City proposal could help minority firms, despite I-200

For the past four years, the city of Seattle tried to counteract the anti-affirmative-action constraints of Initiative 200 through the Boost program, spending $1.7 million to get minority contractors just 1.4 percent of the work on seven large city construction projects.

The City Council quietly killed the program late last year as it drafted a 2005 city budget, deeming Boost a bust.

But that doesn't mean the council and Mayor Greg Nickels have quit trying to overcome the effects of I-200, the statewide initiative that took effect in 1998 that banned affirmative action in local government. Today the council will consider a Nickels proposal that aims to steer more city contracts to women- and minority-owned businesses.

The new policies are more modest than Boost, which offered financial incentives to prime contractors for hiring small subcontracting firms. The incentives were applied to seven projects, including the new City Hall and Central Library.

Those incentives didn't work as intended. Just 1.4 percent of $340 million in subcontracting opportunities went to minority-owned businesses; companies owned by women got 3.5 percent.

That's a far cry from the 30 percent of overall city construction dollars that went to women and minority contractors before I-200.

Through Boost, the $1.7 million in incentives ended up as a reward for hiring mostly white subcontractors on the seven projects.

That's because the city used a color-blind system that rewarded prime contractors for hiring small firms. The thinking was that the vast majority of local women- and minority-owned businesses were small, so such incentives amounted to the best strategy allowed under I-200.

The top recipient of Boost's incentive payments was Hoffman Construction, which received $881,000 for its work on City Hall and the city's new Justice Center. Hoffman Construction did not respond to requests for comments.

"Boost didn't work as well as we hoped," acknowledged Ken Nakatsu, a city executive who oversaw the program.

David Allen, executive vice president of Joseph McKinstry Construction, said Boost was well-intended. But Allen, whose company was a subcontractor on plumbing and air conditioning at the new Central Library, said the incentive payments confirm what he suspected.

"Boost's requirements let too many white, nondisadvantaged companies qualify for incentives. Clearly the intent of Boost was not achieved," he said.

New proposals

The mayor's new proposals represent a "small, but important step forward," said Councilman Richard McIver, chairman of the council's Finance Committee, which approved the measures last week.

The mayor's legislation does not include financial incentives but would:

• Try to make city departments and contractors more aggressively solicit bids from women- and minority-owned businesses.

• Allow city contracts to set numerical goals for the share of contracts that should go to women- and minority-owned business.

• Prohibit the city from contracting with companies that do not try to hire women- and minority-owned businesses.

The mayor's legislation notes that Seattle residents "overwhelmingly opposed I-200" and says changes are "necessary to respond to the dramatic decline in the use of women- and minority-owned business enterprises" by city contractors.

Councilman Nick Licata, who supports the proposals, described them as "nibbling around the edges."

Councilman Richard Conlin said that short of challenging I-200 in court, or getting state lawmakers to repeal the initiative, this is "as close as we can get to affirmative action."

An executive order issued by Nickels in 2002 already called on city departments to reach out to women- and minority-owned companies and set goals for contracting with such firms.

But the new legislation would add a hammer to the city's toolbox. It would let the city disqualify, or "debar," contractors who don't try to solicit bids from women and minority subcontractors.

Nakatsu said the city might rarely bar contractors from doing business with the city, "but the threat of it represents a very useable tool."

It would allow Nakatsu, as director of the city's Department of Executive Administration, to request records from prime contractors that show evidence of their efforts to hire women and minority subcontractors.

He stressed that the city would be judicious in its demands and would acknowledge that for specialized projects — working on a water-treatment plant, for example — there might be a real shortage of qualified minority contractors.

He said the new provisions would require prime contractors at least to show they had tried to hire minority firms and would allow the city to bar those that didn't.

John Carlson, who was the chairman of the I-200 campaign, warned that such a practice could run afoul of the initiative.

"There's nothing wrong with outreach, recruitment and solicitation of minority firms. But any city program that threatens to punish a business because they do not use racial preferences is in clear violation of I-200," Carlson said.

Allen, from Joseph McKinstry Construction, said he "nervously" supported I-200 because affirmative-action programs encouraged the hiring of poorly qualified companies. He said he wouldn't object to the debarment process as long as the city was reasonable in carrying it out.

"They should only be able to chastise companies when they are able to determine there was no effort" to hire minority firms, he said.

By itself, the mayor's legislation probably "will not entirely achieve the council's objectives," according to a council staff analyst. "But combined with other strategies for increasing [women- and minority-owned business] participation that are currently being explored, it may prove an effective approach in the wake of I-200."

Assisting firms

The city's other main strategy has been financing the creation and operation of the Urban League's Contractor Development and Competitiveness Center. Since mid-2002, the city has contributed $1 million to the center, which has five employees.

The center's mission is to assist minority, women, disadvantaged and small construction firms in becoming more competitive by improving their business skills — ranging from computer literacy to bid preparation. It also helps small firms find out what contract opportunities exist and connects them to public and private developers and prime contractors.

To carry out that mission, the center first needed to meet with firms and assess their strengths and weaknesses, such as a lack of accounting, marketing and management skills.

"Our goal is to match the right contractor with the right work," said Tony Benjamin, the center's director. In its brief existence, the center has developed its programs and clientele while also trying to help minority firms win contracts.

"We've been serving hamburgers at the same time we're building the joint," Benjamin said.

Last year the center interviewed and diagnosed more than 60 firms, Benjamin said, and prepared 38 individual plans to help them. The center also formed partnerships with the Seattle Monorail Project, Community Capital Development and Associated General Contractors of Washington aimed at creating more opportunities for small and minority-owned firms.

In addition, Benjamin said the center has helped five local companies get 12 contracts worth $7.7 million.

Carlson and Allen both lauded the concept of the center.

"It sounds like a very positive idea for addressing problems and making small firms more competitive," Carlson said.

Bob Young: 206-464-2174 or byoung@seattletimes.com