South Bend payments to minority- and women-owned businesses are declining, data shows

SOUTH BEND — The complex implementation of a city program meant to ensure an equal playing field for minority- and women-owned business enterprises has left appointees to an oversight board confused about whether conditions are improving or worsening.

Data presented in a report on 2020 efforts shows the fraction of payments made to minority- or women-owned businesses has gradually declined since 2018, falling from 4.8% to 3.7%. And numbers shown in the same report for 2021, made public in May, indicate a further decline to 2.4%.

Established in 2019 but repealed and replaced in May 2021, South Bend's Minority and Women Business Enterprise Inclusion Program sets an annual goal of buying at least 6% of all its goods, services and public works from firms owned mostly by people of color or women. The program's implementation was delayed two years because the original goal of 15% was lowered after an error was found in the disparity study on which it is founded.

Frustration boiled over during a recent meeting of the Inclusive Procurement and Contracting board because mixed messages from Michael Patton, director of the Office of Diversity, Compliance and Inclusion, left members unclear on whether the numbers accurately indicate that the city's inclusion efforts are failing.

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In response to vague caveats about the numbers failing to capture certain information about the city's efforts, Board President Keana Baylis was blunt: "If this is current information, then these numbers are horrible."

To Baylis' concerns, Patton initially replied, "That's your opinion."

Other board members responded with outcry. Baylis was joined by Michael Morris and others in rebuking Patton and saying the opinion of the board ought to matter. Patton was conciliatory.

Patton was unavailable to speak with The Tribune before publication, a city spokeswoman said.

Data presented at the same meeting by the city's chief innovation officer, Denise Linn Riedl, contradicted the trend shown by Patton's reports by indicating an improvement from 2020 to 2021.

But she told The Tribune the discrepancy is most likely due to her inclusion of city legal claims, which Patton's annual reports exclude as outlined in the ordinance establishing the program. "Emergency contracts, legal consulting contracts, or specialized engineering services" aren't governed by the program, nor are transactions for less than $50,000.

Riedl said her office is working with Patton and the IPC to determine which metrics should be included in perpetuity in order to find a substantive measure. The goal is to establish a consistent tracking method and avoid contradictory data.

Regardless, South Bend Mayor James Mueller told The Tribune he agrees the percentage of disadvantaged businesses earning city contracts is poor. He said the trend aligns with underperformance by other governmental entities.

"We would agree that we’re not anywhere close to where we want to be," he said.

"I don’t think there’s anyone that says we’re where we want to be," he added. "I don’t think anyone liked where the starting point is when we began this program, where there’s such a low number of available firms in our area.”

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Jeff Rea, vice president of the IPC board and the president of the South Bend Regional Chamber of Commerce, said he's "been on this board a long time and it's really complicated."

"It's really difficult to understand whether we're making any progress toward the objectives here," he said.

Beyond issues tracking the data, he has noted that more than three-quarters of the minority- or women-owned businesses that earn contracts are consistently from outside the Michiana region. Those firms may raise the percentage rate toward a goal, but they don't build a base of diverse local contractors.

Mueller said the lack of a local base of suppliers owned by people of color or women is part of why the numbers are low. He also cited multiple program false starts that delayed the integration of goals into city purchasing processes until after May 2021.

"Even when we do hit our goals," he said, "oftentimes these (minority-business enterprises) are not local because we don’t have a large market availability here in the South Bend region.”

Mueller clarified that Patton's role is to prepare an annual report on the numbers, but he isn't directly involved in the goal-setting process for each bid awarded by the Department of Public Works or each good or service bought by the city. The percentages are obtained through formulas that multiply the market share of firms owned by women or minorities in all 92 Indiana counties and Berrien County, Michigan.

Efforts made before a 2019 disparity study, corrected in 2020, were stalled because the city hadn't established its legal basis for explicitly seeking business with minority- and women-owned firms. The study, conducted by consultant Collette Holt & Associates, focused solely on South Bend public works contracts from 2015 to 2017.

Mueller said while percentage goals may go unmet in the interim, the city's focus now is building initiatives like its Business Assistance Suite and Mentor Protégé Program to strengthen the base of disadvantaged business enterprises.

"We need to do everything we can," Mueller said, "to boost the number of local (minority- or women-owned) firms that will bid on city projects or work with prime contractors who do win city contracts.”

Morris, a Notre Dame professor of entrepreneurship and social innovation, told the Tribune that in spite of his frustration during the meeting, he thinks Patton is making a respectable effort to improve local conditions for minority- and women-owned businesses.

But "we need results," Morris said. "I just think everybody involved, including the city and Mike Patton, are trying to move things in the direction they need to move. I think the results are inadequate, but the effort's there, and I think in time it will pay off. But there is frustration about this data.”

Morris knows the difficulty of establishing a pipeline of businesses owned by members of disadvantaged groups. Leading Notre Dame's South Bend Entrepreneurship and Adversity Program, he oversees a 12-month program designed to help local businesses and nonprofits become financially sustainable in the long term.

The pool of qualified minority- or women-owned vendors, he agrees, is too small. Local entrepreneurship networks tend to give more support to high-growth, tech-focused businesses that drive economic growth, he said. The ventures of smaller local businesses, such as those involved in construction, are often overlooked.

“The bigger issue for me is you have to really start to think in terms of a pipeline of qualified vendors who are women- and minority-owned, and how you nurture and foster that pipeline," he said.

“The payoff from that is not immediate," he added. "It’s going to take time."

Email South Bend Tribune city reporter Jordan Smith at JTsmith@gannett.com. Follow him on Twitter: @jordantsmith09

This article originally appeared on South Bend Tribune: South Bend efforts to pay more to minority, women-owned businesses lag