Roughly 35 years ago, San Antonio was among the first U.S. cities to put a program on the books to help more women and minority-owned businesses land government contracts.
While decades of data suggests the results have been an overwhelming success story in spreading the wealth of lucrative government contracts, city leaders are now scrambling to keep the progress going in a political landscape that’s grown hostile to all types of affirmative action programs.
On Thursday, the City Council voted 7-4 to amend its Small Business Economic Development Advocacy ordinance, removing the extra points minority- or women-owned small businesses used to receive in the evaluation process for discretionary contracts.
The city will keep in place its goals to award a certain percentage of contracts to small, women- and minority-owned businesses.
While critics on the council blasted the city for cowering in the face a growing state and national political fight over diversity, equity and inclusion (DEI) policies — city officials contend that San Antonio has been so successful in that work, it no longer had the legal standing to keep the points in place.
A 1989 Supreme Court decision allowed for “narrowly tailored” affirmative action measures that must be supported by “compelling interest,” and the city’s most recent disparity study showed more than half of the city’s contracts — worth about $330 million — went to 517 unique small, minority- and women-owned businesses.
“I would argue with the characterization that is in response to any perceived fear of policy changes regarding DEI,” Mayor Ron Nirenberg said ahead of Thursday’s vote on the amended SBEDA ordinance. “…The data that has been presented over time has shown that this program has worked… and so the changes that have been recommended to us today are to continue to adhere to the big original purpose: to eliminate disparities.”
Despite that assessment, Thursday’s vote comes as San Antonio is indeed making big changes to account for a world where race- and gender-conscious contracting policies may no longer be an option.
Across the state, other local governments — including Bexar County — have been sued by white business owners who claim they’ve been unfairly excluded from contracts and grants that take race and gender into account.
The cases are part of a broader effort on the part of conservative legal groups seeking to roll back affirmative action and DEI programs — something they succeeded with last summer in a landmark Supreme Court case that changed the way race can be considered for college admission.
“We are trying to implement a multitude of programming that would benefit the community, even if minority- and women- owned tools were, say, eliminated by state law or the courts,” said Assistant Director of Economic Development Michael Sindon.
He pointed to the city’s investment in an upgraded small business certification program, business mentorships, bonding assistance and other new programs introduced in the SBEDA ordinance.
“We are creating a system to not be caught flat-footed,” Sindon said.
A careful approach
Among the precautions San Antonio has taken is hiring a national procurement expert, Colette Holt, to conduct its most recent disparity study. The studies must be completed every five years to determine whether diversification efforts are still warranted.
In addition her government consulting firm in San Antonio, Holt serves as general counsel to the American Contract Compliance Association, which represents government officials responsible for minority, women and disadvantaged business initiatives.
“I’ve worked on these programs since 1989 and I’ve rarely seen a city that’s done as well as San Antonio has,” Holt told reporters after Thursday’s meeting. “It’s really great, so let’s keep it going.”
Holt agrees with the changes to the SBEDA ordinance, saying the data indicates goal-setting measures — rather than a points system — will continue to provide the desired outcomes, while also shoring up the “legal defensibility” of the program.
Even if the study had come back showing San Antonio wasn’t making progress on diversifying its contracts, however, Sindon said Holt has been among those warning the city about the growing threat of legal action. She regularly sends him examples, like a recent case against the City of Houston.
“[The points] have been looked down upon by the courts, and are probably our biggest legal risk,” Sindon said.
Unequal gains
Councilwoman Teri Castillo (D5), who represents the near West Side, was among those arguing to keep the points in place, because not all businesses have shared equally in the gains.
While white women- and Hispanic-owned businesses are reaping the most benefits from city contracts, the most recent disparity study found that businesses owned by African Americans, Asians and Native Americans were still underutilized.
“There’s still many small, minority-owned businesses that are still looking for an opportunity to be successful, and I think continuing to support what we have in place now will help continue to provide that opportunity,” Castillo said at Thursday’s council meeting.
“I don’t think we should cower,” she continued. “I do know the risk, [but]… it’s one of those fights worth fighting.”
Castillo, along with Jalen McKee-Rodriguez (D2), Melissa Cabello Havrda (D6) and Manny Pelaez (D8), voted against amending the ordinance.
Growing the toolbox
Aside from changes to race and gender-specific points, the updated ordinance includes a number of new tools the city plans to experiment with in diversifying its pools of contractors.
It will study their success throughout the next year, Sindon said.
One new tool is an “emerging businesses” designation that business owners can apply for in the certification process, and that the city can set goals for hiring.
“Just like [small businesses] have trouble competing against [large businesses], micro firms have trouble competing against larger [small businesses],” Sindon said.
“By having goals for them on smaller projects, it gets them into the game, gets them some experience,” he said. “Now they’re building capacity. Now they’re bidding on larger city projects, so it’s developing this interesting pipeline of growth that we didn’t have as much before.”
The city also put a personal net worth cap on the businesses it will certify as a “small business.”
Business groups, like the Greater San Antonio Chamber of Commerce, opposed that change. But it was intended to make sure small business incentives are reaching people who are economically disadvantaged, Sindon said.
“We feel like we’re setting up the infrastructure so that — hopefully things will still continue to be positive — but [we’re prepared] even if [the law changes] down the road,” Sindon said.
Outrunning the political tides
That strategy aligns with one of the bigger pieces of San Antonio’s overall procurement reboot, which has been a yearslong effort to simplify the contracting process across the city’s many taxpayer-funded entities.
The city, Bexar County, CPS Energy, San Antonio Water System and other public entities that spend millions on goods and services via contracts, formed the nonprofit Supply SA to identify problems in the process and streamline their procedures.
So far that effort has included absorbing a troubled agency that was keeping businesses from getting the certifications they need to compete for government contracts.
These changes started, in part, after San Antonio was chosen for a national project to help Black- and Hispanic-owned businesses share in the Biden Administration’s massive infrastructure spending.
Given the changing political landscape, however, former U.S. Secretary of Housing and Urban Development Henry Cisneros, who spearheaded Supply SA’s efforts, said at a meeting just weeks after the Nov. 5 election that San Antonio was lucky to have already set the wheels in motion for change.
“In this era where [Diversity Equity and Inclusion] is under fire and probably not a policy vehicle we can use going forward, the focus on small businesses and local businesses gets us a long way toward having economic development that reaches deep into the communities,” Cisneros said.
“And I’ll be honest with you, it’s now more important than ever.”
Reporter Tracy Idell Hamilton contributed to this report.
