COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, November 15, 2007 1:15 p.m. - - - PRESENT: COUNCILMAN W. WILSON GOODE, JR., CHAIR COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DiCICCO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO BILL 050950 - An ordinance amending Chapter 14 17-1000 of The Philadelphia Code, entitled "Employment of Low- and Moderate-Income Persons by City Contractors"... BILL 070684 - An ordinance amending Title of The Philadelphia Code, entitled "Contracts 17 and Procurement," by enacting a new Chapter 17-1500, entitled "Philadelphia Fair Criminal Record Standard"... RESOLUTION 070741 - Resolution authorizing the Committee on Commerce and Economic Development to hold hearings to review the annual disparity study... - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good afternoon. This hearing is called to order. This is a public hearing of the Committee on Commerce and Economic Development on Resolution No. 070741 and Bill No. 050950 and No. 070684. My name is W. Wilson Goode, Jr., Chair of the Committee. I note that a quorum is actually present, but a quorum is no 12 longer necessary. We will only be hearing the resolution today. The title of Resolution No. 15 070741, authorizing the Committee on Commerce and Economic Development to hold hearings to review the annual disparity study and City contract participation goals released by the Finance Department pursuant to Title 17 of The Philadelphia Code. Bill No. 050950 is not being heard today at the request of Councilman DiCicco, who requested the hearing originally, and Bill No. 070684 is now 3 11/15/07 - COMMERCE - RES. 070741 also being held at the request of the sponsor, Councilwoman Miller. Our first panel for the resolution is MBEC and Econsult. Let me note for the record Committee members present: Councilman DiCicco, Councilman Rizzo, Councilman Clarke was here and left the room. The other Councilmembers and Committee members are on their way. Councilwoman Miller was here as well, who will return. Please state your name for the record.
Yes. Good afternoon, Councilman Goode. My name is Carolyn Nichols. I'm the Director of the Minority Business Enterprise Council and Deputy Director of Finance.
Good afternoon, Chairman. My name is Steve Mullin, M-U-L-L-I-N, with Econsult Corporation.
Thank you. 4 11/15/07 - COMMERCE - RES. 070741 Ms. Nichols, will you be presenting the action plan that you submitted?
I thought it was important to present the action plan as part of the resolution's inquiry into the preparation of the participation goals that were presented in the third quarter FY07 report. It's part of our discussion of how -- not only how the FY08 participation goals were presented, but also how we intend to present the annual participation goals going forward and also in response to concerns that have been raised of late by the Controller's Office and others in terms of how the M/W/DSBE participation report is developed and so forth. So I thought it was important to set this forth. I appreciate your patience in allowing me to give this to you on such late notice. 5 11/15/07 - COMMERCE - RES. 070741 But just to go through it very briefly, within the next two to three weeks, we intend to accomplish a complete and thorough review of the participation report numbers that were presented in the FY06 report, FY07 third quarter report and soon-to-be-released fourth quarter FY07 report, and this review and verification will become part; in other words, will become an addendum, to the FY06 annual disparity study that's already been submitted to Council. This step is crucial in order for the City to verify and validate the City's actual utilization of M/W/DSBEs in City contracts, which serves as the baseline for the City's anti-discrimination policies and the methodological cornerstone of the City's remedial actions, including disparity studies. If the City's participation numbers are perceived as not credible, then all or any of the 6 11/15/07 - COMMERCE - RES. 070741 anti-discrimination strategies through MBEC or any other City agency is rendered ineffective and suspect as a practical reality. As part of the addendum, Econsult would also include a goal-setting report, which will serve as a policy guideline for the office of Director of Finance and MBEC to establish the City's annual participation goals that are required by relevant City Council legislation and could also be incorporated in setting M/W/DSBE participation goals in individual City contracts. The Commonwealth of Pennsylvania has adopted this methodology, and we believe that the City can benefit from using this methodology to establish credibility and believability in the City's annual participation goals, as well as the entire M/W/DSBE participating goal-setting process that serves as the 7 11/15/07 - COMMERCE - RES. 070741 basis for MBEC's participation reports and M/W/DSBE utilization strategies. Upon the completion of this review and findings, I intend to set up a briefing at your convenience that would include City Council representatives, the Controller's Office and any other appropriate stakeholders that want to get involved with us, at which the findings of the Econsult review will be presented. Certainly questions can be asked. The report can be amended based on these discussions, and Econsult's final report will be attached as an addendum to the FY2006 annual disparity study and released to the public and be made available on the City's website. It's crucial that the integrity of the City's participation numbers, which serves as a baseline for everything that we do at MBEC in terms of the anti-discrimination policies, must be established. So that's why we felt it was compelling that we set this process 8 11/15/07 - COMMERCE - RES. 070741 in motion before Christmas, before the end of this Administration and the commencement of a new Administration. So we look forward to your office participating, all of Council participating with us to clarify the participation numbers so that we can all be on the same page and understand going forward what we need to do and where we're going.
Thank you for your testimony, Ms. Nichols. Let me note for the record that Councilwoman Blondell Reynolds Brown, a member of the Committee, is also present. Ms. Nichols, let me begin by stating for the record, the Minority Business Enterprise Council has released several different documents that are available on their website related to participation: a new glossy piece telling about the record of the Street Administration over the last seven, eight years; a disparity study that was done by 9 11/15/07 - COMMERCE - RES. 070741 Econsult; a report up to the third quarter of Fiscal Year 2007; and a report dealing with Fiscal Year 2006. I would like to begin questioning regarding some of the participation numbers and goals set within those documents before Econsult presents their testimony. And I would note to the Committee members that copies of the goals for Fiscal Year 2008 can be found in the packets. Let me start with the first question, Ms. Nichols. What participation goal was set for disadvantaged businesses, DBEs, for Fiscal Year 2007?
In 2007, FY2007, the goals were not set in the same manner that they were for FY08 pursuant to the legislation 060855-A. So typically the goals were established department by department. So as you go through the detail, you'll see the goals were set in that manner, and what we found -- 10 11/15/07 - COMMERCE - RES. 070741
So there was no overall goal for participation of disadvantaged businesses in City contracting for Fiscal Year 2007?
That's correct, other than the Mayor's articulated goal of percent. So we found that to be 9 effective in implementing the legislation 10 060855-A, it made sense to have citywide 11 goals, which probably should have been 12 done all along, quite frankly. But in 13 the past, the goals were always set 14 departmentally, and in the report you 15 would show the goals of the reporting 16 fiscal year, you would show what was 17 achieved in the past fiscal year and you 18 would show what the prospective goal was 19 for the upcoming fiscal year. But it was 20 always done and broken out by department. 21
Let me ask 22 the question a different way, and if we 23 can stick to the answers to the question, 24 that would make it a lot easier and it 25 would go a lot smoother. 11 11/15/07 - COMMERCE - RES. 070741 You stated the Mayor's goal of percent, but aside from the fact that 4 there are mandated goals that are set now 5 or there's a mandate that goals be set, 6 as leader of the Minority Business 7 Enterprise Council, in the last fiscal 8 year, which just ended on June 30th, what 9 percentage of contract dollars was 10 supposed to go to businesses that were 11 not owned by white men? 12
As leader of 15 MBEC, during the last fiscal year, from 16 July 1, 2006 to June 30, 2007, what 17 percentage of contract dollars were 18 supposed to go to businesses that were 19 not owned by white men? 20
Okay. As leader 21 of MBEC, I adopted the goal that was set 22 forth by the Mayor, which was 25 percent. 23 So we sought to achieve that goal. So it 24 would have been 25 percent of -- I 25 believe FY07 was 539 million awarded 12 11/15/07 - COMMERCE - RES. 070741 contracts during that year. So the goal, if you will, even though it wasn't formally stated as such, the goal that we were targeting would be to achieve 6 percent awarded contracts for that year 7 be awarded to non-majority companies. 8
So if I ask 9 the question in reverse, as leader of 10 MBEC, during the last fiscal year, what 11 percentage of business were you expecting 12 to go to businesses owned by white men? 13
I thought I just 14 said we were targeting the 25 percent. 15
That's not 16 the question I asked. I asked the 17 question in reverse. So your 18 anticipation in the last fiscal year was 19 what percentage of business was actually 20 supposed to go to businesses owned by 21 white men? 22
No. Our goal was 23 at 25 percent of the City's awarded 24 contracts -- 25
You're not 13 11/15/07 - COMMERCE - RES. 070741 listening. The question is, what percentage was supposed to go to businesses owned by white men.
I'm not -- maybe I'm missing it. I'm not following exactly what you're saying. As I understand your question, and you can certainly -- and this is how I understand your question. As I understand it, what you're asking me --
Disadvantaged businesses are businesses that are not owned by white men.
What percentage of total contract dollars were supposed to go to businesses owned by white men in the last fiscal year? 14 11/15/07 - COMMERCE - RES. 070741
And you set a goal for businesses not owned by white men.
And so you assume the rest is going to businesses owned by white men; is that correct?
No, not necessarily. The target -- let me explain. The target that we deal with at MBEC is 25 percent to certified 15 11/15/07 - COMMERCE - RES. 070741 businesses. Now, as Econsult, the disparity study and the DJ Miller disparity study has shown, there are also non-white businesses that do business with the City that are not certified, and those businesses also do business with the City.
My question is about contract dollars. In terms of contract dollars, what percentage of contract dollars were you expecting to go to businesses owned by white men in the last fiscal year? It's an honest, direct, simple question.
I guess my answer is, I wasn't -- I'm not -- as leader of MBEC, I wasn't planning or expecting -- that isn't the focus of what I do. So I guess you could say that if I'm expecting percent of businesses to go to MBEC 22 certified firms, then the converse of 23 that would be that 75 percent would be to 24 majority companies, if you look at it 25 that way. Because I was targeting what 16 11/15/07 - COMMERCE - RES. 070741 non-majority companies are getting.
The DBE goal for Fiscal Year 2008 is 32 percent; is that correct?
What we did was, utilizing the legislation, we looked at the present availability of the qualified DBE firms. We looked at the participation on past contracts. We looked at a forecast of eligible contracts to be awarded within the fiscal year, and we looked at the latest annual disparity study, which recommended a goal 17 11/15/07 - COMMERCE - RES. 070741 of somewhere in the neighborhood of 19 to 25 percent. We also looked at the DJ Miller disparity study which had been previously prepared that looked at -- that talked about a range of somewhere in the 20's, in that range. We looked at all of those factors and determined that based on those factors, 32 percent would be a goal that we could articulate for the third quarter, and as I've discussed with you previously --
I'm going to 18 11/15/07 - COMMERCE - RES. 070741 ask a simple question, because you're giving me long statements on every question I ask you and you're not getting to the point. We're going to spend a whole lot of time here we don't need to spend here, because these are very simple questions that require very simple --
Those are the factors I looked at to come up with those numbers.
My question is, how can you achieve 32 percent during this fiscal year if you couldn't achieve percent in the last fiscal year? 16
We didn't achieve it because we didn't -- the City didn't do everything that we needed to do to achieve it. But it is achievable. Thirty-two percent is achievable. Twenty-five percent is achievable.
Why is the goal for African-American-owned businesses only ten percent of all contract dollars?
What I did -- and this is what I did in setting the goal -- the MBE goal overall was 20 percent. In looking at the factors I just explained to you, historically African-American firms have all performed at the level of about 50 percent of the MBE goal. We 20 11/15/07 - COMMERCE - RES. 070741 also looked at the performance level for the third quarter report for FY07, which I included to you -- which is included in the FY07 report --
So the African-American goal was set at 50 percent of the MBE goal?
That's about what we were looking at. And we also looked at what was achieved.
I'm trying to answer. That's what we looked at and we considered. Those are the factors that we looked at. We also understood that this is our first time at doing this. This is the first time in the history of MBEC that we've broken out the ethnic groups. 21 11/15/07 - COMMERCE - RES. 070741 So this is the third quarter report. We knew that we would have another opportunity in the fourth quarter report to look at the numbers and review them and set them again.
Ms. Nichols, I am trying to be patient and I want to be nice, and I told Councilman Clarke, I promised him, that I'm going to try to be nice.
Stop being defensive, answer the questions very simple. The first question I asked you was, what was the goal for 2007, fiscal year 2007. The answer was percent. 19
The second 21 question I asked you was, what percentage 22 of contract dollars were supposed to go 23 to businesses not owned by white men. 24 The answer is 25 percent. 25
The question is, what percentage was supposed to go to businesses owned by white men. The answer is 75 percent. The next question was the DBE goal for Fiscal Year 2008 is 32 percent. The answer is yes. Why? Because that's what we determined it could be. I asked you is 32 percent achievable if you couldn't achieve percent the year 12 before. You said yes. 13 Now my question is simply, why 14 did you set a ten percent goal for 15 African-American-owned businesses? You 16 began to say that you set the goal 17 because historically African-American 18 businesses have only received half of 19 what minority businesses have received 20 and that's why you set the goal. Now, if 21 that's why you did it, just say that's 22 why you did it and we can move on. 23
Well, that was 24 one of the factors, Councilman. That 25 wasn't the sole factor. That was one of 23 11/15/07 - COMMERCE - RES. 070741 the factors.
I just want to know why you did it, and only you know, so tell me.
I'm trying to tell you, but you -- that was one of the factors. That was one of the factors. We also looked at the -- just as the legislation says, we looked at the forecast, we looked at what the performance was in the past contract, we looked at the performance during the third quarter, and that's how I came up with it. And I also said that it was part of my intent to put these numbers in the third quarter report, review them and then revise them as need be for the fourth quarter.
That has nothing to do with the ten percent goal. Why did you set the ten percent goal?
Because it's half of the minority goal? 24 11/15/07 - COMMERCE - RES. 070741
What's the other part? I'll let you talk, but you have to talk about what we're talking about, which is why you set the ten percent goal.
I am talking about what we're talking about. We looked at the performance of African-American firms in the third quarter. We have the numbers in the third quarter report. That was a factor that I looked at in determining the goal.
So what was achieved in Fiscal Year '07 in terms of African-American-owned businesses?
So African-American-owned businesses received seven percent of contract dollars in Fiscal Year '07. So you set a ten percent goal for Fiscal Year '08, 25 11/15/07 - COMMERCE - RES. 070741 which you believe is consistent because African-Americans have only received about half of what minority businesses have received. So are you saying that while you say that percent DBE 7 participation is possible, 32 percent DBE 8 participation is possible, what is 9 possible in terms of 10 African-American-owned participation? 11
Is it seven 13 percent? Is it ten percent? Can it go 14 higher than ten percent? Just tell me. 15
My plan -- 20 because it's an incremental approach. My 21 plan is to double the participation goals 22 within the next two to three years. I 23 believe that African-American firms can 24 perform at the level of 15 percent to 20 25 percent, consistent with the data that we 11/15/07 - COMMERCE - RES. 070741 have with the various disparity studies, and I intend to build up to achieve that.
My question is, for Fiscal Year 2008, what is achievable in terms of participation by African-American-owned businesses?
It's possible, but I would say 15 percent is achievable, I believe, based on --
I think that may 25 be above the -- it's possible, yes, it is 27 11/15/07 - COMMERCE - RES. 070741 possible, based on professional services.
Is 30 percent achievable? You know I'm going to keep going until you stop. Is 30 percent achievable?
That I'm not sure of. I think there we may have outstripped the utilization data I've looked at.
So 30 percent participation is achievable for African-American-owned businesses, but your overall DBE goal was 32 percent?
The overall DBE goal at least that I set for the third quarter was 20 percent. The overall goal was 32 percent. Oh, yes, you're right. It's 32 percent. I'm sorry. Yes, 32 percent.
I'll ask the 28 11/15/07 - COMMERCE - RES. 070741 question again. So 30 percent participation by African-American-owned businesses is achievable in Fiscal Year 2008, but your overall goal for all DBEs, African-Americans, Latino, women, disabled, is only 32 percent?
In your questioning you asked me if it was possible, and I said yes.
Now, the goal that I set at 32 percent, I wanted to hit something that we could achieve, we could hit as a threshold. We can certainly exceed -- we could always exceed the goal. The goal is only a threshold. And I set the 32 percent as an achievable goal that we can hit. But your questions to me was is it possible to hit higher. Yes.
No. We hit 25 21.34. So we didn't quite make it. We 29 11/15/07 - COMMERCE - RES. 070741 were about three points away.
So if the 10 goal was 32 percent for all disadvantaged 11 businesses but 30 percent you say is 12 achievable by African-American-owned 13 businesses, should the overall goal be 14 higher? 15
Why isn't 21 the African-American goal higher? Why is 22 the African-American goal ten percent? 23
I set the goal 24 based on the factors that I discussed. 25 It was our first attempt at this. I put 30 11/15/07 - COMMERCE - RES. 070741 it in here. I knew it would be reviewed and discussed, and I can always amend it for the fourth quarter. It was never my intention for it to be in stone and that's it.
We have established that you set a ten percent goal for African-Americans, but 30 percent is achievable, in your mind. So let's move on --
Let's move on to women. Why is the goal for women-owned businesses only ten percent of total contract dollars?
Why is the goal for women-owned businesses only ten percent of total contract dollars?
There again, it was based on the same factors that I discussed regarding African-American 31 11/15/07 - COMMERCE - RES. 070741 firms. I looked at the performance of women-owned businesses, as I discussed, and that's how I came up with the number for each of the categories.
In Fiscal Year '07, it was about -- I think it was close to seven percent.
It was about the same as the African-American business firm. It was about the same.
So the goal was ten percent, but what percentage of participation could women-owned businesses achieve in Fiscal Year 2008? Is it higher than seven percent?
Could women-owned businesses achieve percent 4 of total contract dollars? 5
Could they 7 achieve 20 percent of total contract 8 dollars? 9
Now, 20 percent I 10 think we would hit maybe a utilization -- 11 availability may be a problem, could be 12 an issue there. 13
So so far we're at possibly 30 percent for African-Americans and percent for 19 women. 20
Do you actually believe that African-Americans and women can receive 50 percent of contract dollars?
I believe that they should receive 50 percent and they can receive it.
I'm talking about for Fiscal Year 2008. Do you actually believe that African-Americans and women can achieve 50 percent participation in terms of all contract dollars?
What percentage of Philadelphia businesses are owned by African-Americans?
What percentage of Philadelphia businesses are 34 11/15/07 - COMMERCE - RES. 070741 owned by African-Americans?
I do, but it kind of faded. I have it right here. And I have the latest census data that I have available for 2004. Approximately 9,285 of the 62,894 businesses in Philadelphia County are African-American-owned. It's about 14.8 percent of the region's businesses.
I didn't ask the region. I asked what percentage of Philadelphia businesses are owned by African-Americans.
Philadelphia County I have 14.8 percent. That's the only data -- that's the data that I have, unless you have different numbers.
And how many black-owned businesses are there in Philadelphia? 35 11/15/07 - COMMERCE - RES. 070741
It's about 50 percent of the directory. It's probably a little under a thousand. It's about 50 percent of the directory is African-American-owned businesses. The directory is currently 1,200. So it's probably, I would say, about a thousand. It's about 50 percent of 1,200.
I'm sorry. Let me rephrase the question, because the question is actually in the context of Philadelphia businesses. How many black-owned businesses in Philadelphia are certified?
Of the thousand approximately -- and I don't have the exact numbers in front of me. Of the African-American businesses that are 36 11/15/07 - COMMERCE - RES. 070741 certified -- I don't have the exact number right in front of me. I can certainly get it to you, but most of those businesses are in the Philadelphia County region by far, and I can get the precise number to you. I don't have it in front of me.
So there are about 9,285 black-owned businesses in Philadelphia, and roughly how many are certified?
About half of our directory. I'll just say a thousand, give or take.
It's about 50 percent of our directory is African-American-owned businesses. 37 11/15/07 - COMMERCE - RES. 070741
What percentage of Philadelphia businesses are owned by women?
Twenty-two 19 percent of Philadelphia businesses are 20 owned by women? 21
How many women-owned businesses are there in Philadelphia? 38 11/15/07 - COMMERCE - RES. 070741