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* NATIONAL SCENE
Federal Minority Contract Program
Helps Firms Mainly In White Areas
Washington — The government’s
flagship program for minority en
trepreneurs awarded $19 billion in eon-
tracts over the last six years, with the
lion’s share going to firms whose head
quarters were in primarily white, well-to-
do neighborhoods.
An Associate Press computer analysis
of “minority setasidc” contracts handl
ed by the Small Business Administration
found that just 22 percent of the pro
ject’s dollars went to companies in
minority areas.
And those companies that qualified
for the program while remaining in
minority areas on average got fewer con
tracts and dollars thatnthose in white
areas, the analysis showed.
The SBA’s 8(a) program directs
federal contracts to minority-owned
companies for work ranging from com
puter processing to construction or
custodial services. SBA has told Congress
that one effect of these contracts has
been to boost job opportunities in less
prosperous city neighborhoods.
Yet to be more competitive, some
business owners said they moved out of
minority communities to get closer to
their federal customers.
“I was so far away from government
installations, the SBA was reluctant to
give me jobs,’’ said Samuel Hayes, who
moved his construction company out of
Benton Harbor, a city in south-western
Michigan where 90 percent of the
population is black.
Now his company, Rah Development,
does business from Northville, Mich., in
an area of the Detroit suburbs where half
the households make more than $167,374
and 90 percent of the population is white.
Near Customers
The program’s supporters say its goal
is to foster minority businesses, not com
munity development. And like any
business, they say, minority companies
need to locate near their customers. In
the 1990s, that often means the suburbs.
“It’s a business decision, not a social
decision as to the location,’’ said C'assan-
12
dra Pulley, SBA deputy administrator.
“It is not a program that is designed for
economic development in black inner-
city neighborhoods.’’
The analysis of 8(a) contracts showed
the average minority-contracting com
pany is in an area where 68 percent of
the residents are white, half the
households earn $37,415 or more, and
only one person in seven is poor.
In contrast, most black Americans live
in neighborhoods where minority
residents are the majority and where half
the households earn less than $24,550.
The Rev. Michael Pfleger, a Roman
Catholic priest on Chicago’s largely
black South Side, said, “I look at the
community I live in here, no businesses
are opening up. You can’t get jobs. I’ve
only seen a continual spiral downwards.”
There is no requirement that par
ticipants stay in minority neighborhoods
or that they be poor. In fact, en
trepreneurs can qualify with a net worth
up to $250,000, excluding their home and
business assets.
When SBA goes to Congress for fun
ding, it presents the program as a
business incubator that benefits im
poverished minority communities.
“Eight(a) firms prov ided employment
for over 102,000 men and women dur
ing fiscal 1992,” the agency said in its
most recent report to Congress. “Many
of these jobs are in the inner city and in
areas of high unemployment.”
The AP analysis, however, suggests
otherwise.
The study analyzed the contractors’
location by the ZIP code of their head
quarters, using racial, ethnic and income
information from the 1990 census. AP
reviewed almost 25,000 contracts cover
ing $17.5 billion of the $19 billion award
ed under the program from 1988 to 1993.
It was not possible to determine from
the data base where the companies did
the contract work, and the SBA said it
did not track the baekground of
employees who worked on the 8(a) con
tracts. Companies owned by blacks or
Hispanics make up three-quarters of the
program’s participants. The review,
however, found:
9% to mostly black areas
• Only 9 percent of the 8(a) contract
dollars went to businesses in black-
majority neighborhoods.
• Four percent went to Hispanic-
majority neighborhoods.
• Nine percent went to neighborhoods
with majority Asian, American Indian or
mixed-minority populations.
• Seven percent of contract dollars
went to neighborhoods with minority
populations from 40 percent to 50
percent.
The largest bloc of 8(a) dollars - 37
percent - went to companies in
neighborhoods with fewer than 20 per
cent minorities. And three-fourths went
to neighborhoods where the typical
household income was more than
$30,000.
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ZEBRA VOL. 2 ISSUE 8