.

“Mr. Blum has done everything he can to stop diversity, equity and inclusion [DEI] programs,” Ellis said. “I think there’s a time when we should not be shy. I’m being even more aggressive about getting them in place, and I’m going to do everything I can as long as I can,” Ellis said. “We’ll always have to follow the law. It’s a right-wing Supreme Court that would go back and have us under Plessy versus Ferguson again. They just rolled back the clock to the ‘40s and ‘50s.”

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