Majority Rules

But minority firms are gaining momentum

By Sean Ryan

Michael Woyan has a plan for minority contractors.

The executive director of the People's Action Redevelopment Coalition has developed a far-reaching initiative for new housing projects in Milwaukee. But it's not the projects themselves that hold revolutionary possibilities for the industry's minority contracting community. It's the way Woyan intends to get it done.

"We're simply meeting an underserved market — the need for affordable homeownership — and using it as an economic engine to fund urgent community needs," he said. "We're nonprofit, but we don't believe that it's enough to do good. One must do good well, and one must do good profitably."

Woyan is setting the groundwork with Milwaukee city government to purchase vacant or abandoned property to develop between 200 and 250 homes over the next few years. He expects the projects to achieve between 75 percent and 100 percent minority participation, and he wants to ensure that contractors working on his projects walk away stronger.

Since many small or starting minority builders have trouble lining up money for projects, Woyan isn't requiring them to supply a bond, and PARC is covering the material costs. The builders will also contract directly with PARC, which is pledging to pay them within two weeks of project completion, eliminating the 60- to 90-day wait that many minority contractors face when working with generals on public jobs.

Under a PARC contract, the builders only have to show up with their equipment and perform the work. When they finish, they'll have a successful project to show for their efforts.

But the initiative isn't just about building projects. It's about preparing minority contractors to succeed. With that in mind, the PARC projects will offer inner-city residents training opportunities in classes for both construction laborers and contractors, said E. Marty Payne, who has partnered with Woyan to bring PARC to fruition in Milwaukee.

All of the projects will include affordable-housing units, and PARC plans to find buyers through local community groups. But the best part of the initiative, which is privately funded with financing from State Financial Bank, is that Woyan plans to turn a profit and invest it into PARC's community partners.

Payne, who's participated in many construction-integration initiatives in Milwaukee, said PARC is trying new and more aggressive approaches because it wants to see better results.

"It's where the rubber meets the road," he said. "Things change when you think like this. If you want a different result, you have to do something different."

Striving for different results is old hat for minority contractors, and PARC's efforts are among the most recent in a long progression of trial and error. The past two decades have shown a slow evolution in the importance of minority inclusion in construction and the methods of achieving it.

The Stark Street Rowhouses, a six-unit townhouse development, is the first in a serious of projects that the People's Action Redevelopment Coalition is hoping to build in Milwaukee with minority contractors. Rendering courtesy of PARC

The formal effort began when the Federal Highway Administration and Wisconsin governments enacted participation goals on their projects in 1983. Only 211 minority contractors gained certification in Wisconsin when the program started, compared to about 900 in 2003.

Despite the increase in certifications, it's hard to play catch-up in the construction industry. It takes time to grow a large construction firm because it needs capital for heavy equipment and the money to cover project bonding and material costs. It also takes time for subcontractors, which most minority contractors are, to build the necessary relationships with generals.

And that's where the public-contracting goals were supposed to come in. They were intended to give minority contractors access to projects so they could build relationships. But in their original and most basic form, the goals didn't solve the real problems that minority contractors face.

Asking majority generals to contract with minority subs for 10 percent or 20 percent of a project is not requiring generals to create meaningful relationships or help the sub build capital. Working one isolated project is not going to significantly improve a small minority contractor's business.

The consensus, shown through the ongoing need for integration programs and the ways people are trying to improve them, is that just meeting goals isn't enough.

"We've got to realize that capacity in the African-American community has never been established," said Roy B. Evans, an attorney and participation program monitor. "What have we grown? If you grow one apple and not the apple tree, and you eat the apple, you have nothing."

The impotency of public goals is rooted in the many ways they can be avoided. Often, it's not very difficult for a general to get a good-faith waiver from the contracting agency, allowing the contractor to disregard participation goals. There also are pass-through companies — fake firms with one minority receiving checks for work that the general usually performs.

Another hurdle for minority companies is that most public-contracting goals can be met with disadvantaged-business-enterprise contractors, which include companies owned by white women. In 2003, the Wisconsin Department of Transportation sent $48.7 million in contracts to DBEs, $21.7 million of which went to firms owned by white women.

There are also instances where government agents will fabricate their contracting numbers. In December, Milwaukee County released an audit of its DBE program that found it had reported false contracting data, granted waivers on 153 of 193 nonconstruction contracts in 2003 and reported some firms as DBEs when they were not certified.

This 1896 photo of the construction of Milwaukee’s City Hall shows a half-black and half-white crew during the workday. Photo courtesy of city of milwaukee

"We have these requirements, and you have been doing things the same way for decades," said Supervisor James White, who requested the audit. "We have other areas where folks just won't do it, haven't done it and will underreport the amount of business that they do."

But government and the industry, PARC included, want to improve, or at least expand, the goal-based systems. Con-struction inclusion, in general, is moving up the priority lists of elected officials, most notably with Gov. Jim Doyle and Milwaukee Mayor Tom Barrett. Their impact can be seen in the decline in state and city waivers since their elections.

When Doyle took office in 2002, WisDOT issued 126 DBE waivers for 302 projects. In 2003, it issued 61 waivers on 323 projects. The same thing happened in Milwaukee, which built a waiver-friendly reputation among minority contractors during Mayor John Norquist's tenure. It has granted only one waiver since Barrett took office, according to Chris Martin, Milwaukee Emerging Business Enterprise Program manager.

Minority contractors in Milwaukee are responding to the new administration's message. In 2003, 38 new contractors were certified as EBEs. In 2004, 52 new firms gained certification.

"When you have help from the top, it makes any type of initiative or any type of change that you want to implement that much easier," Martin said. "[Contractors] have a great understanding that the city, as well as other government entities, is serious about making sure that we have minority contractors on these contracts."

The People's Action Redevelopment Coalition is planning to build new housing on land purchased from the city of Milwaukee on the corner of Fifth Street and Arthur Avenue. Rendering courtesy of PARC

Along with decreasing waivers, the state also is increasing its goals. The Wisconsin Housing and Economic Development Authority, which doesn't use contracting goals, is putting together a participation program for the projects it contributes to. WisDOT's Marquette Interchange reconstruction contracts are achieving the highest DBE goals the agency has ever had. It's still the same goal-based program, but the new and higher goals are turning out better results.

As government focuses more on minority contracting, so does the private sector in Milwaukee. Minority contracting advocates point most often to Wisconsin Energy Corp., which wants to achieve an 18 percent EBE goal on its $350 million Pabst City project, as a leading example.

Marquette University, which has tried to use minority firms as often as possible, is starting to look beyond a goal-based program.

"Through all of our efforts with the construction projects and all the commodity items, we were not satisfied with our results," said Jenny Alexander, Marquette's director of purchasing. "I foresee part of our commitment being how many relationships we develop, not just that we spent X amount of dollars on women and minority firms."

Recent collaborative talks between the Associated General Contractors of Greater Milwaukee and the Wisconsin Chapter of the National Association of Minority Contractors is another sign of new paths opening for minority builders. The groups are talking about creating a directory of minority contractors that AGC's generals can use and are considering a joint membership program between the AGC and NAMC.

The ideas target minority contractors' problems establishing relationships with generals.

"The whole notion of it is we are reaching out, and, correspondingly, I think the minority community is reaching out," said Mike Fabishak, AGC-GM’s chief executive officer. "We want to get up on the bully pulpit and begin to engage the industry in what we're talking about."

Nobody knows if these new initiatives will succeed where others failed. But they do show a recognition that past efforts didn't work, and something more needs to be done.

One common theme, and a sign of hope, between Woyan, Fabishak and David Berkley, executive director of NAMC, is the idea that inclusion is inevitable. Woyan points to a survey showing that by 2007, half of all new construction firms will be established by minorities.

In Milwaukee, the minority has become the majority.

"There are certain things you can't change, and one of the things you can't change is that the world is diverse," Berkley said. "Those who don't embrace it will become dinosaurs."

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