Lightfoot proposes six-year extension of construction set-aside program, new eligibility standards

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

Mayor Lori Lightfoot plans to keep it that way for at least six years, while relaxing standards that prematurely push minority contractors out of the program — but not relaxing them enough to satisfy some aldermen.

Armed with a new “disparity study” mandated by a federal judge, Lightfoot wants to extend the construction set-aside program until December 2027 and alter its eligibility requirements by:

• Allowing minority-and women-owned companies to qualify for the program until they reach 150% of the size standard established by the U.S. Small Business Administration.

• Averaging gross receipts over a seven-year period, instead of five years.

• Narrowing factors used to calculate personal net worth by eliminating non-liquid assets that include real estate, retirement savings and the owner’s interest in non-certified businesses.

Ald. Roderick Sawyer (6th) former chairman of the City Council’s Black Caucus, said the changes proposed by the mayor are “good start,” but not nearly enough.

Sawyer favors lifting caps on gross income and personal net worth altogether.

“I don’t think that, once you’ve achieved a level of financial success that you should be cut off. I’ve always felt that there shouldn’t be a limit on anybody’s personal net worth, primarily because they didn’t change their color,” Sawyer said Monday.

“Once these individuals get to a certain level, they graduate from the program. They hover around for a couple of years doing nothing. They can’t get jobs on the private sector. They can’t grow anymore on the public sector because they got kicked out. And they’re in a legal limbo. They end up coming right back to the program. It makes no sense.”

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

Ald. Gilbert Villegas (36th) branded those caps unrealistically low, considering the bonanza of construction contracts coming down the pike. Instead, he wants caps increased to $10 million for personal net worth, and $100 million for gross receipts.

“We’re in a construction boom. We have a capital bill at the city, at the state, and a proposed capital bill at the feds, O’Hare Airport as well as [private] development that requires” participation from minority- and women-owned businesses,” Villegas said.

“We need to be as aggressive as possible, given the fact that there’s a ton of work coming down the pike. We want to make sure that our communities are participating in these projects. The SBA size standards are a national average. We are the third-most expensive market to do work in. The gross receipts needs to reflect that.”

Villegas also would raise the set-asides for minorities (now 26%) and women (now 6%) by as much as one percentage point each year. Or, at the very least, half a percentage point.

The mayor’s office said the ordinance Lightfoot introduced Friday “makes changes to reflect the financial challenges that small business owners face and the prevalence of larger competitors in the local marketplace.”

“These changes should allow certified firms to remain in the program longer while they continue to grow and build capacity and may also encourage additional [minority- and women-owned businesses] to participate in the program,” Lightfoot’s spokesman wrote in an email to the Sun-Times.

In a summary distributed to aldermen late Friday, the mayor’s office said consultant Collette Holt’s latest disparity study found “ample evidence that race or gender continue to significantly impede … full and fair opportunities” for minorities and women seeking city construction contracts.

“Stereotypes, biased perceptions, assumptions of incompetency and outright hostile work environments remain all too common. Industry networks remain closed to [minority- and women-owned businesses]. Prime contractors that use [minority- and women-owned businesses] to meet government affirmative action goals rarely even solicit them to bid on non-goals work,” the summary states.

“The city’s program remains critical to the success and often even the existence of these firms. Without the affirmative remedial intervention, it is likely the city would become a passive participant in the market failure of discrimination.”

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 set-aside law and giving the city six months to correct them.

Under the revamped ordinance, Asian-Americans were no longer automatically included in a “presumptively socially disadvantaged” group that includes African-Americans, Hispanics and women. A few years later, Asian Americans were put back into Chicago’s set-aside program as a presumptive group.

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

In 2012, the city initiated a “Phased Graduation Program” allowing minority contractors who exceed 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.

Four years later, minority and female contractors demanding a bigger piece of the pie temporarily derailed Mayor Rahm Emanuel’s plan to extend the construction set-aside program for five years. The Council ultimately approved the extension after Emanuel agreed to raise the bar by two percentage points for both minorities and women.