In response to longstanding inequities in the distribution of public contracts, the City of Houston is rolling out sweeping reforms to its Minority, Women and Small Business Enterprise (MWSBE) program.
The new policies, unveiled by the Office of Business Opportunity (OBO), follow a sobering disparity study that found significant gaps in contracting opportunities across nearly all business ownership groups except unclassified firms.
The city has been hosting targeted listening sessions and industry-specific meetings to gather feedback.
OBO Director Cylenthia Hoyrd said the changes are designed to level the playing field for historically marginalized business owners while adhering to legal guidelines shaped by past litigation.
“Instead of removing groups, we will still include them in the program,” Hoyrd told the Defender. “They will remain in the category, but they will participate at a cap level. The cap level is based on their availability in the market…After that, it goes to the other groups, or the other groups can be counted as a whole thing. We leave that up to the prime to determine who they want to use.”
Disparity study
The overhaul’s foundation is a disparity study conducted by MGT Consulting. The study analyzed five years of procurement data (FY18–FY22) across construction, professional services, goods and other services in a nine-county region.
The study found that 71.5% of the City’s spending went to unclassified firms, while only 28.5% went to certified minority- and women-owned businesses.
Significant disparities were identified across nearly all categories for Black, Hispanic, Native American and Asian-owned firms.
Black-owned firms, in particular, faced disparities in every contracting category, including construction, professional services, goods and other services. The study provided a legal foundation for the city’s race-conscious programs, critical in light of recent legal challenges to MWBE initiatives nationwide.
“It wasn’t that they [Black-owned businesses] didn’t meet availability, it’s that they still had a disparity,” Hoyrd explained. “They weren’t used according to their availability. What we’re doing is they have full participation. So a firm could literally put a Black business in for 26%, use them for the whole 26%. They could put them in for 10%, if the goal is 10%.”
Policy changes
To address these disparities, Houston is introducing a suite of new programs and policy changes designed to expand opportunities for underutilized businesses while maintaining compliance with court rulings like Croson (1989) and Kossman (2016), which require statistical evidence for race-conscious programs.
Among the most notable changes:
- Small Contractor Rotation Program (CRP): A two-year initiative where city departments assign recurring, smaller-scale projects to MWSBEs. The goal is to improve cash flow, bonding capacity and performance history, eventually helping participants transition into prime contractors.
- Small Business Reserve (SBR) Program: City departments will now designate 20% of their procurement budgets for contracts between $100,000 and $500,000 to certified small businesses only. This ensures that smaller firms are not forced to compete against large and well-established vendors.
- Expanded SBE Coverage: The cap that previously limited SBEs to construction-only contracts has been removed, allowing participation across all procurement categories.
- New certifications and flexibility: The updated policy includes certification flexibility for disabled and veteran-owned businesses and imposes personal net worth caps to ensure benefits are directed toward truly disadvantaged firms.
Among the program reforms are a mentor-protégé program, a personal net worth cap on M/W/S/VBE and the creation of a Small Business Hub.
Voices from the community
Janice Little, a Black entrepreneur and long-time advocate for supplier diversity in Houston, praised the new programs but urged continued vigilance.
“I wanted to find out what the changes were going to be with the certification program and see what steps they’re going to be rolling out with making sure that everyone is aware of the changes,” said Little, who owns a real estate leasing company and a real estate management company that provides support services to graduates and entrepreneurs.
Hoyrd echoed that sentiment, noting that transparency and accountability are now implemented into the new framework. The city will also begin rejecting pay applications from prime contractors who fail to pay subcontractors on time and will highlight subcontractor payments during regular project meetings.
Hoyrd suggests that businesses participate in the city’s Mentor Protégé Program.
“That’s going to be really, really significant if they can be mentored by a firm. With the SBR, we have a lot of Black firms that are mid-sized and not as large in some of our industries,” Hoyrd said. “If they can come in as primes in our SBP program, they will be able to work as primes and be considered for primes for larger projects as they build their capacity.”
A 2023 legal challenge targeting the constitutionality of MWBE programs raised the stakes, but the city says its updated policies are narrowly tailored and legally defensible. They rely on statistical evidence and race-neutral alternatives when appropriate.
The updated program is designed to survive legal scrutiny: Goals are aspirational, not quotas, set using availability data rather than disparity indices alone and incorporate “narrow tailoring” principles.
Workshops, contractor training, and rollouts with major partners such as Metro, Houston ISD, Harris Health, Houston Community College, the Small Business Administration and the Port of Houston will continue through the end of 2025. By early next year, city officials hope to see measurable improvement in contract participation rates for MWSBE firms.
Next steps
Certified small businesses could begin preparing to qualify for new programs like CRP and SBR. Prime contractors must brace for stricter enforcement on subcontractor relationships and reporting.
Meanwhile, community organizations and advocacy groups could continue monitoring implementation, especially during the policy rollout phase between September 2025 and January 2026.
