Although the program has helped many small, minority-owned contracting businesses progress economically, city officials said it’s under threat of elimination.
What’s happening?
The city’s Office of Business Opportunity has offered the MWBE program since 1984, which allows minority-and-women-owned businesses an equal opportunity to work on city government contracts. However, the program could be eliminated because of a lawsuit filed in 2023 against the city by a white couple from Spring who own two landscaping companies, Cylenthia Hoyrd, director of the office, said during the March 19 Economic Development Committee meeting.
The lawsuit states the program violates the equal protection clause of the 14th Amendment of the Constitution. The couple claims their companies were in a five-year, $1.3 million contract with the city; however, under the program’s rules, they were forced to pay $143,000 to a minority-owned competitor to finish part of the work, according to the lawsuit.
The overview
The trial will determine whether or not the program is unconstitutional, and if so, the program could be forced to shut down, Hoyrd said. A disparity study—conducted by MGT in 2023—was presented during the committee meeting, which City Attorney Arturo Michel said will help the city defend itself in the lawsuit.
A disparity study—which hadn’t been done since 2006 in Houston—determines whether a government entity engages in practices that exclude minority, women-owned businesses when awarding work contracts, according to the Office of Business Opportunity. Hoyrd said the study provides actionable results that can be used to “narrowly” change parts of the program.
Through surveys, focus groups and interviews, the disparity study looked at whether or not minority-and-women-owned businesses faced disparities in business categories such as construction, professional services and goods.
The study found there was no disparity for Hispanic-owned businesses in the construction and professional services categories. Asian-owned businesses in the professional services category faced no disparity either.
Hoyrd said, based on the study, it’s recommended that these groups facing no disparity be moved into a race-neutral small-business enterprise category of city contractors.
Michel said if the city doesn’t adopt the recommendations from the study, the trial will proceed under the outdated 2006 study without recent data to back up the program. He said the U.S. District Court for the Southern District of Texas has given the city until the second week of April to make a decision.
“I’d like to say without adopting the updated ordinance that supports the findings in the study, we do risk a 40-year setback,” Hoyrd said. “So, be very clear that the findings in the study narrowly tailor this program, and we are at a kind of crossroads of having the study and going to litigation.”
What they’re saying
Over 40 people, mainly minority business owners or members of minority business groups, spoke during the committee meeting’s public comment period and were concerned over the study’s recommendations.
Gordon Quan, the first Asian American to be elected as an at-large member in the Houston City Council, said he believes Asian, African American and Hispanic communities are growing the fastest in Houston, and the study doesn’t reflect what’s going on in the city or the market.
“We’re looking at this from, ‘How do we exclude some of these communities from participating in programs that benefit the city and benefit these communities?’” Quan said.
Laura Murillo, the president and CEO of the Houston Hispanic Chamber of Commerce, said she believes sample size matters and the study needs more participants to make an accurate assessment.
Vernetta Mitchell, an economic inclusion leader with MGT said while the study reached out to over 30,000 entities, only 800, or 2%, responded.
“We scheduled a lot of activities to try to engage more businesses, from mailing postcards [and] making phone calls,” Mitchell said. “We don’t believe there were any stones unturned, but we cannot force people to participate.”
Daniel Yoo, vice president of the Asian Chamber of Commerce of Houston, read off a joint statement from his group as well as the city’s Filipino-American and Korean chambers of commerce, stating they’re concerned this recommendation will have “severe and lasting negative consequences” for Asian-owned businesses.
“The city of Houston has long prided itself on its commitment to diversity, equity and inclusion in business opportunities,” Yoo said. “However, this proposed change would effectively eliminate vital pathways for Asian-owned businesses for city contracts. Despite the study’s findings, removing the Asian category ignores the ongoing barriers and challenges that Asian American entrepreneurs face in assessing public sector contracting opportunities.”
Gregg Reyes, president and CEO of Reytec Construction Resources, said his company wouldn’t be where it is today if it weren’t for the program.
“Eleven years in the program, our first job was a $296 door repair right across the street at the park,” Reyes said. “Today, Reytec Construction is 435 people in five different cities, and we did more than $225 million in business this year. I understand we’re in a rock and a hard place, but we’ve got to work out a way to make this work for everybody. We cannot take this program that has been so successful for all different races.”
What’s next?
Houston City Council voted to push back the vote on the disparity study up to 30 days on March 26, which council member Mario Castillo said would allow the administration more time to engage with stakeholders and hear their ideas.
“While the data collected provided a snapshot, a lot of stakeholders, for whatever reason, weren’t a part of that process and had ideas to share that we need to consider,” Castillo said. “This delay will allow those stakeholders to participate, for us to take the feedback in and bring something back to the council that’s more comprehensive.”
Michel said this 30 day delay will give the council the flexibility to bring the proposed changes back sooner for the court case if needed.
