Milwaukee facing minority contracting questions

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By Beth Kevit

Conflicting opinions about whether Milwaukee should have contract set asides for specific minorities has left the city’s policymakers at a standstill.

A federal lawsuit challenging a disparity study, which the city used to justify race- and gender-specific set-asides on contracts, prompted the city to suspend those requirements, which are a part of Ordinance 370. While those requirements are suspended, the city is continuing its race- and gender-neutral program.

But Milwaukee should not let one failed ordinance be the end of its attempts to target its program at specific minority businesses, said Reggie Smith, a partner at Tallahassee, Fla.-based MGT of America Inc. MGT, a national firm that conducts disparity analyses, was not involved in Milwaukee’s study.

“The city made a decision to commission a study for a reason,” Smith said, “and I’m sure that reason didn’t go away just because of a lawsuit.”

However, some aldermen said the city has no desire to do another disparity study.

“It was worse than useless,” said Alderman Joe Dudzik. “It got us into a lawsuit, and we ended up with egg on our face.”

The Common Council and Mayor Tom Barrett on June 11 approved a lawsuit settlement that includes repealing portions of Ordinance 370. Jacksonville, Fla.-based D. Wilson Consulting Group LLC conducted the disparity study on which the ordinance was based.

D. Wilson’s listed phone number has been disconnected.

Under the race- and gender-neutral system, 25 percent of the money the city spent on construction annually was reserved for any minority business. Ordinance 370 restricted that money, setting aside 7.31 percent for companies owned by women, 5.57 percent for companies owned by African-Americans and 0.07 percent for companies owned by Asian-Americans. Any minority business could bid on the remaining 12.05 percent.

The Hispanic Chamber of Commerce of Wisconsin sued Milwaukee in May 2012, and the American Indian Chamber of Commerce of Wisconsin later joined, claiming the changes harmed its members’ businesses.

Milwaukee suspended the race- and gender-based set-asides in February during settlement talks and has returned to the 25 percent pool shared by all minority-owned businesses.

Although the city, under the terms of the settlement, cannot use the data or analysis from D. Wilson’s report, Milwaukee can hire another firm to determine whether any minority-owned businesses need an extra boost.

“It’s kind of difficult to do that,” said Alderman Ashanti Hamilton, “knowing that lawsuits could come from any direction.”

Alderman Joe Davis Sr. said he believes African-American businesses need a specific set-aside on city contracts, but he shared Hamilton’s skepticism of a second study.

“I think it’s time for us to pause,” Davis said.

Pausing would be a mistake, said Kim Hurtado, managing shareholder of Wauwatosa-based Hurtado SC. Hurtado, an attorney with experience in resolving conflicts involving disadvantaged business enterprises, was not involved in the lawsuit but said the city should remain committed to solving what often is a complicated problem.

“Statistics is messy,” she said. “It’s not this neat, tidy package.”

The settlement does not ascribe fault to D. Wilson, and Hurtado said it would be hasty to assume the company was lax or careless in examining Milwaukee’s minority business climate.

“It may be that their study pool led them to an erroneous conclusion,” she said, “but that’s not necessarily that they were negligent.”

She said if the city fails to act, it could face legal challenges from groups that received no benefit from a race-neutral program but were given a leg up by Ordinance 370.

George Lawrence, executive director and secretary of the Wisconsin chapter of the National Association of Minority Contractors, said he is sure some business owners are considering filing the challenges Hurtado predicted.

“Another can of worms could be opened as a result of this,” he said. “Only time will tell.”

Lawrence, who said the city should conduct another disparity study, declined to name any firms that might be considering lawsuits, but, he said, the race-neutral program does not help many of his members, especially African-American business owners.

If the city stands pat and does not do another study, MGT’s Smith said, Milwaukee runs the risk of failing to solve problems it already has acknowledged exist.

“I think that the problem is going to be you still are not going to be able to move the needle,” Smith said, “on the affected groups that were indicated.”

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