City Council committee extends set-aside program for contracts with firms owned by minorities, women

Chicago’s construction set-side program for minorities and women is one of the last surviving big-city programs in the country.

On Wednesday, the groundwork was laid to keep it that way and perhaps even raise the bar to benefit both disadvantaged groups.

Meeting virtually for the first time, the City Council’s Committee on Contracting Oversight and Equity voted to extend the set-aside requirements until September 2021 to give a consultant time to complete the “disparity study” required to justify continuing and strengthening the program.

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Colette Holt had been scheduled to complete her study by Dec. 31, but “COVID came along to set us a little bit behind schedule,” she told aldermen Wednesday. Holt promised to have “findings for initial review sometime in early spring.”

In 2016, minority and female contractors demanding a bigger piece of the pie temporarily derailed then-Mayor Rahm Emanuel’s plan to extend the construction set-aside program for five years.

The City Council ultimately approved the extension, but only after Emanuel agreed to raise the bar by 2 percentage points for both minorities (increased to 26%) and women (increased to 6%).

Now, Ald. Gilbert Villegas (36th), Mayor Lori Lightfoot’s floor leader, hopes to use the latest extension and disparity study to justify raising the bar yet again — to 30% for companies owned by minorities and 10% for firms controlled by women.

“This really challenges the industry to say, ‘We have some goals that the city has put forward. How are we gonna try to make ’em?’ That’s a better approach instead of us setting the bar so low,” Villegas said Wednesday.

“If they don’t meet the 30 and 10, they have to explain why. There’s still a process they can go through. It’s not a quota program where they’re mandating. They have to demonstrate good-faith efforts.”

Ald. Jason Ervin (28th), chairman of the City Council’s Black Caucus, said he, too, would like to raise the bar for minorities and women — but only if the disparity study can justify it by proving there is market capacity.

“Of course we would like to see additional work for African-American companies. But we have to make sure we can stay within the confines of the law. The disparity study is supposed to show us what the capacity is. Then, we can make an educated decision, based on what the numbers look like,” Ervin said.

“When you talk about poverty, you talk about lack of opportunity. These businesses tend to hire people who look like them. That helps lift all of us up.”

Villegas also wants to raise caps on gross income and personal net worth that have forced construction companies owned by women and minorities out of Chicago’s set-aside program.

Companies are now forced to “graduate” from the set-aside program when their average gross receipts exceed $33 million over the previous three fiscal years and when the owner’s personal net worth tops $2.4 million.

Villegas branded those caps unrealistically low at a time when a $30 billion bonanza of construction contracts is coming down the pike from mega-projects like Lincoln Yards and “the 78” and public projects like a Chicago casino, O’Hare Airport expansion, the state capital plan and Lightfoot’s five-year, $3.7 billion capital plan.

He suggested increasing the caps to $10 million for personal net worth, and $100 million for gross receipts.

“That’s been one of the biggest barriers to really seeing minority-and women-owned firms take it to the next level where they can compete and really benefit the city by having more firms competing for work.”

The state of California has no caps and awarded “north of $20 billion” worth of business to minority firms last year, Villegas said. In capless Miami, minorities and women got $4.1 billion.

Chicago has limits and thresholds and managed just $680 million. The barrier is thresholds that follow “national standards” established by the Small Business Administration, he said.

“We’re the third most expensive market. We have to see some gross receipts and personal net worth that are relative to cities like New York and L.A. to really be fair,” Villegas said.

Ervin agreed raising the caps on personal net worth and gross receipts would “help more companies stay in” the set-aside program. He pointed to companies that “graduate out of the program, only to end up back in it because they don’t see the opportunities available in the general marketplace.”

In 2012, the city initiated a “Phased Graduation Program” that allows minority contractors that have exceeded the program’s size standards to gradually exit over three years. Those firms get a 75% credit the first year, 50% in year two, and 25% in year three.

Chicago’s set-aside program is one of the nation’s last, but the road to maintaining it has been rocky.

In 2003, a federal judge responded to a lawsuit filed by the Builders Association of Greater Chicago by outlining a series of legal deficiencies in the existing set-aside law and gave the city six months to correct the problems.

The Council followed the legal roadmap to the letter. Under the revamped ordinance, Asian-Americans were no longer automatically included in a “presumptively socially disadvantaged” group that includes African-Americans, Hispanics and women.

They were forced to apply individually and sign affidavits documenting past discrimination. Generalities and mere anecdotes were not enough. They had to cite specific incidents of discrimination, including names, dates, places and amounts of money denied.

The redrawn ordinance also included a five-year sunset provision.