Travis County Commissioners Court
May 23, 2006
Item 28
28. A. Receive briefing from colette holt regarding recommendations for improving the historically underutilized business (hub) program; and b. Approve three-month extension (modification no.2) to contract no. Ps050206re, colette holt and associates, for consulting services for hub program.
>> good morning or afternoon, judge, Commissioners, cyd grimes, Travis County purchasing agent. We are here this morning with ms. Hospital. You all have met ms. Holt before. We promised you that you would be back in may to give you an update and we got ms. Holt here, although she's had a very, very busy schedule.
>> would you like to --
>> yeah.
>> [indiscernible] you said that you would be here in may, you did it.
>> I was hoping.
>> listen when she left it was 50 degrees in chicago. [laughter]
>> cold.
>> and ms. Colette holt is a national expert on affirmative action programs, she works closely with local consultants, u.t., the city of Austin. Like cyd mentioned she did our first review in November of 2003, we welcome you and thank you for being back here to review our program again.
>> thank you for having me for letting me get back home, accommodating me. It has been quite a haul here. What we have for you this afternoon is a short powerpoint that goes over the elements of the report that we did for the city of Austin for Travis County and for capital metro. That updates the evidence available in this community on discrimination against minority and women owned firms in the construction -- and construction related professional services industry. The report for the city has been given to them and accepted. And we have drafted a new ordinance. My understanding was that it was supposed to be on last Thursday's agenda, but I think the day after tomorrow when I just said I couldn't come back here quite that fast. Hopefully the city will be passing it and that the county will also be considering some changes to your program. Whatever your pleasure is, I can go through the whole thing, if you have questions at the end or I can take them as you go, whichever you like. Let's make sure that we can get this to go here. Okay. Quick review, legal standards, I know the county attorney has briefed you on these, but it's always a good reminder that we operate in an environment where the courts make it difficult to have race and gender conscious programs and most of the local programs that have been challenged in the last several years have been struck down. We have had much better success with the federal d.o.t. Program and I致e been involved in a lot of those cases lately. Which is one reason that I have gotten behind on your project. Two elements, strong evidence of discrimination, that your remedies are narrowly tailored to that evidence. In the report we looked at both statistical and anecdotal evidence of discrimination against h.u.b.s in the Austin contracting community. In particular we looked at prior evidence of discrimination that included 1987 economic development commission review, which was done through the city. The 1993 disparity study, that was done for the city of Austin and capital metro. And then additional data that the city looked at in 2004, when it updated its programs. This included revised availability estimates for minority and women-owned firms in the Austin area as well as reviews of other Texas studies. In this report we looked first at statistical evidence of private sector disparities. This is important because communities like the county, like the city, like capital metro that have been running disadvantaged programs, you are unlikely to find large and disparities in your program. That's an artifact of the program, what you want to be sure to look at is what happens when there are no affirmative action efforts, that usually means other governments that don't have a program. We tried to get some information from some of the other local governments, but were unsuccessful, as well as what happens in the private sector. So the -- the -- the nutshell version of what we found is that we found large and statistically significant disparities for blacks, they were largely negative and statistically significant for hispanics, negative and statistically significant for asian americans, largely negative and statistically significant for native americans and a little footnote there, that was a relatively small population to study. So it's difficult to perform much statistical testing. Then also negative and statistically significant for white females. What that means is that the county has pretty solid statistical evidence that out in the private sector where there are no h.u.b. Goals, there is no affirmative action by and large, that minorities and white women are experiencing large and statistically significant disparities in their opportunities to do business. We also conducted several focus groups with local business owners in Austin, both hubs and non-hubs, we asked them about their business experience, what's it like to do business in this community, what's it like to go and get loans, bonds, the kinds of things that are necessary for entrepreneurial success in the construction industry as well as what's it like to do business with each of the governments. We certainly found much evidence of discrimination in obtaining public sector contracts, people reported stereotypical treatment and unprofessional treatment, jobsite and work site harassment, diminished growth opportunities as well as contract specifications if they found to be difficult and often very burdensome. Contracts were large, required large bonds, payment performance bonds and those types of things. We also asked them about discrimination complaints. And an overwhelmingly people said well we would like to complain, but we are afraid that we are going to be retaliated against. Not so much by the contracting entity but by the prime majority male contractors. So they were very reluctant to complain, some people had complained and had not found that to be a particular successful route to new business opportunities. They also talked about problems in obtaining private sector contracts and finally in particular about access to capital. The reason I stress that is because this is the type of evidence that some courts have found very persuasive because if you can't get a loan on a fair basis, you are going to never be competitive, especially in an industry like construction where the margins are so tight and where of course things are done on a low bid basis. If for example a hub contractor is going to pay more for his bond, it's going to be difficult for him to be competitive and be the otherwise lowest responsible bidder. We also looked in particular at the county's program. This is what people told us. They said that overall they found the h.u.b. Program was very useful. Everyone was very clear that without these types of affirmative action programs they will obtain little or no business. Where there aren't goals, there is just not opportunity. But that said, they said they often thought they got insufficient information from prime contractors, often they were called very late in the bidding process, they thought that the county needed to better enforce good faith efforts to meet goals, they also reported slow payment from prime contractors and having to chase down their money and being unsure of when and if the prime contractor had been paid by the county, and then finally they complained about things like substitutions on the jobsite, they were originally listed but they weren't used, so they suggested that -- that there be an additional monitoring h.u.b. Participation. As I said, they said that the -- that the programs were critical to their success. And in general, the non-h.u.b. Contractors did support the program. One of the things that continues to -- to amaze and -- and it's so positive about Austin in comparison to many, many of my other clients, is that there is general community consensus here that fairness and equal opportunity are important goals for government agencies. It's not true everywhere. So it is refreshing that the prime contractors by and large supported the program. They just urged that the goals are realistic. That they not be set on high that they couldn't be met excuse me and some talked about what they thought was the low availability of qualified hubs and suggested perhaps that the county, the city and the other agencies need to do more to help the hubs become competitive and to increase their capacity to do work. Finally, let's turn to the recommendations that -- that I致e made and we'll -- working with cyd and sylvia and others, we are going to try to put those into some documents and -- and provide those for your review in the future. Certainly one thing that the county might want to think about is gathering some additional evidence to meet strict scrutiny. The availability estimate that's we used for this statistical testing were gathered for the city of Austin. They are getting a bit long in the tooth now. How old is too old? I don't know. There is no court case that says two years is fine, five years is too long. But certainly, you know, data that's pushing five, six years old would -- could probably stand to be updated. And then two additional surveys that -- that everybody chose not to do this time. You could do in the future, one is to survey hubs and non-hubs about their business experiences. This provides statistical information about -- about anecdotal experiences as well as surveys on access to credit. Those two surveys have been found in a couple of cases, including the case fweps the city of -- against the city of chicago, to have been pivotal in the court's finding that there was sufficient evidence to continue to have a minority women business enterprise program. Then finally, some additional things to do, adopt some new race and gender neutral measures, the federal courts do require that an agency use race and gender neutral approaches to the greatest possible extend. You don't have to try them all and prove that they fail. But you definitely need to consider them and try them where you can. Certainly one of the most important is contract unbundling. They talk about they are too large to bid on and manage. As a very, very small business person myself, that really can be a barrier. Certainly review bonding and insurance requirements does the county in fact ask for more information than it may need. There tends to be in government sort of a routine amount of insurance to be asked for, I get these all of the time, where they want $5 million worth of coverage on a $50 million contract, is that -- that is a barrier. It's also a cost by the way, of course, to the agency. Another thing to think about, this is a more -- large undertaking would be to think about a small business set aside program. The courts really do not let us do race and gender based set asides anymore. People use that term, but it's inaccurate. However, a -- a program that sets aside contracts for bidding by small firms only, it would be open to all small firms not just those owned by historically under utilized individuals does not have to meet the same legal tests and some places have had pretty good luck with this. You have to --
>> what -- [indiscernible] when you said set aside, I知 envisions what you're saying. But in my mind I知 looking at different groups, small businesses, rather, that want to do business and then -- then thinking about the amount of money, is there a set amount of money that we can look at as far as what are we considering being a small set aside amount of money. What would that -- what would be the minimum in your opinion as far as that amount of money for the set aside program.
>> well, there's two components really to what you are asking. The first is what is a small business. How would you define that.
>> right.
>> then the second is what types of contracts would you put into a small business set aside. As to the latter, I just can't give you a figure off the top of my head. One of the things that we would want to look at along with cyd and others is, you know, the -- kind of a [indiscernible] some places a small contract is under a million dollars, some places that's way too high. So we would have to make some judgments about what you thought would be an appropriate -- appropriate size in order to put into the set aside program. That might vary during the course of the year, if you had a lot of contracts that are big, you might want to break them up more or vice versa, so I think that you would kind of have to feel your way along there.
>> probably still have a -- entrepreneur coachment of also connect into your funding requirements also.
>> sure, absolutely.
>> it would be a part of whatever -- [indiscernible] as far as bonding which is another requirements.
>> that's absolutely correct. If you -- let's say that you had a $500,000 contract, obviously that's easier for a small firm to bond than a $5 million contract. But it still may be beyond the reach of some of the small firms. So I think we kind of have to experiment. People haven't tried in here.
>> I understand.
>> we might have to feel our way a little bit, I think.
>> okay.
>> part of that, too, is to think about things like a link deposit program that help to finance these firms. Some places have them. The way they work basically is that the county's depository institutions would agree to make loans to qualified small firms using the county's contracts as collateral. Often now because they aren't assignable that can be a problem. The bank gets paid first or in a joint check with the borrower so they know that they are going to get their money, but some places have had pretty good luck with linked deposits. Protege mentor was something that the hubs mentioned, maybe working with larger firms to help them do things. Not just how to run a particular contract but how to be better business people. Have good safety programs, risk management. What kind of accounting controls do you need, things that are often difficult for small firms to learn except perhaps through negative experience.
>> are we able to identify the firms --
>> I can certainly go back to the transcripts and say that and I know that sylvia had some elements of that with one of the other agencies here, so it may just be a question about beefing that up and seeing that -- where there might be interested, but certainly particularly on the hard bit construction side, interested in that.
>> we have had a hard time getting firms to participate, right? Last time didn't we just have five or six, rather than 20 or 30?
>> mentor protege.
>> I think that in association with the associated general contractors and --
>> I sit on the board at cmpn, a local non-profit. We've had challenges in getting proteges and getting teams together, what we did was put a statement in -- we think they are documents, contract whether they are minority or not, if they are interested in being a part of that, we refer them to --
>> how many proteges do we have today?
>> I think as far as teams, 10. With cnpi.
>> I thought they mentioned over the several last year, they had done about 25. Did I just dream that?
>> I thought -- that report last year, I thought --
>> active proteges today.
>> I can't tell you today.
>> small number, isn't it?
>> yes. 6 to tentative.
>> okay.
>> it's not our program. It's the --
>> I知 not intending it to be a trick question [laughter]
>> it's a good idea. I知 just -- what I知 wondering is are we able to get out and get proteges really interested. Those who articulate support and those who will join us and be served.
>> well, one of the things that makes a big difference, you need to give some people incentives to do it. If it's just a nice idea, there will be a few that are willing. By and large people are in business they are busy. One of the things that the state d.o.t.'s have found helps the mentor protege program to be more effective is for example giving them credit towards meeting big goals for participating in the program. Then they have got some real incentive to want to do it. So I think if we are going to try to increase the number we united to find out just what might get the mentors seem to be the ones that we are missing, the minority firms may be interested. The other thing is matching up people by size. Mid sized non-minority firm isn't real excited about mentoring. Five years they may come take their work away. It would be hard pressed to ask somebody to do that. Get a small firm and pair them up with somebody a generation before they are even in that league. So you have got to kind of be a little bit more creative about how to do it. Another thing people suggested was an internship program. This would really be for the county itself to take -- to take college students or perhaps even high school students interested in the construction industry and maybe having them come and spend the summer in the county offices, trail behind the project managers, show these young minority and white females what the industry is about, get them interested in it. It's difficult for people to want to do something that they have never seen, they don't know anything about. Trying to build those kinds of relationships perhaps with u.t. As well. Then a couple of other things that are less interesting to the firms but -- but the program managers and lawyers are really important, first is creating some control contracts. One of the things that the county I think wants to be able to say if it ever were challenged look when we put out contracts without goals, this is what happens. If your experience is anything like every place else, the minute the goals aren't, there the participation will plummet. It would be nice to be able to prove that ininstead of just assert it. It's often difficult to understand why a contract might go out without goals where there otherwise would have been. I think the people here are pretty sophisticated about the legal issues, that can be explained. The second thing is ensure bidder non-discrimination. The courts like this, let's make sure that we have a process so that if someone is discriminated against, they know what to do, who to go up to, there will be a process to manage that complaint. Then finally complete contract and vendor data, I know that sylvia and cyd have been working on this, because one of the things that will make a full-fledged disparity study difficult and expensive is going to be the lack of full and complete subcontractor records for non-hub firms. This is true everywhere. For the city of Austin, back in 2004 we actually had to go and sample and go back to all of the project managers and ask them to go through their paper files to try to pull this together. Which was expensive and very time consuming. Then finally, revising the ordinance for the program policies, we are going to work on that. He want to try to set some contract specific goals. Let's look at the availability. For that particular project to make sure that the goal really fits that. Random audits of hub utilization, make sure that the contractors are in fact doing what they tell you that they are doing. To the extent that we can, strengthen the criteria for good faith efforts which might relate back to some mentor protege ideas. Increase monitoring of contract compliance. Develop some programs success measures, what do we mean by a successful program? Is it the number of contracts that we give out, is it the number of prime contracts, subcontracts, dollars, what is it that we really want to measure? Here again developing guidelines for program as well as discrimination, complaint procedures, then have a machine dated review and sunset. Doesn't mean that the program has to go away, but the courts really are adamant that these programs be reviewed regularly. As most recently in the university of michigan case, justice o'connor reminded everybody that you would have to review these programs. [indiscernible] go away, we need to be sure that we do that. We are working on this last piece now.
>> so what's the next step for -- for you and this next step for Travis County?
>> well, I think the next step for me is to finish going through this mountain of documents that sylvia e-mailed me, making changes, sending them back, coming to some consensus about it. Then presenting those. I知 not quite sure what your process is to change all of that. Then I suppose the question is at some point going forward in the next year or two, who you want to start doing some more evidence gathering. The city is thinking about that as well. Capital metro I think is thinking about it. Federal transit administration unlikely to allow them to continue to use the 1994 study in perpetuity. Eventually they are going to have to do something. That might be a chance for all of the agencies to come together again. There's some significant cost savings in doing that. Then go forward.
>> let's make sure that the court understands, middle mill while the city still is in a different position that we are, we have some catching up to do to update, participate with the city to get to a point where we would have, meet that constitutional scrutiny. I have asked you this before, I have forgot ten the numbers, they change over time, but what too you think the current estimate is to meet the -- the strict [indiscernible] requirements, use goals, race specific, race based goals.
>> well, as to what it would cost you to if do a full-fledged disparity study. The good news is that you have got significant pieces of it now. So what we need to do, we would need to go back and do customized availability estimates, anecdotal data collection, surveys, hard to guess, maybe 200,000, that might be on the low side. Sort of depends. If you partnered with the city for example, part of what costs so much is to buy this dunn & bradstreet data. If you are going to buy it, it will be once. Buy it twice, no reason, that's a cost that could be spent. Business experience, credit surveys, about $75,000, if you split them, now you are down in some reasonable range. It's hard to say, but you have got a big piece of this, to be quite candid about it. The county paid for the anecdotal portion, the city paid for the statistical portion. You guys have it. They said we have it here, you might as well take it, it's public information. They kind of got a good deal there, I think.
>> any opportunity for other opportunities in the city -- other than city and county to participate financially, share the benefits of that, is that also still a possibility for those willing to cost share.
>> oh, sure. I urge people to do it all the time. I will be candid, what tends to be the stumbling block to get everybody organized, which I really can't quite do on my end, sometimes they are turf battles, personality conflict. It's a bigger group to manage, but certainly can be done. The school district is a possibility. Capital metro is a possibility. The state is somewhere in the throes of doing a disparity study, that's been going on for about a year and a half. Every time I ask anybody about it, nobody seems to know anything. I知 not sure what's going on there. Any of the other local agencies that would be interested in past operating would be -- the more you have the cheaper it gets. I will give you example, the city of chicago is going to do one, involves nine agencies, the total cost of a million six, but with all of these agencies the city has a good chunk of it. We got, for example, cook county down to 250,000. This is a county that's got 8 million people in it. That's not a bad cost. That's why I say when david asks how much it will cost, sort of depends who is in, who is out, what everybody wants to do.
>> we are asked to extend the contract for three months, somebody is working on that amendment?
>> yes. How are we in terms of funding the contract money still available.
>> I haven't spent very much of your money actually. That's the good news.
>> we have funding, about 18,000 left, out of the 25 that you gave us.
>> let me ask you a couple of thing. What grade a through f, a being honor roll kids, a through f, what grade would you give Travis County for its hub program?
>> oh, goodness, well that's kind of a hard question.
>> [indiscernible]
>> right. A person about to sign your contract extension. Let me say this, one thing I certainly think that gets an a for improvement is the amount of resources and support given to the program. When I first came and talked to you, it was not quite a one woman band, but she didn't have near enough resources to get the scob done. That has changed a lot. So for providing support and commitment counting it today, data collection, well, you are about to think about -- about getting a new program and we have talked about what some of them are out there. I guess that I would give that a b. Overall certainly the hub firms thought that the county's program would -- was better than some. They don't -- it's not as stringent at the federal program, we try to explain to them, they have the u.s. Congress to back them up. So I guess that I would say overall it would probably be b, b plus, we need some improvement but major, major, major progress.
>> so that the reason that we get the award that we get. We get the awards because we have been at this for 10 years. We were the first county to officially adopt a hub program. We've partnered with , you know, I致e been to waco to u.s. Congressman's hub fairs and helped spread the word and sylvia worked with other counties and so -- so we are working hard to make it work. The law is our stumbling block. But I think that we have benefited from -- from the city of Austin, capital metro and some of the -- of the entities that do have the law, I think that we have benefited from that.
>> I guess where I am going, I would eventually like to know where to -- to end it or -- or jump off, get you all in the right direction, maybe after we spend $25,000 we will be there, you know.
>> hopefully not that much, really.
>> but I guess the other thing is that -- I知 a little concerned that -- that I don't know how long that we thought that our contract last April was going to take, but I know that we appropriated $25,000 and to date we have only been billed $6,000 and maybe there's -- maybe there's another billing to come or whatever. But I am a little concerned that we -- that we appropriate the money to do this thing and I think that we are doing it because we are doing the right thing. I mean, how -- if we do this three months, does that mean that -- if we do the extension three months, that we are going to spend $18,000 in three months.
>> what I talked to glen about this morning was I really would like to see spent the last bit of money spent on -- is on the legal language that we can put in our contracts to hold people to not substitute firms when they tell us they are going to use a certain hub firm, language in there that says that they will pay on time, language that strengthens that they will make a good faith effort to contract hub firms. That's where I would like to see the money spent is on the contractual language that -- that holds them to the contracts.
>> do we not have the ability to do that in house?
>> we have to some extent that it was -- it was wonderful to be able to partner with the kind of expertise that -- that we had, though.
>> that's what colette brought.
>> across the nation she's watching -- [multiple voices] [indiscernible]
>> she's one of the few I think you mentioned earlier were, you know, successfully back a challenge.
>> let me say this, too, because a large part of this is on my shoulders. Took long inventory do the report than we anticipated. Had some issues with the data, with the city, no -- no need to bother to go into them all. So until you got the report you adopt the report, we don't really have -- we didn't have a basis on which to strengthen anything. This really provides us with the foundation, more construction language, we can finish the how the, paint it, put in the light fixtures, turn it on, you can move in. In terms of how much time it will take, I don't really anticipate that it's going to take the reminder of the total contract amount. My expectation is to send things off to cyd and sylvia, they will send them off to the county attorney's office. One thing that I always say, david heard me say it, I don't have a Texas law license, I知 not about to give you an opinion on what might be permissible under state law. But I can certainly give you national best practices about what to do now that you have more evidence to support your program, then you can go about enforcing it more -- more vigorously. So there is a -- there is an interplay there between what you can put in the contracts, what we could support so that they are not coming in here, telling you you just got yours sued, which isn't going to do the hubs any good. Some of this is on me, we've had three big trials on these affirmative action cases in the last nine months, it's been a swamp. I apologize for that. All in favor? That passes by unanimous vote. See you soon.
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Last Modified:
Wednesday, May 23, 2006 1:12 PM