“There appears to be no reason in logic why 99 percent of the businesses in the country are forced to squabble over 20 percent of the Federal purchase dollar, when a select 1 percent continue to capture their 80 percent market share largely undisturbed.” United States Commission on Minority Business Development, 1992. (The History of Black Business in America, Juliet E.K. Walker)
While the 20 percent cited above may now be 30 percent in some areas of the country, the issue raised in 1992 is still valid. According to the U.S. Census Bureau, small firms with fewer than 500 employees represent 99.9 percent of the total number of businesses in this country. This statistic is relevant not only to the political discussions regarding taxes but also to the disparities in the system, especially those pertaining to African American owned businesses.
One of the problems is the definition of “small.” Depending on the category and product, a “small” business can employ up to 1,500 persons, and they may have receipts as high as $21.5 million. General and heavy construction companies can be classified as “small” with annual receipts as high as $17 million, depending on the type of construction, and special trade construction annual receipts may not exceed $7 million. This is one aspect of the minority hustle game – and “minorities” are losing every day.
The “minority” business sector has been thrust into a game in which all of the businesses classified as such, and as “small,” must compete against one another. To make matters even worse, their small share is steadily eroding because large companies are playing the “front company” and “pass-through” games. So much for fair competition.
It is unfortunate that some Black owned companies are willing subjects in the front and pass-through games and allow their small businesses to be used by larger ones. They agree to alliances where all they do is sign checks or allow their names to be used in a partnership agreement that is purported to be 51 percent “minority” owned. Control? Well, that’s something else again; the small Black firm has little or no control or say-so when it comes to the actual business dealings. After all, it’s just a “front” company.
That same scenario takes place every day with White owned firms as well. A husband and owner of a large business puts his wife’s name on a business, gets it certified as a WBE (woman owned business) and he’s off and running after a cut of that 30 percent piece of the pie. Sad thing is virtually everyone in the industry knows this occurs, and many of them know exactly who is committing these misdeeds. The small firms are afraid to tell for fear of being excluded from future deals, and the large firms won’t tell because they are raking in the profits.
Other tactics that especially affect small Black construction firms include “bid shopping,” unpaid change orders, high bonding costs, tying up bonds for an inordinate period of time, setting and holding high retainer percentages from contract amounts, unions that steer certain employees to the jobs while passing over qualified Black union workers, and prime contractors taking 60-120 days, and longer, to pay their subcontractors, despite having already been paid themselves.
I am very proud to say, however, that through the cooperative efforts of the Cincinnati branch of the NAACP, the Cincinnati African American Chamber of Commerce, and the Cincinnati City Council, along with major construction company partners, developers, and project owners, we have made significant gains by pointing out and stopping unethical practices that plague the construction industry, in both the public and private sectors.
Yes, the games continue and others are being invented all the time. But we have had tremendous success relative to the problems not only in construction but also in the professional services and supplier industries; and we acknowledge and celebrate the firms and individuals that are working with us to grow our small businesses.
Rock Ventures, Caesar’s Horseshoe Casino, Cincinnati Center City Development Corporation, the Metropolitan Sewer District, Mercy, Children’s, and Christ Hospitals, Princeton School District, the Cincinnati Public Schools, and many of their prime contracting firms have led the way to significant increases in revenues for small Black businesses, as well as other businesses legitimately classified as “minority” and “women-owned.”
Across the nation the hustle goes on, but we must continue to fight against it by calling out the offending companies and even our own brothers and sisters who participate in unfair practices. We must also be resolute in our stance against those union officials who perpetuate the inequities that exist, particularly in the construction industry. If we work together to bring fairness to the game, our businesses will have every opportunity to grow into large businesses, rather than having to stay in that “small” and “minority” category. How does your city measure up?
Jim Clingman, founder of the Greater Cincinnati African American Chamber of Commerce, is the nation’s most prolific writer on economic empowerment for Black people.