Racial disparities undermine Oakland’s contracting process. Can the city fix it?

This story was co-published with The Oaklandside.

Earlier this year, Oakland adopted a roadmap outlining steps to help minority and woman-owned businesses get a fairer share of public contracts. But for many contractors and advocates, the question is why has it taken so long?

In 2008, Oakland first commissioned a study to determine whether there were racial and gender disparities in the city’s contracting process for construction, architecture, maintenance and other services. 

That study, and subsequent studies conducted every five years, found that Oakland steered the vast majority of its public dollars to a small group of largely white, male-owned firms.

“Two decades, four disparity studies, and disparities still exist. It’s unacceptable,” City Councilmember Carroll Fife said when the most recent report was presented in February to the council’s Life Enrichment Committee, which she chairs.  

In construction, seven non-minority-owned firms received 71% of all contract dollars from 2016 to 2021, with four firms accounting for roughly half, the consulting firm Mason Tillman Associates found. 

“When discrimination is built into the system, you can have good people perpetuating bad policies,” Fife said. “And it recreates systems that are problematic for generations to come.”

Based on their availability, African American firms were expected to receive roughly $21.5 million of the city’s contract dollars, the study found, but received less than $700,000. Firms owned by white women received about $80,000, compared to an expected $6.5 million.

“The findings are not just troubling, they are appalling,” Brenda Harbin-Forte, a retired Alameda County Superior Court judge and chair of the Oakland NAACP Legal Redress Committee, said at the February committee meeting.  “We have let these things go on in our city. We need action.”

When the report came to the full City Council in March, more than 20 people gave public comment, criticizing the city’s contracting practices as preferential and discriminatory, and demanding the council take action.  

“I think there is evidence that there is preferential treatment, and I think that should be addressed,” Eleanor Ramsey, the president and CEO of Mason Tillman and the author of the report, told the council. 

Racial disparities aside, nearly 65% of the city’s prime contracts were awarded to non-Oakland businesses. Ramsey, a Black female Oakland business owner, said that’s bad for the whole city because it translates to lost tax revenue and fewer active commercial spaces.

“It’s good for the city to keep money within the city.  Just pure economics makes it important to do things differently,” Ramsey told the council committee.

The council accepted the report and directed staff to draft a road map to implement its findings. In April, city leaders accepted a staff report that spelled out steps the city would take to level the playing field.

Contractors are frustrated

Stanley Cooper, a Black man born and raised in Oakland, runs a civil construction firm and has found it difficult to compete for public work. 

“I started this company myself, but I want this to outlast me. And if Oakland keeps going the way it is, it’s going to be next to almost impossible for an up-and-coming company like myself to outlast a system that’s not really set to have a company like mine advance and grow,” Cooper said in an interview. 

Having started Cooper Construction and Engineering in 2018, Cooper said younger firms like his are often outbid by larger and more established companies that buy supplies in bulk. Smaller firms also have trouble abiding by the city’s requirement that contractors be able to fund a project for at least 60 days, he said. 

As a result, firms like Cooper’s often end up as subcontractors to larger firms on city projects. 

“When we say prime and subcontractor, they’re the same qualified companies. One just has access to the money to financially run a project, and the other doesn’t,” Cooper said. 

Oakland has tried to improve the odds for small firms like Cooper’s by making it easier to obtain the certification necessary to bid on city projects. Changes made in January to clarify the rules requiring contractors to be headquartered in Oakland worked to increase the number of certified minority-owned businesses, an April report from the city’s Department of Workplace and Employment Standards showed. But the needle barely budged for that group’s percentage of all city-certified contractors. 

As a result, city staff met with community organizations, contractors, including Cooper, and the African American Chamber of Commerce to address the findings and identify barriers that Black and other disadvantaged contractors still face, with the intention of developing a “roadmap” to address them, at Oakland’s Life Enrichment Committee meeting. 

“The City and stakeholders identified several areas of alignment related to contracting reform, transparency, and accountability efforts,” Emylene Aspilla, director of the Department of Workplace and Employment Standards, said in a statement. 

The city’s proposed roadmap was presented on April 21 and calls for helping smaller firms access bonding, insurance and capital, while exploring reduced bonding requirements for some projects. The memo also said the city would beef up outreach efforts to get small and minority-owned firms certified.

Ramsey said disparities persisted even in smaller contracts and discretionary procurement of services under $50,000, which are awarded without advertising to the public. 

“Disparity is highest where oversight is weakest,” Ramsey told the council.

The latest disparity report shows Black-owned firms made up nearly 16% of businesses available to take on work for the city but received only about 2.5% of contracts under $50,000 during the report’s time frame. This problem was observed about a decade ago in a similar study. In the city’s 2017 disparity report, African American firms made up 7.6% of the available construction firms but ended up receiving just 1.8% of contracts. 

Harbin-Forte called the situation an emergency. “This has been going on entirely too long, and you turned a blind eye to it,” she told the council. 

Subcontractors wait to be paid

The most recent disparity report does not make recommendations for how to fix inequities in the city’s contracting systems. But councilmembers discussed ideas at their April meeting. One issue that could be addressed immediately, Fife said, is timely payments to subcontractors. 

Despite the legal requirement that prime contractors pay subcontractors within 15 to 20 days of a job, subcontractors say they often are left to wait months for payment, with some reporting delayed payments up to a year. Cooper said he’s had to wait several months for a city contractor to pay him, and there is little he can do about it. 

“If you’re a subcontractor who’s trying to get work from a prime, it’s a good chance that you’re not going to cry too much about not getting paid in a timely fashion because, of course, we want to try to do business again with that prime contractor. And it doesn’t make it right.” 

The disparity report also noted subcontractors aren’t informed of when prime contractors are paid, giving them little ability to enforce payment rules or hold prime contractors accountable.

“If I don’t know if the prime didn’t get paid, then how do I know he’s seven days late?” asked a subcontractor who was not named in the report. “If you got paid and the people who work for you don’t know that you got paid, you can hold that check for another two months.”

Similar to the delayed payments, contractors say there are things the city could do to help small contractors better understand and navigate the process. For example, smaller contractors don’t have to obtain what’s called a bid bond. They only need to have a bond for up to half of the bid amount for a contract. So if they bid $500,000, they only need a bond for $250,000. But many contractors don’t know this, which has limited their participation.

“It wasn’t out to the contract community. It wasn’t written anywhere, it wasn’t a requirement, it wasn’t in the bid documents, so nobody knew about it. That’s huge, because we have a requirement that’s for us, but it just doesn’t get out to the community affected,” Samuel Adams, owner of SD Adams Corp., an Oakland civil engineering firm, said at the April meeting. 

Another recent change, said Aspilla, from Workplace and Employment Standards, was a decision by the city administrator to halt all waiver fees until further notice. 

Waivers allow the city to exempt certain contracts from local-business participation requirements, a practice critics such as Cooper say can weaken Oakland’s equity goals by allowing major projects to bypass small and minority-business protections.

Councilmember Ken Houston, who worked as a contractor before joining the council, says he has been waiting to see this waiver change for over 25 years. “It’s a little emotional to see that this change is actually happening, and I see some movement,” he said.

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