May 31, 2007
THE TRUE COST OF MINORITY PURCHASING AND WHO BENEFITS
Watchdog has been studying the subject of minority purchasing for some time and it has lots of ramifications. It is one of those subjects that is “politically correct” and the media is very wary of touching and reporting it.
The whole rationale for minority set asides and preferences is that in the past minorities have been discriminated against and there is a lot of truth in that statement. Therefore to make up for past discrimination, it becomes justified to set aside a certain portion of contracts and business that should go to minority firms. This was set in the City Code as shown below.
M/WBE City Code
Sec. 2-325. Minority and women business enterprise procurement program.
(a) Findings. The Memphis City Council hereby adopts the following findings:
(1) Construction, professional services and supply firms owned by M/WBEs in the Memphis
MSA have been subjected, disproportionately, to low participation levels in City of
Memphis contracts and in the Memphis private marketplace relative to their availability.
(2) The City of Memphis has been a direct and a passive participant in a system of
discrimination in the private marketplace in Memphis and, in the absence of the
establishment of certain annual and project goals as well as other procurement
strategies, would continue to be a passive participant in such a system.
(b) Statement of policy. Under all the circumstances and based on the factual predicate which
has been established after careful study and review, the City of Memphis has a compelling
interest to fully remedy the ongoing effects of past and present discrimination against African
Americans and female business owners in both the public and private sectors of its marketplace.
As a passive participant in a system of racial and gender exclusion practiced by elements of the
local construction, professional and supply industries, the City of Memphis has an affirmative duty
to dismantle such a system. This affirmative duty also entails the continuation of initiatives to
encourage the development of local small businesses, in general. Essentially, the City of
Memphis has a compelling interest to assure that public dollars derived from tax collection and
revenues are not utilized to further discriminatory practices.
However the following sections of the City Code do not permit rigid quotas.
Set asides at the City Charter level are not legal. Refer to 2-327 "Goals"
- it states in section (a) - 3, that "The annual goals provided above shall
be reviewed annually by the M/WBE advisory committee. These overall M/WBE
participation goals are only intended to be benchmarks for evaluating the
overall performance of the M/WBE program on an annual basis. These
participation goals are not and, shall not be quotas."
Section B states, "On individual contracts or projects, there is no
requirement that the above annual M/WBE goals be met."
Lastly, Section 2-331 (b) states, "Bid Preference. If upon review of the
results of the annual program goals, the city determines that it has not
achieved the individual M/WBE program goals based on contracts let or awards
made during the preceding fiscal year for women or minority business
enterprises, then the city may consider amending said ordinance to include
bid preference as maybe permitted by law."
The fact that they have not done the last part is testament that it is not a
legally defensible act.
There was a defining lawsuit that was brought by the West Tennessee Chapter of the Associated Builders and Contractors when the ABC chapter and seven local contractors sued the school board claiming the district's 1996 minority participation plan has caused the district to pay more for construction projects that have benefited only a few minority subcontractors.The school board had voted to award those contracts to contractors who had higher minority participation and a higher price tag. The two projects would have cost $411,000 more than the two low bids. The case was decided in 2000 in favor of the ABC and it cost the taxpayers (the School Board) $900,000. The board agreed not to use race or gender as criteria for awarding contracts.
It has been determined in numerous lawsuits around the country that rigid percentages of minority participation are illegal. Minority participation goals have been determined to be legal. Therefore the local government agencies have resorted to other means to achieve their goals and the Uniform Certification Agency and the ACS contract by the City of Memphis is a good example of a scheme to direct contracts to minority firms without the spotlight of open records. But what has been the result of these efforts? What has in fact happened is that a group of certain favored firms and individuals have gotten the biggest piece of the pie. What has been the cost to the taxpayers? Without complete and open records, it is hard to determine but there are some indications which we can point to.
Example #1- MLGW- Thomas Technologies versus Dell Direct.
Here is an email from a source at the MLGW describing the process of this award to Thomas over Dell. The award for "servers" was awarded to Thomas against the recommendation of the MLGW IT department. They were forced to award to Thomas after he applied pressure to the MLGW board. I can tell you for a FACT that he was not low bid. Not even close. They broke the law and the rules by awarding to him. Dell Computers was low and that's who the MLGW Network engineers recommended awarding to. They had done business with Dell direct for years.
Watchdog has posted a lot of information on Thomas Consultants in the past pointing out their successful contracts with the MLGW, the City of Memphis and the County. Here is a partial list of Thomas Consultants deals.
• MLGW for $1,974,572
• MLGW for $1,420,812
• City of Memphis thru the ACS contract for $2,351,055
• Shelby County Government for $934,856.21
The Shelby County situation is interesting in that they recently changed from their old practice of giving business to certain firms to a policy that benefits the taxpayers. Watchdog followed closely (with open records requests) asking for all bids in response to the RFP and all awards) and the result was that the purchasing department and the IT department decided to buy from the Tennessee Dell contract rather than Thomas Technologies saving 30% for the taxpayers. See the attached correspondence verifying this information.
The Herenton Administration has abused it power to award professional contracts blurring the lines between an RFP contract and a professional contract. This abuse is why any future administration should be denied the power to award professional contracts without competitive bids and we will be publishing further information on this subject in the next month.
Click here to read about Shelby County changing course on its computer bids and refusing to pay 30% extra to Thomas
THE TRUE COST OF MINORITY PURCHASING AND WHO BENEFITS
Watchdog has been studying the subject of minority purchasing for some time and it has lots of ramifications. It is one of those subjects that is “politically correct” and the media is very wary of touching and reporting it.
The whole rationale for minority set asides and preferences is that in the past minorities have been discriminated against and there is a lot of truth in that statement. Therefore to make up for past discrimination, it becomes justified to set aside a certain portion of contracts and business that should go to minority firms. This was set in the City Code as shown below.
M/WBE City Code
Sec. 2-325. Minority and women business enterprise procurement program.
(a) Findings. The Memphis City Council hereby adopts the following findings:
(1) Construction, professional services and supply firms owned by M/WBEs in the Memphis
MSA have been subjected, disproportionately, to low participation levels in City of
Memphis contracts and in the Memphis private marketplace relative to their availability.
(2) The City of Memphis has been a direct and a passive participant in a system of
discrimination in the private marketplace in Memphis and, in the absence of the
establishment of certain annual and project goals as well as other procurement
strategies, would continue to be a passive participant in such a system.
(b) Statement of policy. Under all the circumstances and based on the factual predicate which
has been established after careful study and review, the City of Memphis has a compelling
interest to fully remedy the ongoing effects of past and present discrimination against African
Americans and female business owners in both the public and private sectors of its marketplace.
As a passive participant in a system of racial and gender exclusion practiced by elements of the
local construction, professional and supply industries, the City of Memphis has an affirmative duty
to dismantle such a system. This affirmative duty also entails the continuation of initiatives to
encourage the development of local small businesses, in general. Essentially, the City of
Memphis has a compelling interest to assure that public dollars derived from tax collection and
revenues are not utilized to further discriminatory practices.
However the following sections of the City Code do not permit rigid quotas.
Set asides at the City Charter level are not legal. Refer to 2-327 "Goals"
- it states in section (a) - 3, that "The annual goals provided above shall
be reviewed annually by the M/WBE advisory committee. These overall M/WBE
participation goals are only intended to be benchmarks for evaluating the
overall performance of the M/WBE program on an annual basis. These
participation goals are not and, shall not be quotas."
Section B states, "On individual contracts or projects, there is no
requirement that the above annual M/WBE goals be met."
Lastly, Section 2-331 (b) states, "Bid Preference. If upon review of the
results of the annual program goals, the city determines that it has not
achieved the individual M/WBE program goals based on contracts let or awards
made during the preceding fiscal year for women or minority business
enterprises, then the city may consider amending said ordinance to include
bid preference as maybe permitted by law."
The fact that they have not done the last part is testament that it is not a
legally defensible act.
There was a defining lawsuit that was brought by the West Tennessee Chapter of the Associated Builders and Contractors when the ABC chapter and seven local contractors sued the school board claiming the district's 1996 minority participation plan has caused the district to pay more for construction projects that have benefited only a few minority subcontractors.The school board had voted to award those contracts to contractors who had higher minority participation and a higher price tag. The two projects would have cost $411,000 more than the two low bids. The case was decided in 2000 in favor of the ABC and it cost the taxpayers (the School Board) $900,000. The board agreed not to use race or gender as criteria for awarding contracts.
It has been determined in numerous lawsuits around the country that rigid percentages of minority participation are illegal. Minority participation goals have been determined to be legal. Therefore the local government agencies have resorted to other means to achieve their goals and the Uniform Certification Agency and the ACS contract by the City of Memphis is a good example of a scheme to direct contracts to minority firms without the spotlight of open records. But what has been the result of these efforts? What has in fact happened is that a group of certain favored firms and individuals have gotten the biggest piece of the pie. What has been the cost to the taxpayers? Without complete and open records, it is hard to determine but there are some indications which we can point to.
Example #1- MLGW- Thomas Technologies versus Dell Direct.
Here is an email from a source at the MLGW describing the process of this award to Thomas over Dell. The award for "servers" was awarded to Thomas against the recommendation of the MLGW IT department. They were forced to award to Thomas after he applied pressure to the MLGW board. I can tell you for a FACT that he was not low bid. Not even close. They broke the law and the rules by awarding to him. Dell Computers was low and that's who the MLGW Network engineers recommended awarding to. They had done business with Dell direct for years.
Watchdog has posted a lot of information on Thomas Consultants in the past pointing out their successful contracts with the MLGW, the City of Memphis and the County. Here is a partial list of Thomas Consultants deals.
• MLGW for $1,974,572
• MLGW for $1,420,812
• City of Memphis thru the ACS contract for $2,351,055
• Shelby County Government for $934,856.21
The Shelby County situation is interesting in that they recently changed from their old practice of giving business to certain firms to a policy that benefits the taxpayers. Watchdog followed closely (with open records requests) asking for all bids in response to the RFP and all awards) and the result was that the purchasing department and the IT department decided to buy from the Tennessee Dell contract rather than Thomas Technologies saving 30% for the taxpayers. See the attached correspondence verifying this information.
The Herenton Administration has abused it power to award professional contracts blurring the lines between an RFP contract and a professional contract. This abuse is why any future administration should be denied the power to award professional contracts without competitive bids and we will be publishing further information on this subject in the next month.
Click here to read about Shelby County changing course on its computer bids and refusing to pay 30% extra to Thomas
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