2018 Fiscal Year State Budget, NC Budget and Tax Center

How to make a program irrelevant: The N.C. Office for Historically Underutilized Businesses

If you want a program which “advocate(s) actions which increase opportunities for historically underutilized businesses and promotes diversity and inclusion in state government procurement and contracting” to not do its job, you do it quietly.

The Historically Underutilized Business (HUB) Office was established by Executive Order 150 in an effort to remedy past and ongoing discrimination in the procurement and contracting markets in North Carolina. After being codified in 2001, the initiative aimed to 1) increase the amount of goods and services acquired by state agencies from HUB firms, 2) make progress towards eliminating barriers that reduce participation of HUB firms, 3) encourage purchasing officers and relevant personnel to identify and utilize HUB vendors and contractors, 4) educate HUB firms on doing business with the State of North Carolina and 5) provide resources for HUB firms.

Since its inception, the program has experienced very modest success but has been plagued with persistent inequity. A study commissioned by NCDOT in 2014 found ample evidence that race and gender remain barriers to the full and fair opportunity to participate in NCDOT’s contracts. NCDOT’s study employed a ratio measure to determine how HUB enterprises were utilized relative to white-male owned enterprises, where ratios below 80 percent indicate a disparity. For every 100 contracts awarded to white-male owned businesses, white women got 79.87 contracts, Black-owned businesses received 49.94 contracts, and Hispanic-owned businesses got 18.25 contracts.

In another example, during FY 2014-2015 Wake County Public School System (WCPSS) awarded $23.4 million dollars in contracts for goods and services to HUB firms out of $147 million total. Of that $23.4 million, $20.4 million was awarded to women-owned businesses, while Black-owned businesses received $80,072. In the next fiscal year (2015-2016), out of the $131 million awarded for contracts in goods and services, WCPSS awarded HUBs $11.4 million. Women-owned businesses earned $7.8 million. Black-owned businesses earned $27,234. African Americans make up 21 percent of Wake County.

In this context of gross inequity, the General Assembly’s conference budget contains amendments to NCGS 136-28.4 that seek to obscure information about the program by aggregating goals for women-owned businesses and minority-owned businesses. This is highly problematic for many reasons.

First, data reveal that institutions reaching the aspirational goal of 10 percent in HUB participation generally do so by contracting with women-owned businesses more than other minority group business. This is readily evident in the aforementioned Wake County example.

Second and connectedly, while we willingly acknowledge that women-owned businesses face discriminatory challenges, one cannot ignore the potential that some white male business owners could create companies in the names of their wives (or any other female partner), own a 49 percent stake and qualify for HUB certification. If this company is awarded a contract, then their business counts towards the public entity’s aspirational goal of 10 percent, thus reducing the pool from which other qualified HUBs can compete.

This obfuscates the purpose of the HUB program, which was to create a space where truly disadvantaged business enterprises have a better opportunity to earn procurement and contracting opportunities. It is why data is imperative to understanding the full picture of how this program is used. It is why language that includes a call to “good faith efforts” is essential to ensuring the implementation of an aspirational goal that otherwise is without teeth.

This amendment is yet another salvo in an attack that rolls back years of civil rights progress in North Carolina. This amendment, which assaults economic mobility for minority communities—when coupled with racial gerrymandering that dilutes the political power of minority communities, HB 2 that constricts social mobility of minority communities, and the dismantling of the Human Relations Commission, which jeopardizes the equalizing institutions serving minority communities—shows this General Assembly is not concerned with building an economy that truly works for everyone.

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