Fair Shot: Minority Business Owners Advocate For More State Contracts

Magali Verdugo is no stranger to challenges.

In 2004, she immigrated to America from Ecuador and learned English.

In 2013, she started a construction company, a sector in which only 10% of the workforce and 14% of managers are women.

Last year, as the owner and president of American Building Wreckers, an East Hartford-based demolition and asbestos abatement company, Verdugo had to deal with the impact of COVID – which has postponed some projects – to support its employee base.

And now Verdugo is accepting a new challenge: advocating for the State of Connecticut to assess whether its set-aside program, designed to guarantee minority businesses (MBEs) like his a minimum percentage of contracts with the state, responds adequately. needs, in light of increased national attention to racial equity issues and the dire impact of the pandemic on minority-owned businesses.

In Connecticut, which first implemented its set-aside program in 1977, 25% of all government contracts must be awarded to small businesses and at least 6.25% of contracts must be specific to small businesses. minority-owned businesses.

Thirty-eight states have some form of layaway programs, according to the National Conference of State Legislatures, but Connecticut is one of the few to set a mandated percentage.

But the 6.25% gap for minorities has not changed for almost 35 years.

“The percentage [for state contracts] is too small and there is not enough area to grow them [minority] entrepreneurs to become more valuable for the [construction] industry, ”said Charles LeConche, Labor Relations Specialist for American Building Wreckers.

To encourage the state to examine any disparities in state contracts and, they hope, increase the percentage of state dollars allocated to minority businesses, Verdugo and LeConche are working with some state lawmakers to pass the bill. 5652 – introduced by Hartford Democratic State Representative Edwin. Vargas – to investigate the matter. It is one of the few House bills currently in the Legislature to address racial equity concerns.

It’s a question that is already on the radar of the State Department of Administrative Services (DAS), which administers the set-aside program, according to agency spokeswoman Lora Rae Anderson.

The curriculum, which is enforced by the State Human Rights and Opportunities Commission, can only be legally changed if the state conducts a formal disparity study that shows inequalities for certain minority groups.

And although funding for such a study has not been approved by the legislature in the recent past, Anderson said, state budget chief Melissa McCaw intends to commit carry-over funds into the state budget to finance a study on disparities.

“This past year has hit our economy hard and we know that… state government agencies have a role to play in our important recovery efforts, Anderson said. “We are optimistic about the launch of this disparity study and [potentially] make the necessary changes based on its results. “

Lifebuoy required

This focus comes as small employers in general and minority-owned businesses in particular grapple with the fallout from COVID, which has highlighted racial disparities, said Glendowlyn Thames, deputy commissioner of the Department of Economic and Community Development. (DECD).

“Among the most affected sectors [by the pandemic] were hospitality, tourism and retail and these are traditional industries in which minorities and women operate, ”Thames said.

According to the National Bureau of Economic Research, 41% of black-owned and 32% of Latino-owned businesses closed their doors temporarily or permanently last April, at the start of the pandemic, compared to a quarter of businesses owned by Latinos. women. and 22% of all businesses.

In part, Thames says, this is because minority-owned businesses traditionally face barriers in accessing capital through traditional lending institutions. In fact, a pre-COVID study by JPMorgan Chase found that more than half of minority-owned businesses have less than two weeks of operational cash reserves.

This is not the case with Verdugo’s company, which generated $ 2.5 million in revenue in 2020 – modest growth in recent years.

But she still relied on $ 100,000 from the federal government’s Paycheque Protection Program (P3P) to keep her 30 employees, all minorities, at work.

It is an infusion of capital that many minority-owned businesses have not received. According to figures from the Small Business Administration, of the 4.9 million loans granted under the CARES Act, only 2% went to black-owned businesses.

This has put additional pressure on federal and state governments to throw a lifeline to MBEs.

Recent changes to the PPP program, whose deadline has been extended to May 31, aimed to expand access for minority-owned businesses.

Meanwhile, Thames said the Lamont administration had attempted to provide assistance, including in October when it committed $ 50 million from the state’s CARES Act relief funds for grants to small employers. hardest hit by the pandemic; 50% of the money was intended for businesses in struggling municipalities.

It is a temporary solution to a longer term challenge. As the state – and its minority businesses – seek to rebuild the economy after the pandemic, providing access to capital and creating more access to state-certified projects for minority-owned businesses will be an important consideration. .

While Verdugo’s company is fortunate to have strong working relationships with several construction companies in need of demolition services, and its state certification status has created many business opportunities, Verdugo said that his push for greater equity under the state set-aside program was about his business; it is about the minority community as a whole.

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