City of New York Disparity Study- Executive Summary

By The City of New York and MGT Consulting Group 

1.   INTRODUCTION

 The City of New York contracted MGT Consulting Group (MGT) to conduct  a Minority and Women-owned Business Enterprise (M/WBE) Disparity Study (“Disparity Study”). The objective of this Disparity Study was to conduct a disparity analysis of the utilization of M/WBEs in New York City procurement activity, compared to the availability of M/WBEs in the relevant market area.

The Disparity Study’s findings are presented in detail in the full report and supporting appendices. This executive summary summarizes the evidence on the overarching research question:

Is there factual predicate evidence for the continuation of the City’s M/WBE program?

MGT found sufficient evidence of disparity and recommends that the City continue its M/WBE program to address identified disparities. The following sections summarize the approach, findings, and recommendations stemming from the effort.

2.   STUDY OVERVIEW

FRAMEWORK AND APPROACH

State and local governments may create affirmative action programs to guide their purchases of goods and services “…where there is a significant statistical disparity between the number of qualified minority contractors willing and able to perform a particular service and the number of such contractors actually engaged by the locality or the locality’s prime contractors.” See Richmond v. J.A. Croson Co.,  488 U.S. 509 (1989) (“Croson”). Croson further states that the appropriate remedy for such an inference is likely not a “rigid numerical quota,” id. at 508, but could be a program that offers “some form of narrowly tailored racial preference,” id. at 509. This study has been designed and executed to assess whether such statistical disparities exist in the City’s procurement activities, and successively, to recommend appropriate actions to remedy any observed disparities.

To ensure conformity of findings to the “narrowly tailored” standard prescribed by Croson and successive precedent, the approach and analysis was bound by specific parameters to ensure its relevance to City contracting activity.

• The period over which the City’s procurement of goods and services was analyzed extended from July 1, 2006 through June 30, 2015.
• The study examined the following procurement categories:
  • Architecture & Engineering
  • Construction
  • Professional Services
  • Standardized Services
  • Goods or Commodities

PUBLIC ENGAGEMENT

MGT, in collaboration with the City engaged in the following outreach efforts: reached over 100,000 businesses and business groups by e-mail or phone, and engaged the business community through community meetings held in each of the five boroughs, and the Disparity Study website. The comprehensive outreach campaign also included digital and print ads in various ethnic media sources, radio ads, postings on social media, as well as printed materials distributed at public events. Outreach was conducted in Spanish, Chinese, Korean, and Haitian Creole, as well as English. As a result of these efforts, over 5,000 business owners and representatives provided direct input into the study’s research and findings, through surveys, interviews, focus groups, and testimonies. Of those, about 60 percent of the respondents were M/WBEs.

It was of importance to the City and to MGT to maximize engagement with the business community and stakeholder organizations, and provide opportunities to comment on their experiences with the current M/WBE program. Activities included:

• Community meetings in each of the City boroughs;
• In-depth interviews and surveys with business owners representing business categories procured by the City;
• Focus groups for business owners representing business categories procured by the City, to share experiences and perceptions;
• Meetings and interviews with program stakeholders;
• Online and social media communication; and
• Printed, digital, and radio

3.   KEY FINDINGS

DISPARITY ANALYSIS

The current default certification area, encompassing 13 counties spanning between New York and New Jersey, met the 75 percent standard of awards and was therefore identified as the study’s relevant market area.¹ MGT analyzed both utilization (dollars awarded by M/WBE classification and procurement category) and availability (proportions of firms by M/WBE classification and procurement category) within this market area.

Table ES-1 shows availability estimates, which are the proportions of firms by M/WBE classification and procurement category deemed willing and able to provide goods or services to the City of New York that are located within the relevant market area.

TABLE ES-1

AVAILABILITY ANALYSIS SUMMARY

*Availability shown for all M/WBEs does not equal the sum of the individual categories because the WBEs category is comprised of all women-owned firms, regardless of race or ethnicity.

MGT found disparities between utilization and availability of M/WBEs during the Disparity Study period. The disparity indices were substantial² and statistically significant³ in all procurement categories and M/WBE classifications, except for Native Americans in Standardized Services⁴.

1 MGT uses the “75 percent rule” to determine the relevant market area. This rule is generally accepted in antitrust cases. In another relevant case, James C. Jones v. New York County Human Resources Administration, 528 F.2d 696 (F.2d Cir. 1976), the court accepted less than 100 percent of the data when it was reasonable to assume that the missing data would not significantly change the results of the analysis.

2 A “substantial” disparity is an index value of 80 or below, which is a benchmark that has been recognized by the U.S. Supreme Court as a standard in the determination of employment discrimination (see Connecticut v. Teal (Teal), 457 U.S. 440 (1982)) and has been referenced in federal guidelines for conducting disparity studies (see National Cooperative Highway Research Program Report 644: Guidelines for Conducting a Disparity and Availability Study for the Federal DBE Program, p. 49 (2010))

3 Statistical significance was conducted at a 95 percent confidence interval, which confirms that there is a five percent chance  or less that the observed differences between availability and utilization were a result of random chance.

ANECDOTAL EVIDENCE OF DISCRIMINATION

MGT gathered perceptions, experiences, and proposed suggestions to enhance the contracting experience from the business community, particularly among M/WBE firms. The examination of anecdotal evidence reveals the barriers that M/WBEs faced in participating in City procurements, including procurement process issues, certification challenges, financial obstacles, prime contractors’ behavior, competition against larger firms and other barriers. These findings provide anecdotal corroboration and illustration for the statistical evidence of disparities found by the Disparity Study.

DISPARITIES IN THE PRIVATE SECTOR

Analysis of the private sector demonstrates disparities that exist for M/WBE firms operating in the private sector within the City’s market area.

Specific findings from the research include:

• Findings from the U.S Census 2012 Survey of Business Owners (SBO) data indicate that there are substantial disparities for M/WBE firms across different business
• Findings from the 2015 Public Use Microdata Samples (PUMS) data indicate that:
  • M/WBE firms were significantly less likely than nonminority males to be self-employed.
  • If they were self-employed, M/WBE firms earned significantly less in 2015 than did self- employed non-minority

This evidence stands alongside the disparities observed in public sector contracting to illustrate the substantial inequities that continue to exist in the City’s marketplace.

4. KEY RECOMMENDATIONS

The following recommendations are based on the synthesis of MGT’s findings and do not necessarily tie to one specific finding. In developing the Disparity Study`s recommendations MGT focused on addressing policies that will strengthen the City’s efforts to increase utilization of M/WBEs in its procurement. These are presented in detail in Chapter 6 , Findings and Recommendations within the full report.

RECOMMENDATION A: PROGRAM CONTINUATION

This Disparity Study’s findings support the continuation of the City’s M/WBE program within the relevant market area. Based on the statistical analyses undertaken in the Disparity Study, there is a quantitatively significant disparity between utilization of M/WBEs and their availability in the marketplace. The findings presented in the anecdotal analysis provide additional corroboration of the barriers that M/WBEs face in participating in the City’s procurement process. Furthermore, the evidence from the private sector analysis illustrates the substantial inequities that exist in the City’s marketplace, underscoring its compelling interest in continuing to pursue remedies to address these extant gaps.

4 This was the instance where the population is too small to determine statistical significance. However, the Disparity Index value of 1.88 is so low that the statistical significance is less essential to the confirmation of the gap that exists between utilization and availability.

RECOMMENDATION B: PROGRAM EXPANSION

The results of the Disparity Study provide evidence for expansion of the current M/WBE program. The City should consider the following program changes:

• Revise the $100,000 contract cap in the Goods or Commodities
• Include Asian American firms in the Professional Services category in the M/WBE program for the purposes of crediting their utilization towards M/WBE participation
• Expand the current minority categories to include Native American

RECOMMENDATION C: GOAL SETTING

The Disparity Study provides support for the City’s current aspirational goal of 30% utilization for M/WBEs, for increases in the City’s current citywide industry-specific goals, and the establishment of new goals, such as for Asian Americans in the professional services category and Native Americans in all categories. The City should continue to set project-specific goals to further address disparities based on M/WBE availability for project scopes.

RECOMMENDATION D: PROGRAM COMPLIANCE

The City should increase efforts to ensure all contracts with M/WBE goals are subject to ongoing monitoring for subcontracting participation to make sure that prime contractors are making sufficient progress and complying with project goals.

RECOMMENDATION E: EXPANDING POLICY AND LEGAL TOOLS

The City should continue to expand its policy and legal tools to help increase M/WBE utilization, in collaboration with New York State.

RECOMMENDATION F: OUTREACH FOR M/WBES

The City should continue increasing outreach and recruitment of M/WBEs in the City’s program.

RECOMMENDATION G: TECHNICAL ASSISTANCE, CAPACITY BUILDING AND ACCESS TO CAPITAL

The City should continue its current programs that provide technical assistance, capacity building, and access to capital support. We recommend pursuing further expansion of such services and initiatives.

RECOMMENDATION H: REMOVING BARRIERS TO PARTICIPATION

The City should focus efforts on removing barriers to participation, which is important for increasing M/WBE participation in the City procurement.