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Houston City Council members are pushing to strengthen the city’s minority contracting program at the same time conservative advocates, emboldened by a recent U.S. Supreme Court decision, fight to end it altogether.
Supporters say the program is needed to give a fair shot to Black, Latino, women and other disadvantaged business owners long shut out of government contracting. Opponents, including a white couple who sued the city in September, claim it illegally doles out public money on the basis of race.
New Mayor John Whitmire said he wants to overhaul the program, but the city is waiting on the outcome of a long-delayed study before it acts. The result of the debate playing out in court and council chambers could have a lasting impact on Houston’s minority- and woman-owned business enterprise program, which last year was tied to $614 million in city contracts.
Denise Hamilton, a workforce development consultant who is certified to participate in the city’s program, said she can see the need for improvements to make sure it is accomplishing its goals. She hopes the end result of this moment will not be for the program to be dismantled altogether, however.
“The reality is we need to ensure that we are building capacity among minority business owners in our city, because they are the builders of our next generation,” she said.
The program
Houston’s program, which dates to 1984, is one of many such initiatives that sprouted up in big cities over the past half-century.
Over time, the city’s program has expanded to include enterprises run by minority, women, disabled, LGBTQ and small business owners. The city has set different goals for participation by such companies on different types of contracts.
On construction work, for example, contractors are supposed to aim at giving 35 percent of the work to disadvantaged subcontractors. If contractors miss those goals, they are supposed to demonstrate that they made “good faith” efforts to meet them.
The Office of Business Opportunity profiles some of the beneficiaries on its website: an engineering and construction company that completed more than $100 million in city projects over 10 years, an office product supply company that employs more than 50 people and a translation firm owned by a Peruvian immigrant that provides services to the Houston Airport System.
According to the city’s most recent annual report, Hispanic-owned businesses received 31.7 percent of the total amount awarded to firms through the program, Asian-owned businesses received 20.4 percent, Black-owned firms received 17.4 percent and companies owned by white women received 9.7 percent.
Firms must be certified by the city as MWBE-owned to participate as subcontractors.
Laura Murillo, president and CEO of the Hispanic Chamber of Commerce, noted that Hispanics make up a huge share of the area’s population – 45 percent in the city of Houston, for example.
“It absolutely is imperative that these MWBE programs exist to provide a level playing field. We know that in order to be able to create generational wealth and opportunity, we must be able to have access to contracts and capital,” she said.
Houston’s program has inspired a similar initiative in Harris County spearheaded by Precinct 1 Commissioner Rodney Ellis. He also has pushed for similar programs at other big contracting agencies, including as the Metropolitan Transit Authority, Harris Health and the Port of Houston, while criticizing those that do not take up the mantle.
That expansion is what led a frustrated couple from Spring, who felt their opportunities for contracts were dwindling, to file suit against the city and Midtown Management District, according to their lawyer.
Jerry and Theresa Thompson say that since 2006, their two landscaping companies have relied in large part on government contracts. In their lawsuit, they allege that Houston’s program is forcing them to subcontract $143,000 of work from an overall $1.3 million contract, and that they narrowly lost out on a $350,000 contract from the Midtown Management District in 2022 because their firms are not certified as minority or woman-owned.
The couple is asking a federal court to declare the city and district’s programs unconstitutional under the equal protection clause of the 14th Amendment.
Similar previous legal challenges against Houston’s program have been rejected. This time, however, the couple’s lawyer at the conservative Pacific Legal Foundation said she thinks they have the upper hand following the U.S. Supreme Court decision last year ending affirmative action at colleges and universities.
“Something just like increasing diversity, or trying to help people, that’s not a good enough reason any more for the government to use race to treat people differently,” said Erin Wilcox, the lawyer. “That set the bar pretty high, and programs like Houston’s program aren’t going to meet that high standard.”
The lawsuit before U.S. District Judge David Hittner, a Ronald Reagan appointee, is at an early stage. The judge gave the plaintiffs a legal victory on Jan. 12, however, when he denied motions from the city and management district to dismiss many of the lawsuit claims.
Speaking to City Council on Jan. 17, City Attorney Arturo Michel pointed to prior failed lawsuits. He said the city should be on firmer footing once it approves a long-delayed disparity study, a report that serves as the legal basis for minority contracting programs.
The city’s last disparity study was completed in 2006. The city scrapped a contract for a fresh study in 2020 after spending $821,000 and has refused to explain why. Former Mayor Sylvester Turner had hoped to submit a second, $768,000 study, which is being conducted by Tampa-based MGT Consulting, for approval to Council by the end of his term. He missed that deadline.
“You have to have a disparity study to show what the issue is,” Michel told Whitmire. “Ours is now stale, and we have to adopt new goals through that study, and that is what we are in the process of doing right now. So, I think we are where we need to be right now, mayor.”
Making changes?
The discussion at council was prompted by a contractor’s failure to meet its goal of subcontracting 21 percent of a $1.5 million contract for roadway reconstruction at Ellington Airport to disadvantaged businesses.
City contractors are supposed to demonstrate “good faith” efforts to meet such goals but the firm in question failed to do so, according to the Office of Business Opportunity. Still, the city was legally obligated to approve the contract because the firm had completed the work, Michel said.
District J Councilmember Edward Pollard was one of three councilmembers to vote no.
In an interview, he said the payout illustrates his longstanding concern that the city’s contracting program lacks teeth. Currently, contractors lose the opportunity to bid after failing to demonstrate good faith twice in three years, but he is interested in barring contractors after one failure.
“We need to look at our contract language with the primes, so that we actually have some leverage in court if it does go to litigation,” he said. “What I want to get away from is just automatically saying we have to vote for this, because we will get sued.”
Additionally, Pollard said he would like to tighten the schedule for payments to minority subcontractors, to give companies opportunities to file grievances when they feel they were dropped without cause and to allow minority companies with prime contracts to “self-perform” as the subcontractor meeting all of the city’s disadvantaged business goal. Currently, they can receive up to half of the goal credit.
At-large Councilmember Letitia Plummer also has raised concerns about the growing share of city funds spent through cooperative purchasing programs, which are aimed at getting better deals for local governments. Plummer says local, minority-owned firms have trouble accessing the coop programs.
Without offering specifics, Whitmire said he was open to changing the city’s contracting ordinances.
“We’ve got to do it right, and have a plan that we can perhaps even improve upon,” he said.
In a statement Thursday, a Mayor’s Office spokesperson said the city is waiting on the pending disparity study.
“It is premature for the city to talk about specific changes that may be made to the MWSBE program without receiving the final study,” Mary Benton said. “We prefer to review the recommendations that will be presented by the consultant, MGT.”
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