Minority-, women-owned firms may have lost out on Chicago’s coronavirus contracts

Minority- and woman-owned and operated companies may have lost out on city business as Chicago waited weeks to learn whether enforcing its affirmative-action contracts program would jeopardize federal reimbursements for millions of dollars in COVID-19 spending.

In early April, city officials asked the Federal Emergency Management Agency whether Chicago was complying with federal contract rules about reimbursement.

“We started sounding the alarm,” the mayor’s office says.

Federal rules ban preferences for contractors being required to be from a particular place, which is intended to prevent corruption.

But Chicago’s MBE/WBE program, which stands for minority-business enterprises and women’s-business enterprises — has such a “local preference.” That means those businesses must be based in Cook County or surrounding counties to qualify.

On Wednesday, FEMA waived its ban on reimbursing cities that have a local preference and let Chicago apply its MBE/WBE program to first-time city vendors with COVID-19 contracts.

City officials say most of the funds to be spent on the COVID response involve companies with existing contracts with the city — and which already have MBE/WBE partners. FEMA said those contracts were OK.

The problem involved first-time contractors. Some of them already have finished the work under their contracts, so there’s no possibility of MBE/WBE involvement. And companies like AirGas, which supplies oxygen to the field hospital at McCormick Place, don’t have subcontracting opportunities, officials say.

Now, City Hall is asking other first-time vendors to amend their contracts to include certified MBE/WBE businesses.

“While these are unprecedented times, this administration has remained committed to ensuring Chicago’s minority- and women-owned businesses continue to participate, grow, and thrive in public contracts awarded by the city,” the mayor’s office says.

Mark O’Mara, of Haggerty Consulting in Evanston, says Chicago’s consideration of MBE/WBE businesses in awarding contracts is one of many issues the city and FEMA have been working out.

“FEMA and the state and the city are in constant coordination throughout this entire process on many different levels, from the executive level to the rubber-meets-the-road response teams,” says O’Mara, whose company advises municipalities and businesses on dealing with FEMA.

He says FEMA’s contract rules are complicated, and getting reimbursements from FEMA is “an administratively burdensome process that is typically measured in months to years, not weeks to months.”

Reimbursement is a “marathon, not a sprint,” O’Mara says.

City officials say they don’t think the three-week delay in getting an answer from the federal government hurt minority- and woman-owned businesses seeking COVID-related contracts and subcontracts.

They say companies already doing business with the city before the pandemic — such as F H Paschen, a Chicago construction company helping set up the McCormick Place field hospital with a $9.9 million contract — were following the city’s affirmative-action rules to get COVID-19 contracts. It sets aside 30 percent of its work for MBE/WBE subcontractors.

A week ago, City Hall said more than $65 million was budgeted for the field hospital, sheltering people and buying personal protective equipment — a figure that’s rapidly rising.

It’s impossible to say how much of that business minority and female contractors have potentially lost because of the delay in Chicago getting the approval from FEMA.

The city’s goal under its affirmative-action program is to award 25 percent of non-construction contracts to MBEs and 5 percent to WBEs. The goals for construction contracts are 26 percent to MBEs and 6 percent to WBEs.

The only primary contractor with MBE or WBE certification to be given COVID-19 work by the city was Medical Express Ambulance Service, a woman-owned business with a contract paying up to $684,000.

Two first-time city vendors have agreed to amend their contracts and try to hire minority- or woman-owned subcontractors:

• Vizient, a Texas company hired to obtain medical equipment and drugs and oversee the supplies at the field hospital, with three contracts for up to $2.5 million.
• Matthew Schipper Inc., a suburban company that’s dispatching and coordinating transportation for COVID-19 patients and subcontracting ambulances at the field hospital, with one contract paying as much as $997,000.

Two other first-time city vendors already had volunteered to hire MBE/WBE subcontractors, officials say:

• Midwest Physician Administrative Services LLC, to be paid up to $10 million for the first phase of its work, which had hired two MBE/WBE-certified companies to check backgrounds of field-hospital applicants and another company to hire temporary staff.
• SMG Food & Beverage/Savor, which has two contracts for a total of up to $2 million to provide food at the field hospital. Savor committed to giving MBE/WBE firms 30 percent of its work.

City officials say they’re also working with Walgreens, which has a $1 million contract to fill prescriptions for field-hospital patients who need drugs that aren’t on site. The city is discussing having Walgreens amend its contract to include opportunities for MBE/WBE participation, though the mayor’s office says, “The company does not subcontract out any of their work.”