The City of Charlotte Update Disparity Study

1. The City of Charlotte Update Disparity Study FINAL REPORT PRESENTATION October 11, 2011 Presented to the Economic Development Committee Submitted by:

2. Legal Guidelines and Methodology • Croson • Strict Scrutiny Standard of Review • There must be a compelling interest, such as remedying the present effects of past discrimination • Compelling interest can be found in private sector discrimination if linked to the public sector • Under Narrow Tailoring an Agency • Must employ and evaluate race neutral efforts first • Limit the burden on third parties • Set goals related to availability • Ensure program flexibility

3. Legal Guidelines – (cont.) In H.B. Rowe Decision (2010) Fourth Circuit accepted MGT’s approach on: (involved NCDOT) • Focused on subcontracting disparity because there was no prime contracting M/WBE program • Anecdotal: The survey in the 2004 study exposed an informal, racially exclusive network that systematically disadvantaged minority subcontractors • Program suspension: the fall in M/WBE subcontractor utilization of 38 percent when SBE program substituted for M/WBE program is evidence of discrimination

4. MGT Conclusions • To implement a race- and gender-based program, a City must demonstrate: • Statistical data showing disparity • Anecdotal evidence of discrimination • Race and gender neutral program not effective • This study shows: • Statistical disparity in City contracting • Insufficient anecdotal evidence • SBO Program has been effective

5. 2011 Results – African Americans

6. Anecdotal Results – African American Total of 168 African American Respondents • 41% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program • 33.4% of firms stated that there is an informal network that excluded their firms • 25% of firms were included for good faith efforts then dropped after contract award • 3.6% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects • 7.7% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

7. 2003 v. 2011 African American Utilization Comparison

8. 2011 Results – Asian Americans

9. Anecdotal Results – Asian American Total of 49 Asian American Respondents • 26.5% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program • 14.2% of firms stated that there is an informal network that excluded their firms • 10.2% of firms were included for good faith efforts then dropped after contract award • 4.1% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects • 4.1% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

10. 2003 v. 2011 Asian American Utilization Comparison

11. 2011 Results – Hispanic Americans

12. Anecdotal Results – Hispanic American Total of 49 Hispanic American Respondents • 28.6% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program • 20.4% of firms stated that there is an informal network that excluded their firms • 16.3% of firms were included for good faith efforts then dropped after contract award • 0% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects • 2.0% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

13. 2003 v. 2011 Hispanic American Utilization Comparison

14. 2011 Results – Native Americans *Using custom census measure of availability

15. Anecdotal Results – Native American Total of 19 Native American Respondents • 31.6% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program • 15.8% of firms stated that there is an informal network that excluded their firms • 15.8% of firms were included for good faith efforts then dropped after contract award • 0% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects • 0% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

16. 2003 v. 2011 Native American Utilization Comparison

17. 2011 Results – Nonminority Women

18. Anecdotal Results – Nonminority Women Total of 117 Nonminority Women Respondents • 27.3% of firms stated they were used when SBE goals applied, but seldom or never, solicited for other contracts outside of the SBO Program • 23.1% of firms stated that there is an informal network that excluded their firms • 15.4% of firms were included for good faith efforts then dropped after contract award • 3.4% of firms experienced discrimination as a subcontractor bidding/proposing Charlotte projects • 5.1% of firms experienced discrimination as a prime contractor bidding/proposing Charlotte projects

19. 2003 v. 2011 Nonminority Women Utilization Comparison

20. 2003 v. 2011 Disparity Study ComparisonM/WBE Utilization Dollars-Subcontracting • Spending with M/WBE construction subcontractors increased from $23.2 million to $62.1 million, a 166.5 percent increase. • WBE construction subcontractor utilization increased 268.6 percent. • MBE construction subcontractor utilization increased 67.5 percent. • M/WBE construction subcontracting as a percentage of the total prime contracts tripled. • The percentage of construction subcontract dollars received by M/WBEs increased from 7.7 percent to 28.9 percent • The number of M/WBE construction subcontractors increased 27.2 percent. • Spending with WBE A&E subcontractors increased 118.5 percent. • MBE A&E subcontractor utilization increased 148.0 percent. • The number of M/WBE A&E subconsultants utilized increased 82.0 percent.

21. Disparity Findings at Sub Level – M/WBE Construction Overutilization = > 100.00 Substantial Disparity = < 80.00

22. Disparity Findings at Sub Level – M/WBE Architecture & Engineering Overutilization = > 100.00 Substantial Disparity = < 80.00

23. Subcontractor Utilization: 2011 Disparity Study Compared to 2003 Disparity Study WBE • WBE construction subcontractor utilization increased 268.6% • WBE A&E subconsultant utilization increased 118.5% MBE • MBE construction subcontractor utilization increased 67.5% • MBE A&E subconsultant utilization increased 148.0% • M/WBE construction subcontracting as a percentage of the total prime contracts tripled

24. Private Sector M/WBE Construction Subcontractor Utilization • MBE subcontractors were issued permits for projects totaling $22.2 million (1.20%). • WBE subcontractors received $33.5 million in subcontracting projects (1.82 %). • This lack of use of M/WBE subcontractors in the absence of SBE subcontracting goals was consistent with what M/WBEs stated in the survey.

25. Disparity Findings at Prime Level – M/WBE Construction

26. Disparity Findings at Prime Level – M/WBE A&E Overutilization = > 100.00 Substantial Disparity = < 80.00

27. Disparity Findings at Prime Level – M/WBE Professional Services Overutilization = > 100.00 Substantial Disparity = < 80.00

28. Disparity Findings at Prime Level – M/WBE Other Services Overutilization = > 100.00 Substantial Disparity = < 80.00

29. Disparity Findings at Prime Level – M/WBE Goods & Supplies Overutilization = > 100.00 Substantial Disparity = < 80.00

30. MGT Conclusions This study finds disparity in City contracting. However, evidence does not support the restoration of race- and gender-conscious subcontracting goals because: • SBO Program has been more effective in M/WBE utilization than the previous M/WBE Program • SBO Program as effective as other M/WBE programs in the Charlotte area • The anecdotal evidence of racial exclusion was less in this study than the evidence in the H.B.Rowe case

31. Key Recommendations Options to Consider: • Raise the informal threshold for construction • Vendor rotation • Mandatory joint ventures on large construction projects • Include SBE subcontracting goals in categories other than construction and A&E • Include RFP provision requiring proposers to report prior M/WBE utilization and future strategy • Raise the personal net worth threshold

32. Questions