City and quasi-public contracts exceeded 30% participation goal, and contract size for M/W/DSBE primes increased by 23.8%

PHILADELPHIA – The City’s Office of Economic Opportunity released its Annual Disparity Study and Equal Opportunity Plan (EOP) Analysis companion reports for Fiscal Year 2016 (FY16). Fiscal Year 2016 began in July 2015 and concluded June 2016, stretching both the Kenney and Nutter administrations. The Disparity Study examines availability and utilization of minority, women, and disabled-owned enterprises (M/W/DSBEs) on City and quasi-public contracts. The accompanying EOP Analyses report on participation of M/W/DSBE firms and the construction labor force on projects that require EOPs, those where the contract exceeds $100,000.

The FY16 Disparity Study, performed by Philadelphia-based firm Econsult Solutions and Milligan & Company, analyzed the inclusion of M/W/DSBEs on $991 million in City and quasi-public contracts. The study determined that 30.7 percent of this spending went to M/W/DSBEs, up from 30.6 percent in FY15 and surpassing the 30 percent participation goal for FY16. Aggressive new participation goals for FY17, which were first established in the FY15 Disparity Study, remain the same – 35 percent overall, 20 percent for MBEs and 15 percent for WBEs.

While the utilization trends are positive, the report only showed moderate growth in the availability of M/W/DSBE firms – 25.6 percent, a 0.1 percent increase over the prior year. When compared to M/W/DSBE availability in the Philadelphia MSA, FY16 utilization numbers yielded a disparity ratio of 0.90 – an improvement from the FY15 ratio of 0.85, but still below the optimal disparity ratio of 1.0.

“Given the continued upward trend in our use of minority, women and disabled-owned firms on City and quasi-public contracts, we agree that Philadelphia must increase its goals in order to keep challenging itself and opening up more opportunities for M/W/DSBEs,” said Commerce Director Harold T. Epps. “The FY15 Disparity Study recommended increasing Philadelphia’s participation goal to 35 percent from 30 percent beginning with FY17, an objective which was set with full knowledge that it would take us some time to achieve. The Kenney administration is deeply dedicated to raising the bar for inclusion, and we plan to do all we can to ensure that more M/W/DSBEs are engaged on contracting opportunities for FY17 and beyond.”

Several efforts have been made to increase the participation of M/W/DSBE firms. In October 2016, more than 40 events aimed at growing minority businesses and increasing awareness about contracting opportunities with the City were held as part of Minority Enterprise Development (MED) Week. The Office of Economic Opportunity also convened a roundtable discussion with representatives from multiple cities to develop best practices for driving diversity and inclusion. Recently, voters approved Best Value legislation, which will open doors for Philadelphia’s minority-owned businesses.

Additionally, Rebuild is developing a model that is expected to help diversify the trades and increase the capacity of M/W/DSBE firms. These models will help Rebuild meet participation goals in the near term, but they are also a long-term investment in growing the pipeline of minority-owned businesses and a minority workforce that can benefit from future contract opportunities. The Office of Economic Opportunity is already working closely with Rebuild, and is confident their diversity model will help the landmark program increase opportunities for minority, women and disabled-owned businesses across the city.

“The FY16 Disparity Study findings show some progress towards providing equal access to opportunity for minority, women and disabled-owned firms, but we are not yet satisfied with where Philadelphia stands,” said Iola Harper, Deputy Commerce Director for the Office of Economic Opportunity. “The study also highlights important gaps in the use of these firms, and we will continue to act urgently until the targeted disparity ratio is reached. Capacity building for our available M/W/DSBEs will be a key focus of future efforts to increase minority participation and reach this goal.”

The study also identified a positive trend in the percentage of contract dollars with M/W/DSBEs serving in the primary position – 11.4 percent in FY16, up from 11.1 percent in FY15. Another notable trend, the average contract size for M/W/DSBEs primes, rose from $210,000 to $260,000 – a 23.8 percent increase. Despite the significant increase in contract size for M/W/DSBE primes, this still lags behind the value of majority primes, which average $340,000. In FY15, 13.8 percent of contracts were awarded to City-based firms, a number that increased by 1.2 percent to 15 percent in FY16.

In addition to the analysis of M/W/DSBE availability and utilization, the Disparity Study also includes two EOP Analysis companion reports focused on usage of M/W/DSBEs relative to commitment levels and employment composition on EOP projects.

A review of contractor compliance on 645 active and closed projects with EOPs that reported data in FY16 showed 56 percent of the EOP projects exceeded their M/W/DSBE participation goals, while 86 percent of the projects achieved 90 percent or more of their participation goals. Both numbers represent an increase over the previous year, when 54 percent of the EOP projects exceeded their M/W/DSBE participation goals and 84 percent of the projects achieved 90 percent or more of their participation goals.

The companion report on employment composition includes the distillation of 775,000 employment hours worked by various trades on construction contracts from July 1, 2015 to June 30, 2016. Overall minority workforce participation was 31 percent for FY16, just short of the stated 32 percent goal. With current availability at 45 percent, the recommended goal for minority participation in the workforce remains at 40 percent for FY17 and FY18. The Study recommends African Americans be targeted for 22 percent of the workforce, Hispanic and Latino Americans for 15 percent, and Asian Americans for 3 percent. Because the availability of women in the trades is currently only 0.7 percent, the recommended goal has been decreased from 7 percent to 5 percent.

The FY16 Disparity Study and EOP Analysis supplements can be found online. The Office of Economic Opportunity commissions all three studies on an annual basis in compliance with legislative requirements. For additional information on monthly meetings to educate vendors and contractors about opportunities to do business with the City, visit the event calendar on phila.gov/business.