San Jose wants to boost opportunities for minority and women-owned businesses

As minority businesses struggle to survive during the pandemic, the San Jose City Council is amplifying its efforts to ensure smaller, BIPOC, LGBTQ and women-owned businesses get a fair shot at competing for government contracts.

The San Jose City Council voted unanimously Jan 12. to advance a proposal from Vice Mayor Chappie Jones and Councilmember Sylvia Arenas to evaluate disparities in contracting opportunities for minority businesses, an effort to figure out which groups need more support.

Jones said Proposition 16 — a November ballot measure that sought to overturn California’s ban on affirmative action — could have helped the city prioritize minority and women-owned businesses. Since the measure failed, Jones said a disparity study could provide data to illustrate the need for supporting these businesses.

“This tool assists in determining through extensive research whether there is discrimination in government procurement and contracting processes,” said Walter Wilson, founder and CEO of the Minority Business Consortium. “Given the frailty of small businesses impacted by COVID-19, the importance of economic and economic disparity study for the city of San Jose is more important now than ever.”

The Minority Business Consortium has long explored how minority businesses can land more government contracts. The organization recently helped the city of Santa Clara conduct a similar disparity study, according to Wilson.

The city offers a variety of contract jobs local businesses can bid on, including offers to pour concrete, provide automobile parts or training for city staff — but often, these contracts are awarded to larger businesses, putting smaller ones at a disadvantage.

Last year, the city awarded $191 million in construction contracts.

Local businesses were awarded 28% of the dollars and small businesses were awarded a mere 6%. San Jose also awarded $72 million in consulting contracts. Local businesses received 82% of the dollars and small businesses were awarded 33%, according to David French, division manager for the Department of Public Works.

Based on a recommendation from the Small Business Advisory Task Force — a coalition of local business leaders — lawmakers also approved breaking up opportunities into smaller public works contracts to increase the supply of opportunities for small businesses.

“We know that COVID won’t last forever,” said Dennis King, the task force’s vice chair. “So it raises the question about when it’s gone, to what extent can those of us that have shared the misery of COVID — to what extent can we share in the times of prosperity?”

The council also approved King’s suggestion to create a matchmaking or mentorship program that would help minority businesses network and navigate challenges.

Jesus Flores, president of the Latino Business Foundation Silicon Valley, applauded City Hall’s efforts to boost minority-owned businesses.

In East San Jose, Flores said 30% of small businesses belong to undocumented individuals and almost 60% of small businesses are owned by women — many of whom are women of color.

He said the majority of businesses he represents in San Jose have five or six employees. The problem is, he said, many of these businesses don’t know about city contracts or how to compete for them.

“Those businesses are the ones that need a lot of support at this time,” Flores said, “because they don’t have the resources that other businesses have.”

San Jose’s public works department recently launched programs to waive certain steps of the contracting process for small businesses.

Duran Construction Group, a small local business, was among the participants.

“We’re anxiously awaiting to see what turns out,” said owner Ray Duran. “I’m happy to say that we are hopefully one of the 26th contractors that have been pre-approved … it’s given us a great opportunity for someone like us.”

San Jose has launched other programs to address business inequality in the past. One such program established in 1983 obligated the city to reach out to at least four minority or women-owned businesses when seeking construction contracts over $50,000.

San Jose’s inclusionary business program continued until 2000 until the California Supreme Court determined that the city gave “unlawful preferences” to minority- and women-owned firms on subcontracts in the case Hi-Voltage Wire Works, Inc. v. City of San Jose — a violation of California’s ban on affirmative action.

Jones and Arenas said the red tape discouraged minority and women-owned businesses from getting contracts.

The effect trickled down to Oakland, San Diego and San Francisco whose similar programs were squashed, according to Jones’ and Arenas’  memo. Ending the program caused a $20 million annual loss for minority and women-owned businesses in San Jose, according to estimates.

In the fiscal year 2018-2019, contract awards for these businesses were at a 5-year low so San Jose began prioritizing small businesses for construction contracts.

Legal challenges still prevent San Jose from making contract decisions based on race, sex, military status or sexual orientation. But Arenas and Jones assert that a study may help the city revise procedures to help disadvantaged businesses get a leg up.

“Given all that’s been happening over the past year and the struggles that are disadvantaged businesses have been having, it’s our responsibility to do more,” Jones said.

To see the city’s contract job offerings, visit its bidding page.

Contact Carly Wipf at [email protected] or follow @CarlyChristineW on Twitter.