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Submitted by: Mason Tillman Associates, Ltd.
December 2012
Draft Report
Executive Summary
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Metropolitan St. Louis Sewer District Disparity Study Report - Executive Summary i
Table of Contents
EXECUTIVE SUMMARY .............................................................................................. 1
I. STUDY OVERVIEW............................................................................................ 1
A. STUDY PURPOSE .............................................................................................. 1
B. STUDY TEAM .................................................................................................... 1
C. INDUSTRIES AND STUDY PERIOD ...................................................................... 2
D. ETHNIC AND GENDER GROUPS STUDIED .......................................................... 3
E. PRIME CONTRACT DATA .................................................................................. 3
F. SUBCONTRACTOR DATA ................................................................................... 4
G. CONTRACT THRESHOLDS .................................................................................. 4
II. METHODOLOGY ................................................................................................... 5
A. LEGAL FRAMEWORK ........................................................................................ 5
B. STRUCTURE OF THE REPORT ............................................................................. 6
III. NOTABLE FINDINGS ............................................................................................ 7
A. PRIME CONTRACTOR UTILIZATION ANALYSIS ................................................. 7
B. SUBCONTRACTOR UTILIZATION ANALYSIS ...................................................... 7
C. MARKET AREA ANALYSIS ................................................................................ 7
D. CONTRACT SIZE ANALYSIS .............................................................................. 8
IV. DISPARITY FINDINGS OF STATISTICAL UNDERUTILIZATION ............. 8
A. PRIME CONTRACT DISPARITY FINDINGS .......................................................... 8
B. SUBCONTRACTOR DISPARITY FINDINGS ......................................................... 13
C. RACE AND GENDER-CONSCIOUS SUBCONTRACTING GOALS .......................... 13
V. ANECDOTAL FINDINGS .................................................................................... 14
Table of Contents
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A. SUMMARY OF IN-DEPTH INTERVIEWS ............................................................ 15
VI. REGRESSION ANALYSIS ................................................................................... 15
A. BUSINESS OWNERSHIP ANALYSIS .................................................................. 15
B. BUSINESS EARNINGS ANALYSIS ..................................................................... 16
C. BUSINESS LOAN APPROVAL ANALYSIS .......................................................... 16
VII. RACE AND GENDER-CONSCIOUS REMEDIES ..................................... 17
A. PRIME CONTRACT REMEDIES ......................................................................... 17
B. SUBCONTRACT REMEDIES .............................................................................. 17
VIII. RACE AND GENDER-NEUTRAL RECOMMENDATIONS .................. 18
A. PRE-AWARD RECOMMENDATIONS ................................................................. 18
B. POST-AWARD RECOMMENDATIONS ............................................................... 20
C. PROCUREMENT PROCESS ENHANCEMENTS ..................................................... 22
D. M/WBE PROGRAM ENHANCEMENTS ............................................................. 23
E. WEBSITE ENHANCEMENTS ............................................................................. 23
F. DATA MANAGEMENT ENHANCEMENTS .......................................................... 25
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List of Tables
TABLE 1: BUSINESS ETHNIC AND GENDER GROUPS ........................................................ 3
TABLE 2: DISPARITY SUMMARY: BUILDING CONSTRUCTION
PRIME CONTRACT DOLLARS, JULY 1, 2007
THROUGH JANUARY 31, 2012 ........................................................................... 8
TABLE 3: DISPARITY SUMMARY: NON-BUILDING CONSTRUCTION
PRIME CONTRACT DOLLARS, JULY 1, 2007
THROUGH JANUARY 31, 2012 ........................................................................... 9
TABLE 4: DISPARITY SUMMARY: ENGINEERING PROFESSIONAL SERVICES
PRIME CONTRACT DOLLARS, JULY 1, 2007
THROUGH JANUARY 31, 2012 ......................................................................... 10
TABLE 5: DISPARITY SUMMARY: NON-ENGINEERING PROFESSIONAL
SERVICES PRIME CONTRACT DOLLARS, JULY 1, 2007
THROUGH JANUARY 31, 2012 ......................................................................... 11
TABLE 6: DISPARITY SUMMARY: SUPPLIES AND CONTRACTUAL
SERVICES PRIME CONTRACT DOLLARS, JULY 1, 2007
THROUGH JANUARY 31, 2012 ......................................................................... 12
TABLE 7: SUBCONTRACTOR DISPARITY SUMMARY, MAY 1, 2010
TO JANUARY 31, 2012 .................................................................................... 13
TABLE 8: RACE AND GENDER-CONSCIOUS SUBCONTRACTING GOALS .......................... 14
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EXECUTIVE SUMMARY
I. STUDY OVERVIEW
A. Study Purpose
In 2011 the Metropolitan St. Louis Sewer District (MSD) commissioned a disparity study
because it is undertaking one of the largest construction projects in the St. Louis region.
MSD’s Capital Improvement and Replacement Plan (CIRP) is a $4.7 billion program to
update and rehabilitate the district’s wastewater collection and treatment system. This
multi-decade program will reduce community health and safety risks with the removal of
nearly 400 sewer overflows, which release untreated wastewater into the waterways. The
rehabilitation of interceptors, pump stations, and force mains for the seven wastewater
treatment plants in MSD’s 100-year-old sewer system are also part of the plan. A project
of this scale and magnitude will create long-term economic and employment benefits
within the region.
The purpose of the disparity study was to determine whether or not a statistically
significant disparity existed in MSD’s award of contracts to ready, willing, and able
minority and women-owned business enterprises (M/WBEs). Under a fair and equitable
system of awarding contracts, the proportion of contract dollars awarded to M/WBEs
should be relatively close to the corresponding proportion of available M/WBEs1 in the
relevant market area. If the available M/WBE prime contractors are underutilized, a
statistical test is conducted to calculate the probability of observing the empirical
disparity ratio or any event which is less probable. Croson states that an inference of
discrimination can be made prima facie if the disparity is statistically significant. This
analysis was applied to M/WBEs by ethnicity and gender within the five industries
studied.
B. Study Team
Mason Tillman Associates, Ltd., a public policy consulting firm based in Oakland,
California, was selected to perform the Disparity Study. Mason Tillman subcontracted
with three local businesses, ADE Consulting Services, Davis Associates, CPAs, and
Project Controls Group, Inc., to perform anecdotal interviews and assist with contract
data collection.
1 Availability is defined as the number of ready, willing, and able firms. The methodology for determining willing and able firms
is detailed in Chapter 4.
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Vicki Taylor Edwards, MSD Director of Human Resources, managed the Study. Ramona
Dickens and Todd Aschbacher were part of the management team. Ms. Edwards and the
team facilitated Mason Tillman’s access to the MSD data needed to complete the Study.
The extraordinary cooperation of the MSD staff and business community should also be
acknowledged.
C. Industries and Study Period
The Disparity Study reviewed the contracts awarded during the study period of July 1,
2007 to January 31, 2012. The contracts examined at the prime contract level were in the
following industries: building construction, non-building construction, engineering
professional services, non-engineering professional services, and supplies and contractual
services. At the subcontract level, the same industries were studied except for supplies and
contractual services as there were too few records in this industry to conduct an analysis. The
scopes of the contracts in the five industries studied are defined below:
Building and Non-Building Construction Services include capital improvement
projects, wastewater collection, and treatment facilities.
Contractual Services include all services not identified as professional services.
Engineering Professional Services include architecture, engineers, engineering
design services, land surveyors, planning and management consultants, and
construction management consultants.
Non-Engineering Professional Services include armed security guard services,
claims adjusters, computer facilities management, computer programming
services, financial auditing, financial consulting services, general investment
advisory or consulting services, insurance advisory/consulting services or
insurance broker of record, landscape design services, lawyers, legal services,
pension fund investment portfolio management, pension fund trustee services,
pension plan actuarial services, public relations services, rates consulting, real
estate appraisal services, and real estate brokerage services.
Supplies include all materials and equipment.
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D. Ethnic and Gender Groups Studied
The analysis of disparity was disaggregated into nine ethnic and gender groups. The nine
groups are listed in Table 1.
Table 1: Business Ethnic and Gender Groups
Ethnicity and Gender Category Definition
African American Businesses Businesses owned by male and female
African Americans
Asian American Businesses Businesses owned by male and female
Asian Americans
Hispanic American Businesses Businesses owned by male and female
Hispanic Americans
Native American Businesses Businesses owned by male and female
Native Americans
Caucasian Female Business Enterprises Businesses owned by Caucasian females
Minority Business Enterprises Businesses owned by African American,
Asian American, Hispanic American, and
Native American males and females
Women Business Enterprises Businesses owned by Caucasian females
Minority and Women Business
Enterprises
Businesses owned by Minority males,
Minority females, and Caucasian females
Non-Minority Male Business
Enterprises
Businesses owned by Caucasian males,
businesses that declined to declare their
ethnicity, or businesses that could not be
identified as minority or female-owned
E. Prime Contract Data
The prime contractor data was extracted from three database sources— Application
Management Services (AMS), Companies and Intellectual Property Registration Office
(CIPRO), and Oracle—and included contracts, non-blanket purchase orders, and blanket
orders. In this study the data from each of the databases are referred to as contracts.
Most records in the three database sources contained both prime contract payment and
award data. The data extraction was limited to awards made during the July 1, 2007 to
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January 31, 2012 study period. The records in each of the three databases had a unique
contract or purchase order number. However, when data in these systems were combined,
a unique number was not always assigned. Before the analysis could be performed a
unique number had to be assigned by Mason Tillman. The assignment of an unique
contract number required sorting and grouping prime contract and payment data by
vendor ID, project description, prime contract number, prime award date, and award
amount.
Each prime contract was then classified into one of the five industries. If the contract
description was insufficient to assign an industry, Internet research was conducted.
Mason Tillman’s staff worked closely with MSD using object and organization codes to
classify the contracts into the appropriate industry. Cooperative agreements and contracts
with non-profits, government agencies, and utilities were excluded from the study. The
industry classifications were reviewed and approved by MSD.
Once MSD approved the industry classifications, the ethnicity and gender of each prime
contractor was verified. Certification databases, Internet research, and a survey were used
to determine the ethnicity and gender of the prime contractors. Before performing the
survey the prime contractor’s business name was cross-referenced with the certification
lists. Websites were reviewed for businesses which could not be reached through the
survey. Internet research to identify the business owner’s ethnicity and gender involved a
review of social media sites, telephone directories, and search engines.
F. Subcontractor Data
Extensive research was undertaken to reconstruct the building construction and non-
building construction, engineering professional services, and non-engineering
professional services subcontracts issued by MSD’s prime contractors. Subcontracts for
supplies and contractual services contracts were not included in the analysis because
prime contractors traditionally do not subcontract their work in these industries.
The subcontract data was compiled by MSD. All identified subcontractors were contacted
to verify the award and payment amount. The subcontractor had the option of verifying
data by telephone, email, fax, or U.S. mail. If the subcontractor could not be contacted,
the original data from MSD was used in the utilization analysis.
G. Contract Thresholds
Contracts in each of the five industries were analyzed at two dollar levels. One level
included all contracts regardless of size. A second level included all contracts under
$500,000. For supplies and contractual services a third dollar level was analyzed. The
third threshold included informal contracts that did not require advertising.
The $500,000 threshold was designated because capacity was demonstrated within the
pool of willing M/WBEs at this level. The informal contract threshold was set forth in
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Disparity Study:
Critical Components
1. Legal Framework
2. Utilization Analysis
3. Market Area Analysis
4. Availability Analysis
5. Disparity Analysis
6. Anecdotal Analysis
7. Recommendations
MSD’s procurement policy as $25,000 for supplies and contractual services. MSD’s
procurement policy did not include an informal threshold for building construction and
non-building construction, engineering professional services, and non-engineering
professional services.
II. METHODOLOGY
A. Legal Framework
The review of Croson and related case law provided the legal framework for conducting
the Disparity Study.
A legal review was the first step in the disparity study.
Case law sets the standard for the methodology
employed in a disparity study. Step two was to collect
utilization records and determine the extent to which
MSD had used minority, women-owned, and other
businesses to secure its needed building construction,
non-building construction, engineering professional
services, non-engineering professional services, and
supplies and contractual services. Utilization records
were also used to determine the geographical area in
which companies that had received MSD contracts were
located. In step three, MSD’s market area was identified. Once the market area was
defined, the fourth step, the availability analysis, identified businesses willing and able
to provide building construction, non-building construction, engineering professional
services, non-engineering professional services, and supplies and contractual services
needed by MSD. In the fifth step a disparity analysis was performed to determine
whether there was a statistically significant underutilization within the five industries. In
step six, the anecdotal analysis, the contemporary experiences of business owners in
MSD’s market area were collected. The anecdotal analysis also included testimony from
trade and business representatives that provided information on their members’
experiences seeking or working with MSD. In step seven the statistical and anecdotal
analyses were reviewed and recommendations were written to enhance MSD’s efforts in
contracting with M/WBEs in its market area. In addition a regression analysis was
conducted to determine if factors other than discrimination could account for any
statistically significant disparity.
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B. Structure of the Report
The Disparity Study findings are presented in eleven chapters. The contents of each
chapter are briefly described below:
Overview of the Disparity Study Report
Chapter 1: Legal Analysis presents the case law applicable to business affirmative
action programs and the methodology based on those cases required for the Study.
Chapter 2: Contracting and Procurement Policies Analysis presents MSD’s
contracting and procurement practices.
Chapter 3: Prime Contractor Utilization Analysis presents the distribution of prime
contracts by industry, ethnicity, and gender.
Chapter 4: Subcontractor Utilization Analysis presents the distribution of
subcontracts by industry, ethnicity, and gender.
Chapter 5: Market Area Analysis presents the legal basis for geographical market
area determination and defines MSD’s market area.
Chapter 6: Prime Contractor and Subcontractor Availability Analysis presents the
distribution of available businesses in MSD’s market area.
Chapter 7: Prime Contractor Disparity Analysis presents prime contractor utilization
compared to prime contractor availability by industry and M/WBE status and
determines whether the comparison is statistically significant.
Chapter 8: Subcontractor Disparity Analysis presents subcontractor utilization
compared to subcontractor availability by industry and M/WBE status and determines
whether the comparison is statistically significant.
Chapter 9: Regression Analysis presents an examination of whether there are private
sector economic indicators of discrimination in MSD’s market area that could impact
the formation and development of M/WBEs.
Chapter10: Anecdotal Analysis presents the business community’s perceptions of
barriers encountered in contracting or attempting to contract with MSD.
Chapter 11: Recommendations presents race and gender-conscious and race and
gender-neutral remedies to enhance procurement activities and MSD’s contracting
with M/WBEs and other small businesses.
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III. NOTABLE FINDINGS
A. Prime Contractor Utilization Analysis
MSD issued 40,868 contracts during the July 1, 2007 through January 31, 2012 study
period. The 40,868 contracts included 27 for building construction, 772 for non-building
construction, 186 for engineering professional services, 337 for non-engineering
professional services, and 39,546 for supplies and contractual services.
The payments made by MSD during the study period totaled $914,888,875 for the 40,868
contracts.2 Payments included $265,714,726 for building construction, $288,669,563 for
non-building construction, $90,658,256 for engineering professional services,
$59,704,115 for non-engineering professional services, and $210,142,214 for supplies
and contractual services.
B. Subcontractor Utilization Analysis
A total of 1,489 subcontracts were analyzed, which included 389 building construction
subcontracts, 1,031 non-building construction subcontracts, 51 engineering professional
services subcontracts, and 18 non-engineering professional services subcontracts for the
May 1, 2010 to January 31, 2012 subcontractor study period. The subcontractor study
period differs from the overall study period because it represents the time period for
which subcontract records are readily available.
There were $143,099,473 total subcontract dollars expended during the May 1, 2010 to
January 31, 2012 study period, which included $97,035,474 for building construction
subcontracts, $42,383,416 for non-building construction subcontracts, $2,505,118 for
engineering professional services subcontracts, and $1,175,465 for non-engineering
professional services subcontracts.
C. Market Area Analysis
During the study period MSD awarded 40,868 non-building construction, building
construction, engineering professional services, non-engineering professional services,
and supplies and contractual services contracts valued at $914,888,875. MSD awarded
77.63 percent of these contracts and 71.67 percent of dollars to businesses located in the
City of St. Louis and St. Louis County respectively. Given the distribution of the
contracts awarded by MSD the study’s market area is determined to be the City of St.
Louis and St. Louis County.
2 All figures are rounded to the nearest dollar.
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D. Contract Size Analysis
MSD’s contracts were grouped into nine dollar ranges.3 Each industry was analyzed to
determine the number and percentage of contracts that fell within the nine size categories.
The size distribution for contracts awarded within the nine dollar ranges in all industries
combined demonstrates that 96.61 percent of MSD’s contracts were less than $25,000;
97.63 percent were less than $50,000; 98.37 percent were less than $100,000; and 99.5
percent were less than $500,000.4 Only 0.5 percent of MSD’s contract awards were over
$500,000.
IV. DISPARITY FINDINGS OF STATISTICAL
UNDERUTILIZATION
Below are the prime contract and subcontract disparity findings. There were findings of
statistically significant underutilization of certain ethnic and gender groups in the award
of prime contracts and subcontracts.
A. Prime Contract Disparity Findings
1. Building Construction Prime Contracts
As indicated in Table 2, there were no findings of statistically significant disparity in the
building construction industry for contracts valued under $500,000.
Table 2: Disparity Summary: Building Construction Prime Contract Dollars,
July 1, 2007 through January 31, 2012
Ethnicity/Gender Contracts under $500,000
African Americans No
Asian Americans No
Hispanic Americans No
Native Americans No
3 The nine dollar ranges are $1 to $25,000; $25,001 to $50,000; $50,001 to $100,000; $100,001 to $250,000; $250,001 to
$500,000; $500,001 to $750,000; $750,001 to $1,000,000; $1,000,001 to $3,000,000; and $3,000,001 and greater.
4 Percents represent cumulative amounts and therefore do not sum to 100 percent.
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Ethnicity/Gender Contracts under $500,000
Minority Business Enterprises No
Women Business Enterprises **
Minority and Women Business Enterprises **
Yes = The analysis is statistically significant.
No = The analysis is not statistically significant or there are too few available firms to test statistical significance.
(**) = The analysis does not statistically test the overutilization of M/WBEs.
2. Non-Building Construction Prime Contracts
As indicated in Table 3, disparity was found for African American, Asian American, and
Minority Business Enterprise non-building construction contractors for contracts valued
under $500,000.
Table 3: Disparity Summary: Non-Building Construction Prime Contract Dollars,
July 1, 2007 through January 31, 2012
Ethnicity/Gender Contracts under $500,000
African Americans Yes
Asian Americans Yes
Hispanic Americans No
Native Americans No
Minority Business Enterprises Yes
Women Business Enterprises **
Minority and Women Business Enterprises **
Yes = The analysis is statistically significant.
No = The analysis is not statistically significant or there are too few available firms to test statistical significance.
(**) = The analysis does not statistically test the overutilization of M/WBEs.
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3. Engineering Professional Services Prime Contracts
As indicated in Table 4 below, disparity was found for Asian American, Women
Business Enterprise, Minority Business Enterprise, and Minority and Women Business
Enterprise engineering professional services prime contractors for contracts valued under
$500,000.
Table 4: Disparity Summary: Engineering Professional Services Prime Contract
Dollars, July 1, 2007 through January 31, 2012
Ethnicity/Gender Contracts under $500,000
African Americans No
Asian Americans Yes
Hispanic Americans **
Native Americans No
Minority Business Enterprises Yes
Women Business Enterprises Yes
Minority and Women Business Enterprises Yes
Yes = The analysis is statistically significant.
No = The analysis is not statistically significant or there are too few available firms to test statistical significance.
(**) = The analysis does not statistically test the overutilization of M/WBEs.
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4. Non-Engineering Professional Services Prime Contracts
As indicated in Table 5 below, disparity was found for African American, Asian
American, Hispanic American, Minority Business Enterprise, Women Business
Enterprise, and Minority and Women Business Enterprise non-engineering professional
services prime contractors for contracts valued under $500,000.
Table 5: Disparity Summary: Non-Engineering Professional Services Prime
Contract Dollars, July 1, 2007 through January 31, 2012
Ethnicity/Gender Contracts under $500,000
African Americans Yes
Asian Americans Yes
Hispanic Americans Yes
Native Americans No
Minority Business Enterprises Yes
Women Business Enterprises Yes
Minority and Women Business Enterprises Yes
Yes = The analysis is statistically significant.
No = The analysis is not statistically significant or there are too few available firms to test statistical significance.
(**) = The analysis does not statistically test the overutilization of M/WBEs.
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5. Supplies and Contractual Services Prime Contracts
As indicated in Table 6 below, disparity was found for African American, Asian
American, Minority Business Enterprise, and Women Business Enterprise supplies and
contractual services prime contractors for contracts valued under $500,000. Disparity was
found for African American, Asian American, Minority Business Enterprise, and
Minority and Women Business Enterprise supplies and contractual services prime
contractors at the informal level for contracts valued at $25,000 and under.
Table 6: Disparity Summary: Supplies and Contractual Services Prime Contract
Dollars, July 1, 2007 through January 31, 2012
Ethnicity/Gender
Supplies and Contractual Services
Contracts under
$500,000
Contracts $25,000
and under
African Americans Yes Yes
Asian Americans Yes Yes
Hispanic Americans ** **
Native Americans No No
Minority Business Enterprises Yes Yes
Women Business Enterprises Yes **
Minority and Women Business
Enterprises
No (it’s not
significant) Yes
Yes = The analysis is statistically significant.
No = The analysis is not statistically significant or there are too few available firms to test statistical significance.
(**) = The analysis does not statistically test the overutilization of M/WBEs.
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B. Subcontractor Disparity Findings
Findings of statistically significant underutilization at the subcontracting level establish
the factual predicate necessary for M/WBE program modifications. As indicated in Table
7, disparity was found for African American and Hispanic American building
construction subcontractors. Disparity was also found for African American non-building
construction subcontractors. There were too few supplies and contractual services records
to conduct a disparity analysis at the subcontracting level.
Table 7: Subcontractor Disparity Summary,
May 1, 2010 to January 31, 2012
Ethnicity / Gender
Building
Construction
Non-Building
Construction
Engineering
Professional
Services
Non-
Engineering
Professional
Services
African Americans Yes Yes ** **
Asian Americans No No ** No
Hispanic Americans Yes No ** No
Native Americans No No No No
Minority Business
Enterprises Yes No (it’s not
significant) ** **
Women Business
Enterprises ** ** ** **
Minority and Women
Business Enterprises Yes No ** **
Yes = The analysis is statistically significant.
No = The analysis is not statistically significant or there are too few available firms to test statistical significance.
** = The analysis does not statistically test the overutilization of M/WBEs.
C. Race and Gender-Conscious Subcontracting
Goals
An M/WBE subcontracting goals program can be instituted based upon the findings of
the Disparity Study. Race and gender-conscious subcontracting goals can be set for
groups with findings of statistically significant disparity at the subcontracting level. For
example in the building construction industry race and gender-conscious goals can be set
for African Americans and Hispanic Americans at the rate for which they are available.
Likewise, in the non-building construction industry race and gender-conscious goals can
be set for African Americans at the rate they are available. There were no findings of
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statistically significant disparity in the engineering and non-engineering professional
services. It should be noted that the application of the goal is not a percent of the dollars
that the prime subcontracts. Instead, it is a percent of the total contract value that should
be awarded to groups with a finding of statistically significant disparity, and should be
attained through subcontracting. Table 8 depicts race and gender-conscious
subcontracting goals according to industry, ethnic and gender groups, and availability.
Table 8: Race and Gender-Conscious Subcontracting Goals
Industry Ethnicity Availability Subcontracting
Goal*
Building
Construction
African American
Hispanic American
28.5%
1.21%
30%
Non-Building
Construction African American 17.3% 17%
* Subcontracting Goals are the sum of the availability percentages rounded to the nearest whole number.
V. ANECDOTAL FINDINGS
In addition to requiring a statistical analysis, the United States Supreme Court in Croson
stated that anecdotal findings, “if supported by appropriate statistical proofs, lend support
to a [local entity’s] determination that broader remedial relief [be] justified.5” Croson
authorizes anecdotal inquiries along two lines. The first approach examines barriers
attributed to the local entity. Such action is defined as the active participation of the
government entity. The second approach examines passive participation, which constitute
barriers created by contractors that are awarded public funds.6
The anecdotal analysis included testimony from interviews with 37 business owners and
representatives from 15 trade and business associations domiciled in MSD’s market area.
The business owners described accounts of barriers encountered while working or
seeking work directly with MSD, and the trade and business association representatives
reported experiences of their members. Exemplary practices of MSD and its managers
are also recounted in the interviews.
5 City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989).
6 Id.
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A. Summary of In-Depth Interviews
The anecdotal analysis describes general market conditions, prime contractor barriers,
and the range of experiences encountered by interviewees attempting to do business with
MSD. Some barriers the interviewees identified include:
Racial barriers and harassment
Higher standards of review for M/WBEs
Difficulty meeting pre-qualification requirements
Bid shopping and inadequate lead time to respond to solicitations
Difficulty negotiating supplier agreements
M/WBE certification process challenges
Front companies being used to meet M/WBE goals
Barriers to financial resources
Barriers to bonding
Late payments from prime contractors
The interviewees also provided comments about the M/WBE Program, exemplary MSD
business practices, and recommendations to increase M/WBE participation on MSD
contracts.
VI. REGRESSION ANALYSIS
Three regression models were used to determine whether there were factors in the private
sector which might help explain any statistical disparities between M/WBE availability
and utilization identified in the Disparity Study. The three models examined the
following outcome variables—business ownership, business earnings, and business loan
approval.
These analyses were performed for three industries—construction, professional services,
and supplies and contractual services. The regression analyses examined the effect of
race and gender on the three outcome variables. The business ownership analysis and the
earnings disparity analysis used data from the 2007 through 2010 PUMS datasets for the
City of St. Louis and St. Louis County, and compared business ownership rates and
earnings for M/WBEs to those of similarly situated Caucasian males. The business loan
approval analysis used the 2003 NSSBF dataset and compared business loan approval
rates for M/WBEs to those of similarly situated Caucasian males.
A. Business Ownership Analysis
The business ownership regression analysis examined the impact of different explanatory
variables on an individual’s probability of owning a business. Controlling for race and
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gender-neutral factors, the business ownership analysis results reveal statistically
significant disparities in the probability of owning a business for minorities and females
when compared to similarly situated Caucasian males. Caucasian Females experience the
greatest disparity as they are significantly less probable to own a business in all industry
specifications. African Americans and Asian Americans are significantly less probable to
own a business in two of the industries—professional services and supplies and
contractual services, for African Americans, and construction and professional services
for Asian Americans.
Hispanic Americans, Native Americans, and Other Minorities did not have any
statistically significant findings.
B. Business Earnings Analysis
The business earnings regression analysis examined the impact of different explanatory
variables on a business owner’s earnings. Controlling for race and gender-neutral factors,
the business earnings analysis documented statistically significant disparities in business
earnings for minorities and females when compared to similarly situated Caucasian
males. Caucasian Females have lower business earnings at a statistically significant level
for two of the industries— professional services and supplies and contractual services.
African Americans and Asian Americans have significantly lower business earnings in
the supplies and contractual services industry. Finally, Other Minorities have
significantly lower business earnings in the professional services industry.
Hispanic Americans and Native Americans had no statistically significant findings.
C. Business Loan Approval Analysis
The business loan regression analysis examined the impact of different explanatory
variables on the probability of receiving a business loan. Controlling for race and gender-
neutral factors, the business loan approval regression model analysis reveals statistically
significant disparities for M/WBEs when compared to similarly situated Caucasian
males. Caucasian Females had a statistically significant disparity in the construction
industry, and minorities had statistically significant disparities in the professional services
and supplies and contractual services industry.
The statistically significant disparity documented for M/WBEs when compared to
similarly situated Caucasian males points to the presence of race and gender-based
discrimination as a factor in access to business capital. Access to business capital in the
private sector constitutes a major factor in business development, continuity, and growth.
The documented disparity in M/WBEs’ access to business capital may have adversely
impacted the number of these businesses in the construction, professional services, and
supplies and contractual services industries available to perform MSD’s contracts during
the study period.
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VII. RACE AND GENDER-CONSCIOUS REMEDIES
Mason Tillman recommends several race and gender-conscious remedies to address the
disparity findings. The recommendations are narrowly tailored to the ethnic and gender
groups which had a documented disparity. The application of the numeric remedy could
be a combined M/WBE goal limited to the groups with a statistical disparity.
A. Prime Contract Remedies
1. Institute Incentive Credits for Engineering and Non-Engineering
Professional Service Contracts
Incentive credits should be given to Asian American and Women Business Enterprise
prime contractors in the evaluation process for prime contract awards in engineering
professional services, and African American, Asian American, Hispanic American, and
Women Business Enterprise prime contractors in non-engineering professional services.
B. Subcontract Remedies
1. Set Overall M/WBE Subcontracting Goal
An overall M/WBE subcontracting goal should be established to remedy the documented
disparity in the building construction and non-building construction industries, where
there was a finding of statistically significant underutilization. The goal should be limited
to the groups with a statistical disparity. The overall subcontracting goal should reflect
the availability of these specific groups the Study found to be underutilized at a
statistically significant level. Further discussion of the goals can be found in the
Executive Summary in Section IV: Disparity Findings of Statistical Underutilization, part
C: Race and Gender-Conscious Subcontracting Goals.
2. Set Contract-Specific M/WBE Construction Subcontracting Goals
A subcontracting goal should be set on all building and non-building construction prime
contracts over $50,000 for each ethnic and gender group that had statistically significant
disparity.
3. Conduct M/WBE Subcontracting Goal Attainment Reviews
Goal attainment reviews should be conducted for all prime contractor bid submittals prior
to the recommendation for award to ascertain whether or not the bidder has met the
M/WBE subcontracting goal(s) with contractors performing commercially useful
functions.
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VIII. RACE AND GENDER-NEUTRAL
RECOMMENDATIONS
Mason Tillman recommends several race and gender-neutral remedies to address the
study findings. The race and gender-neutral recommendations are not limited to groups
with findings of statistically significant disparity. In fact, the recommendations are
particularly pertinent to small businesses interested in bidding at the prime contractor and
subcontract levels, and are intended to increase the participation of small businesses.
A. Pre-Award Recommendations
1. Expand Unbundling Policy
MSD should unbundle its contracts into smaller projects to increase the number of
businesses participating at both the prime contracting and subcontracting levels. Large
multi-year contracts limit prime contracting opportunities and give few contractors
control over substantial subcontracting opportunities.
2. Establish a Direct Purchase Program for Construction Contracts
A direct purchase program could allow MSD to procure construction materials and
supplies directly from the supplier. The bid would include the estimate, and MSD would
make the purchase and pay the vendor’s invoice directly resulting in lower supplier
pricing for the prime contractor. For the purpose of bonding a job the cost of supplies
could be subtracted from the bid price, thereby reducing the amount of the contractor’s
bond.
3. Promote Diversity in Distributorships
Manufacturers seeking business with MSD should be required to document their efforts
to authorize M/WBE distributors to sell its product line at the regional or national level.
4. Advertise Small Contracts Bond Provisions
MSD should promote its progressive procurement policy which waives the bonding
requirement for non-building construction prime contracts when the engineer’s estimate
is less than $25,000.
5. Pay Mobilization to Subcontractors
When mobilization payments are approved for the prime contractor, the subcontractor
should be paid an amount equal to their participation percentage no later than five (5)
business days before they are required to mobilize to perform their work.
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6. Review the Pre-qualification Application for Construction, Architectural,
Engineering, and Surveying Contracts
The pre-qualification process for construction, architectural, engineering, and surveying
contracts should be reassessed in order to support the M/WBE Program. The pre-
qualification evaluation standards should be made more transparent.
7. Publish Pre-qualification Evaluation Standards
Construction, architectural, engineering, and surveying pre-qualification evaluation
standards should be published. Businesses should be provided a written evaluation report
when their pre-application is not approved.
8. Support a Training Program to Pre-qualify Businesses for Sewer
Construction Work
MSD should participate in a training program to increase the number of M/WBE and
small local businesses eligible for the sewer layers license required for to be pre-qualified
for sewer construction and deep sewer construction work.
9. Maintain Virtual Plan Room
MSD should consider purchasing software that would allow bidders to obtain digitized
plans and specifications on its website at no cost. Online access to plans and
specifications could reduce the cost for MSD to produce the documents and the
contractor to acquire them.
10. Revise Insurance Requirements
Insurance requirements should be evaluated to ensure that smaller contracts do not
require a disproportionately high level of coverage.
11. Form Partnerships with Financial Institutions
MSD’s relationships with financial institutions should be leveraged to assist M/WBEs
and small businesses with project financing and operating capital. Financial institutions
currently providing services to MSD could offer financial assistance to M/WBEs and
small businesses that typically face barriers to commercial capital.
12. Review Selection Panel Process
The evaluation panel members for engineering professional services and non-engineering
professional services contracts should have accountability for their individual scores.
The panel members should be required to sign their evaluation form. The evaluation
score of the panel members should be released when the Intent to Award is issued.
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13. Enhance M/WBE Outreach Campaign
MSD’s existing outreach campaign should be enhanced to promote the M/WBE
Program’s objectives and policy goals. The following outreach and marketing objectives
should be implemented:
(a) Disseminate press releases and public service announcements to inform
the media and community regarding MSD’s Diversity Programs Office;
(b) Pursue quarterly interviews with local radio and television stations and
partner with local business organizations to discuss opportunities for
collaboration that will benefit M/WBEs and small businesses;
(c) Make print and electronic information on MSD’s diversity programs
readily available;
(d) Draft a business development brochure and manual for MSD’s diversity
programs;
(e) Provide E-notifications for programs and events;
(g) Promote cross marketing strategies with other jurisdictions and trade and
professional associations; and
(h) Develop a quarterly newsletter that includes contracting information
pertaining to M/WBEs and highlights MSD’s M/WBE Program’s success.
B. Post-Award Recommendations
1. Implement M/WBE Subcontractor Substitution Standards
When an M/WBE is substituted out of a contract, the replacement should also be an
M/WBE. Prime contractors should provide written justification when seeking approval to
substitute another subcontractor for one already identified in the contract.
2. Institute a Payment Verification Program
The M/WBE Involvement Reporting web-based application should be modified to
capture all subcontractors and verify their payments. Each subcontractor listed as paid for
the previous billing cycle should be contacted electronically to verify the payment
received.
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3. Develop an Expedited Subcontractor Payment Program
The expedited payment program should be expanded to require prime contractors to pay
M/WBE subcontractors, subconsultants, truckers, and suppliers in a timely manner.
Prime contractors should be required to pay their M/WBE subcontractors within five (5)
days of their receipt of payment.
4. Publish Prime Contractor Payments
All prime contractor payments should be posted on MSD’s website as a means of
addressing the late payment problem and informing subcontractors of MSD’s payments.
5. Track All Subcontractors
Prime contractors should be required to record all M/WBE and non-M/WBE
subcontractors, suppliers, and truckers on the M/WBE Involvement Report web
application.
6. Conduct Routine Post-Award Contract Compliance Monitoring
Monthly contract compliance monitoring should be conducted to ensure that the
subcontractor participation listed in bids, proposals, and statements of qualification is
achieved for the contract duration.
7. Publish M/WBE Utilization Reports
M/WBE Utilization Reports should be published on MSD’s website measuring the
effectiveness of the M/WBE Program and present year-to-date payment, original award,
and modified award by change order or amendment.
8. Develop Contract Opportunities Forecast
A list of upcoming contracts should be published annually with a 12 to 24 month
forecast. The forecast should identify the industries within which contract opportunities
are anticipated to be awarded.
9. Provide Debriefing Sessions for Unsuccessful Bidders
Debriefing sessions should be made available to any unsuccessful bidders. This option
should be published on MSD’s website and included in the Notice of Intent to Award that
is sent to unsuccessful bidders.
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C. Procurement Process Enhancements
1. Standardize and Publish MSD’s Procurement Procedures
Standards should be established to make MSD’s procurement procedures and M/WBE
Program policies more accessible to the business community. MSD’s District
Procurement Procedures should be updated on an annual basis to reflect new policies and
procedures adopted by MSD, instead of periodically issuing addenda.
2. Implement a Commercially Useful Function Requirement
Prime contractors should be required to list certified M/WBE subcontractors, suppliers,
and truckers on their bids and proposals that will perform a Commercially Useful
Function (CUF). The responsibility for listing businesses to perform a CUF should be the
sole responsibility of the prime contractor.
3. Delegate to Diversity Programs Office Authorization to Approve
Subcontractor Waivers
The authority to approve a waiver to a contract-specific M/WBE goal should be
delegated to the Diversity Programs Office. The intent to grant a waiver should describe
the project, listing the MSD project manager, the prime contractor, and findings of the
Good Faith Effort review.
4. Quantified Good Faith Effort
MSD should quantify the good faith effort criteria in its policy in order to measure a
prime contractor’s efforts to secure the participation of M/WBEs when a goal is applied
to a contract.
For example, a prime contractor would earn five points for advertising at least twice in
the general circulation media, minority-focused media, or trade-related publications, ten
(10) days prior to submission.
5. Enhance the Goal Attainment Review
Goal attainment should be verified before a Notice of Intent to award the contract is
issued. The intent to award should be published on MSD’s website at least ten (10) days
prior to issuing an award. It should list the prime contractor’s name, award amount, and
subcontractors.
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D. M/WBE Program Enhancements
1. Expand Small Sewer Contracts Program
Consideration should be given to enhancing the Diversity Programs to include an
expanded Small Sewer Contracts Program. This change would expand the contracts in
the program to include all industries and limit the participation to small local businesses
(SLBEs). The program would be renamed the Small Business Contracts Program.
2. Certification Requirements
The approved certification agencies from which M/WBE certification is accepted should
be reconsidered. The certification policy should state that accepted certification agencies
must conduct certification based on verification of the application documentation and the
service must not be fee-based or under the jurisdiction of a trade or professional
organization.
3. Evaluate Staff Compliance with the M/WBE Program
Staff compliance should be evaluated through both department-level reports of M/WBE
utilization and staff performance reviews. The M/WBE quarterly monitoring reports
should describe the level of M/WBE contracting by department.
4. Fully Staff Diversity Programs Office
The Diversity Programs office should be further supported with the addition of more
professional staff. At a minimum the additional staff should be capable of performing
compliance monitoring and reporting, goal attainment reviews, good faith effort reviews,
and outreach services to M/WBEs and certified small businesses.
5. Establish an M/WBE Ombudsperson Position
The appointment of an Ombudsperson as a resource to support the Diversity Programs
Office should be authorized. The Ombudsperson should have the authority to receive,
investigate, and mediate complaints concerning the actions of MSD staff, its prime
contractors, and subcontractors.
E. Website Enhancements
1. Publish Useful Information on Homepage
A number of items should be available on the MSD’s website:
Virtual plan rooms
Upcoming informal contracts
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Utilization reports
Procurement procedures
Diversity Programs policies and procedures
Protest procedures
Debriefing process
Prequalification requirements
2. Maintain Navigation to MSD Website
Any domain outside of MSD should be loaded in a new window or new tab. Currently,
the external links on the “Supplier Diversity” page are loaded on the MSD parent
window. The user will lose navigation of MSD’s page once these pages are loaded.
3. Develop Mobile-Optimized Website
Given the popularity of small handheld devices, it is recommended that a mobile-
optimized website be implemented for a more efficient experience for handheld device
users.
4. Display the Contracting Telephone Number on the Homepage
The telephone number for the purchasing department should be listed next to “billing”
and “customer service” on the homepage and entitled “purchasing.” MSD should afford
the same assistance to its contractors as it does to its rate payers.
5. List Complete Contact Information for Procurement and Diversity
Program Departments
Names, telephone numbers, email addresses, and facsimile numbers for key staff within
Diversity Programs and Procurement should be published for the convenience of vendors
and customers.
6. Clearly Advertise CIRP Project Opportunities
Because CIRP projects require pre-qualification, these solicitations should be specified
on the Bid Opportunities page. MSD already advertises CIRP opportunities; however, it
is not always designated which projects are CIRPs.
7. Publicize the Entire Scope of MSD’s Diversity Programs
MSD currently has programs in place to support small businesses which should be
publicized prominently on the website. The Small Sewer Contractors Program is not
advertised anywhere on the site.
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8. Provide Bidding History on all Contracts over $50,000
The content provided in the “CIRP Overview” listing past and current businesses that
have bid and/or been awarded CIRP projects should become a standard. This listing is
comprehensive and should be used to provide the same information for all MSD contracts
valued over $50,000.
9. Promote Business Outreach Efforts
While MSD’s website has an events calendar and blog, it should provide links to market
area events, conferences, and training sessions as well.
10. Publish Small Contracts
Contracts under $25,000 should be listed and published on MSD’s website. The threshold
for informal contracts should be posted on MSD’s website, and M/WBEs and small
businesses should be requested to register their interest in performing the small contracts.
11. Offer Links to Small Business Enterprise Supportive Service Program
The MSD website should offer links to local governments and its trade and business
association partners in the market area that offer small business enterprise supportive
services.
12. Create Functionality to Advertise Pre-Apprentice and Apprentice
Programs Training Opportunities
Information contained under the “I am seeking a job” tab should allow pre-apprentice and
apprentice programs to post training information. The application criteria for the
apprentice programs should be published on this page by trade so that the page can act as
a centralized location for CIRP-related training opportunities.
F. Data Management Enhancements
1. Use a Unique Number for all Contracts Regardless of Procurement Type
One numbering scheme should be used for all purchase types in order to eliminate
duplicate contract numbers.
2. Add Source of Certification in the Prime Contractor Profile
A field should be added to the prime contractor profile to capture the certifying agency or
source. Currently, the Oracle system only captures the certification status.
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3. Utilize a Uniform Industry Code Classification System
The use of NAICS codes, an industry classification system, should be utilized to ensure
uniformity in the classification of contracts.
4. Create a System to Report, Track, and Collect all Subcontractor
Information
The M/WBE Involvement Reporting system used to report and track M/WBE
subcontractor payment information should be uniformly applied to all subcontractors
regardless of M/WBE status. This system should be enhanced to have the functionality to
track contract amounts and payments to all subcontractors, subconsultants, suppliers, and
truckers.
5. Create a Field to Capture Prime Contractor and Subcontractor E-mail
and URL Information
Adding an email and URL field in Oracle will help to facilitate communication when
necessary. Electronic communication is a simple way to establish contact between MSD
and its prime contractors and subcontractors.
6. Uniformly Capture Ethnicity and Gender for Contractors/Vendors
The gender and ethnicity of contractors should be uniformly captured regardless of the
procurement type. Currently, the ethnicity and gender is captured differently for purchase
orders, blanket purchase orders, and prime contracts.
7. Accept Electronic Signature on M/WBE Involvement Report Web
Application
The M/WBE Involvement Report web application should be modified to eliminate
redundancies and reduce the management effort that is currently required from the
Diversity Programs Office and the contractor to track and record the information. While
the M/WBE Involvement Report Form is easily accessible online, the current structure
requires that the form be completed and submitted online, as well as printed, signed, and
faxed to MSD.
The Disparity Study was completed and submitted to MSD in December 2012. Copies
are available on MSD’s website at http://www.stlmsd.com/home.
-A-1
MASON TILLMAN
ASSOCIATES, LTD
www.mtaltd.com