Office of Economic Opportunity Releases FY18 Disparity Study
City and quasi-public contracts reach parity for utilization of minority and women-owned firms

PHILADELPHIA – The City’s Office of Economic Opportunity released its Annual Disparity Study and Economic Opportunity Plan (EOP) Analysis companion reports for Fiscal Year 2018 (FY18), using data from July 2017 to June 2018. The Disparity Study examines the 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 where the contract exceeds $100,000.

The FY18 Disparity Study, performed by Philadelphia-based firms Econsult Solutions, Inc. and Milligan & Company, LLC, analyzed the inclusion of M/W/DSBEs on $1.45 billion in City and quasi-public contracts. The Study determined that 30.3 percent of this combined City and quasi-public spending went to M/W/DSBEs, down from 31.7 percent in FY17 and short of the participation goal of 35 percent. However, the value of contracts awarded to M/W/DSBE firms more than doubled from $245.3 million in FY17 to $600.5 million in FY18. Philadelphia-based M/W/DSBEs accounted for 16.7 percent of City contracts in FY18, nearly equal to 17.0 percent the year prior.

The Study showed availability of M/W/DSBE firms in FY18 to be 24.9 percent, down 1.4 percentage points compared to the prior year. When compared to M/W/DSBE availability in the Philadelphia MSA, FY18 utilization numbers yielded a disparity ratio of 1.0, which is an optimal disparity ratio and an improvement from the FY17 ratio of 0.99. Based on the report’s determination of parity between availability and utilization, the consultants recommended that the City continue its aggressive participation goals for future years – 35 percent overall, 20.4 percent for MBEs, and 16.6 percent for WBEs.

“The Disparity Study shows that Philadelphia continues to make incremental progress towards providing equal access to opportunity for minority-, women-, and disabled-owned firms. Though we’ve achieved parity regarding utilization of minority- and women-owned firms, we are not yet satisfied with where the City stands,” said Iola Harper, Deputy Commerce Director for the Office of Economic Opportunity. “Ambitious participation goals have been set over the past few years, with the expectation that it would take us some time to reach 35 percent participation. The Kenney administration remains deeply committed to inclusion, and we will do all we can to ensure that more M/W/DSBEs are engaged on City and quasi-public contracting opportunities.  We also aim to increase capacity for available M/W/DSBEs to serve in the role of prime contractors and support aspiring business owners who could help to further diversify the pool of firms available to the City and quasi-public agencies.

Several efforts have been made to increase the participation of M/W/DSBE firms, including the creation of the Emerging Vendor Program (EVP) with Rebuild, the addition of new staff and oversight committees, and growth of the OEO Registry. The Emerging Vendor Program gets owners on the path to becoming a certified minority- or woman-owned business by allowing participants to count toward diversity goals on Rebuild contracts while providing the business with expert assistance to work toward their permanent certification. Two OEO Enforcement Managers were hired in 2018 to strengthen compliance efforts. Additionally, since projects over $5 million struggle more to meet goals, the City convenes a group of stakeholders to provide oversight for M/W/DSBE inclusion for these projects.

The release of the FY18 Disparity Study comes a day after Philadelphia was selected by Citi Foundation and Living Cities to join to the City Accelerator initiative on Inclusive Procurement. The initiative provides $50,000 in financial support for cities to find innovative, effective, locally-tailored strategies to leverage public purchasing power to develop firms owned by people of color. Philadelphia’s goal in participating in the City Accelerator is to address gaps in utilization of M/W/DSBEs and significantly increase response rates to contracts by minority business enterprises, with a particular focus on local firms.

The FY18 Disparity Study showed a continued positive trend in the percentage of contract dollars with M/W/DSBEs serving in the primary position—14.5 percent in FY18, up from 12.9 percent in FY17 and 11.4 percent in FY16. Another notable trend is the rise in average contract size for M/W/DSBE primes, up from $280,000 to $300,000. Despite a significant increase in contract size for M/W/DSBE primes, this still trails the average contract value for non-M/W/DSBE primes, which remained unchanged at an average of $390,000.

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

A review of contractor compliance on 738 active and closed projects with EOPs that reported data in FY18 showed 56.6 percent of projects met or exceeded their M/W/DSBE commitment, while 87.1 percent of projects met at least 90 percent of their M/W/DSBE commitments.

The companion report on employment composition includes the distillation of 677,455 employment hours worked by various trades on construction contracts from July 1, 2017 to June 30, 2018. Overall minority workforce participation was 29.2 percent for FY18, short of the stated 40 percent goal. With current availability at 45 percent, the recommended goal for minority participation in the workforce remains at 40 percent for FY19. 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. Women accounted for just 0.5 percent of workforce participation, well below the goal of 5 percent. Although current availability is just 3.3 percent, the recommended goal for FY19 remains at 5 percent.

The FY18 Disparity Study and EOP Analysis supplements (participation and workforce) can be found online. An Executive Summary of all three reports is also available. The Office of Economic Opportunity commissions the studies on an annual basis in compliance with legislative requirements.