Bucking the trend: Houston is expanding its affirmative-action programs. But will it help black contractors?

Brian Smith spends his days inspecting the progress on the $3.2 billion Greater Houston Waste Water Program. But he readily concedes that, had it not been for the city's affirmative-action program, his company would not be working on the five-year operation to overhaul Houston's sewer system.

Smith, an architect, began inspecting waste-water treatment plants in 1986 while working at a local firm. A year later, he formed his own company, Brian Smith Construction Inspection. After being certified, Smith began to compete for business under the city's affirmative-action program.

"Houston's affirmative-action program has been a tremendous opportunity for us," says Smith, 36. "It has helped to grow our company. Without it, I don't think we would have had the opportunity to participate on projects like the [waste-water facility]."

While affirmative-action programs are under attack across the country, Houston officials are strengthening and expanding theirs. If there's a lesson to be learned from Houston, it's that politicians respond to voters and voters alone. Houston's black community, about 28% of the city's population, has consistently demanded a fair share of the region's economic wealth and will band together to oppose anyone who threatens their participation.

Recently, Houston's Mayor Bob Lanier signed an executive order that increased the goals of the city's affirmative-action program. Lanier, a wealthy, 70-year-old white businessman, says the time is not right to eliminate or scale back affirmative action. "To pretend that we're in a world in which there is equal opportunity is just nonsense to me," says the popular, two-term mayor.

Expanding Houston's program hasn't been welcomed by all the city's residents. But few can deny that it has strengthened the region's economy by creating more taxpayers. Smith, for example, now employs 21 people. Last year, his company had revenues of $1.8 million; $1.6 million came from city contracts. This year, he expects to earn $2.2 million in revenues, with $1.9 million of that coming from city contracts.

MOVING FORWARD

In March 1995, Lanier signed an executive order that increased the city's affirmative-action goals. The mayor's order was unanimously passed by Houston's city council. Under the old goals adopted more than a decade ago, 12% of the city's construction contracts went to women- and minority-owned firms. Eight percent of the city's purchasing contracts and 19% of the professional service contracts went to women- and minority-owned firms.

In 1994, that translated to close to $100 million that was paid to Minority and Women Business Enterprises (MWBEs) by Houston - about 17% of the $603 million in city contracts. Under the new goals recommended by the mayor, those percentages increased to 17% of construction dollars, 11% of purchasing dollars and 24% of the city's professional service dollars.

It's too early to tell whether the increased goals will funnel more money to black contractors, but Houston is striving to increase minority participation, not scale it back. Women and minorities make up more than 60% of its population.

"To shut down or cut back on affirmative action would send a chilling message to those groups and the youngsters in those groups," Lanier says. "It's not uncommon for us to incur a cost to have particular groups have a stake in our economy. We do it for farmers, those in the shipbuilding industry, and those in the home-building industry. I think there is a cost to affirmative action, but it's an absolute cost we ought to bear."

Not only did Lanier increase the city's affirmative-action goals, but he also strengthened the program, which some critics had labeled weak in enforcement and compliance. Lanier included a number of other measures, such as reducing the size of contracts (when feasible) to let smaller contractors compete, speeding up payments, making performance bonds more accessible and imposing sanctions against prime contractors who try to circumvent the program by setting up "front" companies.

THE ROCKY ROAD TO

INCLUSION

In August 1984, Houston's then Mayor Kathy Whitmire and the city council passed a MWBE ordinance that established citywide goals for minority and women-owned companies. It was the first such ordinance in Texas. The goals were 7% for purchasing, 10% for construction and 16% for professional services.

Statistics for minority- and women-owned businesses participating in city contracts are not available before 1981. From 1981 to 1983, MWBEs earned a pittance of city contracts, $7.4 million, an average of $2.5 million a year. Under Whitmire's leadership, the amounts quickly rose and, from August 1984 to December 1990, more than $383.6 million (approximately 13% of city contracts) went to MWBEs.

Houston restaurateur Harlon Brooks became certified in the city's affirmative-action program in 1985, and he's benefited greatly. Today, Brooks, 51, has two barbeque restaurants at Intercontinental Airport and one at Hobby Airport, and he has a mobile food court at the George R. Brown Convention Center. This year, Brooks expects close to $5 million in sales from his eateries on city property. "There is no way I could have gotten into those airports without the city's affirmative-action program," says Brooks, who employs more than 70 people. "They helped me get financing and opened many doors." Brooks plans to open a 6,000-sq.-ft. restaurant at a city-owned facility in downtown Houston in 1996.

Over the years, Houston's affirmative-action program was criticized by just about everyone. Minorities complained that too many city contracts were going to white women and to front companies set up by majority contractors. Before leaving office, Whitmire commissioned a study on the city's affirmative-action program from predominantly black Texas Southern University. That study, released in 1992, called for an increase in goals from 12% to 17% in construction; from 8% to 11% in purchasing; and from 19% to 24% in professional services (the exact goals Lanier later pushed for).

The TSU study also recommended giving companies owned by white women lower goals than those for minorities, a suggestion that angered many white Houston residents. Aware of the TSU study, and wanting to avoid legal troubles, Lanier commissioned another study after taking office.

That study showed that African Americans received only 1.7% of the city's construction contracts. The bulk of such contracts were going to companies owned by white women and Latinos. Outraged by the lack of African American business, the local NAACP and 24 other black labor, political and business groups staged a protest in downtown Houston to pressure city officials into revamping their affirmative-action program.

Some black business owners demanded the removal of white women from the program. "Affirmative action is for people who are denied the opportunity to do business," says Richard Battle, the owner of All Service Electric Co. and past president of the Association of Minority Contractors of Houston. "White women have been denied, but they should not be lumped in with minorities. There should be a limit to how much of the goals white women get," says Battle, who began getting jobs through Houston's program a decade ago. Today, nearly half of his annual sales of $3 million comes from city contracts.

Fearing a loss of their piece of the lucrative contract pie, white women business owners mobilized and fought back, staging their own demonstration at a city council meeting. "They said we're fronts and that's not true. It's also not true that we're getting the majority of the work," says Debra Daniel, owner of DEI Construction and president of the Texas chapter of Women Construction Owners and Executives. "We put a lot of pressure on the mayor to make sure we were not removed from the program."

Trudy Berger, owner of Capital Ideas, which develops affirmative-action programs for major firms, recalls that Lanier was in a sticky predicament. "The white contractors were screaming, `We're not going to buy any increase in goals!' The only way the white contractors would ultimately agree to it was if women were not separated from the program because that gives them a lot of flexibility in how they meet those goals."

There was also pressure from the state legislature. State Rep. Ron Wilson, an African American from Houston, threatened to have the legislature stall Houston's pending $500 million package unless Lanier accepted the TSU recommendations. Lanier and Wilson hammered out a compromise, but it angered white contractors. "We had problems with the raising of the goals," explains D'Ann Maddox, executive director of the predominantly white Houston Contractors Association. "A lot of our contractors didn't feel there was the capacity to support it. It's very difficult at times for them to get bids [from minority contractorsl."

Maddox cites a majority contractor who recently sent out letters to "almost every single person" in the city's affirmative-action directory and received only two returned bids. "It's a cumbersome, tedious process," Maddox complains.

Pat Kiley, executive vice president of the Houston Chapter of the Association of General Contractors, agrees. "The guy who has done a $100,000 plumbing, air conditioning or electrical job cannot necessarily set up immediately and do a $1 million job."

After hearing the concerns of all involved, Lanier made a commitment to try to reach the TSU numbers. Construction contracts to minority- and women-owned businesses reached 17.5%, professional service contracts rose to 24% and purchasing from such firms reached 11%.

A NATIONAL

MODEL?

Not only did Lanier increase the goals of Houston's affirmative-action program but he also strengthened it, implementing sanctions against prime contractors or minority companies found guilty of acting as fronts. Contractors can lose their bid books and be barred from participating in city business for five years.

"The sanctions, we feel, are a little too strong," argues Maddox. "We know there has to be some teeth in the ordinance in order for everyone to comply, but we feel five years is too much. We asked them to change it from six months to a year. We felt that was something our contractors could live with, but they didn't agree."

Lenoria Walker, the newly appointed director of the city's affirmative-action program, supports the tough sanctions. "Something needed to happen. A few primes have abused the program in the past, and the sanctions will stop that," Walker says. "We also will now have close monitoring so that those the program was designed to benefit will get the help they need."

Lanier hopes Houston's program will become so successful that one day there will be no need for it. "When we get to the point that the problem of discrimination is solved, I would agree we won't need such programs," Lanier says. "But I don't think we're there yet."