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Three years after Houston shelved an $821,000 study of racial and ethnic disparities in city contracting, Mayor Sylvester Turner’s administration is racing to complete a do-over before he leaves office.
Houston has not completed a full study of disparities in city contracting since 2006, potentially leaving it vulnerable to lawsuits from contractors who think the program to level the playing field for minority- and women-owned businesses is tilted against them.
City officials have declined repeated requests for comment on why they abandoned the first effort. They also have refused to release the draft study itself.
Despite the lack of transparency, City Attorney Arturo Michel promised this time would be different in March remarks to the City Council. Shortly afterward, the council approved $768,000 for a second study that is supposed to be completed by the end of the year.
The city has given only a vague explanation of why it abandoned the first study: the contract’s “data and methodology” were flawed.
“That could really just mean anything,” said District A Councilmember Amy Peck, the only one around the council horseshoe to raise questions at the March meeting. “When you don’t provide the information and the details, it makes people question what really is going on.”
Government entities rely on such studies to protect themselves from legal challenges and demonstrate the importance of contracting with minority and women-owned businesses. The lack of an updated study threatens to hinder a contracting program at City Hall that’s staunchly supported by some on the council.
At every meeting, District J Councilmember Edward Pollard scrutinizes votes to pay contractors like a hawk. Have they fulfilled their promises to subcontract work to women- and minority-owned businesses? If not, Pollard is sure to speak out.
For the grandson of a civil rights icon, it is personal. Pollard said his father, who owned a small uniform company, championed the idea of contracting with black-owned businesses decades ago in the face of skeptics.
“For me, it’s a program that’s extremely necessary to ensure that all businesses, especially small, minority businesses, can have a fair share getting a piece of the pie,” Pollard said.
Setting goals
Houston launched its program to give more opportunities to minority and women contractors in 1984. The idea was simple: Allow firms that face suspicion or outright discrimination in private industry to access the contracts that local governments hand out for construction work, professional services, supplies and more.
Generally, the program works by setting a goal for prime contractors to subcontract some work to small businesses or businesses owned by women, minorities and people with disabilities. The long-term aim is to help those companies “graduate” to serving as prime contractors themselves.
According to the city’s most recent annual report, Houston paid $587 million to target firms serving as subcontractors, penciling out to 36 percent participation, which exceeds the city’s goals.
While Houston’s program has robust support from elected officials, it always has faced skeptics. In 1996 and again in 2014, a contracting firm owned by a white man filed a lawsuit against the city alleging that the program was shutting him out of work.
The courts have laid out strict requirements for opportunity programs in response to such challenges. Cities must be able to point to statistical analyses backed by data to show that minority and women-owned firms are being shortchanged.
In response to those rulings, what one academic described as a “cottage industry” has sprung up to supply cities with disparity studies. Those studies, according to a 2007 article in the academic journal Public Administration Review, “have been used almost universally as the legal support for minority contracting programs at the state and local levels.”
By the time Turner was sworn in for his first term in 2016, however, the city’s studies were getting rusty. The city had released a study of the construction industry in 2012 in response to one of the contractor’s lawsuits. The last study of the overall contracting market was issued in 2006.
The long lag came despite the fact the city code requires Houston to make “best efforts” to conduct a new disparity study every five years.
In August 2016, City Council approved a $942,000, three-year contract to conduct a new study with a sole proprietorship owned by Colette Holt, a Yale and University of Chicago-educated attorney who is one of the leading players in the small world of disparity studies. By February 2017, Holt had received her first payment and the study was in full swing.
Something appears to have soured the relationship by the time she received her last payment in February 2020, however. By then, the city had paid Holt $820,988.
Both sides refuse to discuss what happened.
Reached by phone, Holt said legal ethics prevented her from commenting on the contract, though she confirmed the relationship had come to an end.
“I have to be honest and tell you that I have a longstanding policy about not talking to the press unless I’m authorized by the client,” Holt said. “The most important thing is to support the (minority and/or women-owned business enterprise) program.”
New study
City officials are not talking, either. Marsha Murray, director of the city’s office of business opportunity, declined to be interviewed if the scrapped study would be discussed. Turner’s press office declined an interview request and did not respond to a detailed list of questions.
The city has rejected public information requests for the study and for its communications with Holt. In response to another records request, the city said it did not have a termination letter, which the contract required if the city wanted to end the agreement before the end of the three-year performance period.
The only glimmer of insight came in the form of a “frequently asked questions” document released ahead of the March council meeting.
“Despite our best efforts, we were unable to publish a study which the City could rely on to determine whether the M/WBE Program should continue in its current form; the data and methodology on which the draft study was based compromised the validity of the draft study’s findings and conclusions,” city officials wrote.
The vague explanation left Peck flummoxed. Even Pollard, the council’s most outspoken supporter of the program, said he had been given no more insight.
Whatever misgivings the city had about its study, it appears they were not shared with Harris County, which also had linked up with Colette Holt. At a July 2018 meeting, Precinct 1 Commissioner Rodney Ellis convinced his colleagues to approve $600,000 to “piggyback” off the city’s study.
In a written statement on Thursday, a county spokesperson said, “The county did not join the (City of Houston) study, the contractor did a study just for Harris County.” The city never informed the county it had any concerns about its Colette Holt study, the spokesperson said.
The county study, which was released in June 2020, provides the legal basis for a program that has boosted participation by women and minority-owned firms by 32 percent over three years, according to a July presentation to commissioners court.
At the same time, Harris County was building a new program on the basis of a Colette Holt study, Houston was going back to the drawing board. The city solicited proposals for a new contract last year. At the March 7 council meeting, council members were asked to vote on the new contract with MGT Consulting, another firm that often conducts disparity studies.
Peck asked Turner why this contract would be different.
“I understand that the scope of work for this disparity study is pretty much the same as the previous one,” she asked. “Is there confidence that this will yield usable results this time?”
Turner referred the question to Michel, the city attorney.
“What we’ll do this time is, we’ll tie the payments to the deliverables to make sure we’re getting what we need at the appropriate time. I don’t believe we did that before,” Michel said.
In fact, the city’s contract with Colette Holt included a detailed chart of 49 “deliverables” tied to city payments. The contract with Colette Holt also required the company to provide monthly progress reports, which the city has declined to release.
As the council was approving the contract with MGT Consulting, Turner told Peck he hopes the new study will be ready for council approval by the end of the year.
For now, the city is relying on 17-year-old data despite massive demographic changes and new legal challenges from conservative groups, who sense an opportunity in the wake of the Supreme Court’s decision gutting affirmative action at colleges and universities.
Pollard said he hopes the new study will be finished soon to give council members more information when it votes on contracts – and to protect the city from lawsuits.
“There is always going to be litigation over breaches of contract from vendors,” he said. “You just want to be able, as a city, be able to go into some of these legal challenges with as accurate as information as possible, so you not only protect the city, you protect the taxpayers.”
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