Study: AISD passive participant in discrimination

The Austin Independent School District board of trustees heard troubling news Monday: AISD’s contracting process does nothing to combat entrenched discriminatory practices among businesses and governmental entities in the Austin area, according to a recent disparity study.

The study, which began in May 2013, examined AISD, Travis County and the city of Austin’s business contracting and procurement practices. For AISD, these contracts pay a variety of businesses for services that include facility construction, food supplies and plumbing repairs.

Conducted by Nera Economic Consulting, the study examined how often the district hired minority- and women-owned businesses in the Austin area for its varying contract needs. It also surveyed a wider market of minority and women business owners – which included Travis, Williams, Bastrop, Hayes and Caldwell counties – for statistical and anecdotal information about their contracting experiences with AISD and other governmental entities.

Jon Wainwright, a senior vice president at Nera who presented the study’s results to the trustees, said the firm found differences in the contracted wages that minority- and women-owned businesses receive as well as in business-owner earnings and the rate at which these businesses form in the five-county market area.

Wainwright said that one of the reasons for these gaps is minorities’ – particularly African-Americans’ – and women’s lack of access to capital. While loan denial itself is a race-neutral cause for the differences, Wainwright said minority and women business owners are often denied loans when identical applications are approved for their non-minority male counterparts. Wainwright added that when these business owners manage to get loans, they often pay higher interest rates as well.

Wainwright said that data supporting these claims span from the mid-1980s through the early 2000s. After that time period, the Federal Reserve canceled a survey containing the information, but Wainwright said that his firm and other colleagues have since continued to gather data that supports the findings.

In addition, in order to gather information needed for the study, Nera staff pored over thousands of AISD contracts and subsequent related subcontracts. Minority- and women-owned business utilization is usually seen in subcontracts, Wainwright said, where prime contractors can discriminate against their services in ways that have nothing to do with the quality of work done.

“We feel very confident that the disparities we observe in the market area are largely, if not entirely, attributable to discrimination,” Wainwright said. “And that’s an important leg to the stool, to know that the market in which AISD is operating – in the absence of a formal (historically underutilized business) program – AISD might be what the courts call ‘a passive participant in the discriminatory marketplace.'”

Historically underutilized business (also known as HUB) programs often have participation goals or offer incentives for contractors and governmental entities to employ minority- and women-owned businesses as subcontractors.

Wainwright said that AISD’s direct employment of minority- and women-owned businesses is a “mixed bag.” According to board documents, AISD underutilizes minority- and women-owned businesses for construction and nonprofessional services, but uses more of these businesses in professional services and commodities contracts.

“These are institutional factors that don’t break down easily,” Wainwright added. “We see them when HUB programs are there, and (when they) then go away … you get a reversion to the norm.”

Wainwright recommended putting in place race- and gender-neutral as well as race- and gender-conscious measures in order to close the gap. These measures would put AISD closer to adopting a formal, overarching HUB program, which it – along with all but three school districts in Texas – does not presently have. Currently, AISD has two policies that encourage HUB utilization.

District 3 Trustee Ann Teich said she was in favor of creating a formal HUB program. District 6 Trustee Paul Saldaña said several AISD academic programs groom students to enter the construction industry or become small-business owners, so AISD should lead the way in this initiative. Saldaña chairs the AISD Board Oversight Committee on Equity, Diversity and Inclusion, which has regularly discussed HUB issues in the past months.

“Unfortunately, we do have legacy contracts here in Austin,” Saldaña said. “One of the challenges that we heard in the anecdotal and quantitative data is that a lot of minority-owned businesses can’t even get their foot in the door because we impose our own qualifications, and then prime contractors impose additional qualifications.”

AISD Superintendent Paul Cruz said staff would need at least a month to review the study and make its recommendation.

State Rep. Dawnna Dukes (D-Austin), who has a track record of involvement in this policy area, was present at Monday’s meeting. She said that in order to implement race-conscious measures under Texas law, AISD trustees must first accept and acknowledge the study results. Then, staff and trustees must sculpt a program that closely addresses those results.