Education & Workforce Development and Environment and Government

Industry: Let's build minority business: Construction consortium working on diversity

October 31, 2005

A consortium of some of central Indiana's biggest players in construction has set its sights on improving minority involvement in the $8-billion-a-year industry.

The Indiana Construction Roundtable, an organization made up of some of the biggest users and providers of construction services, on Oct. 12 approved a diversity outreach initiative. The ambitious plan aims to increase minority participation in the construction industry by rewarding contractors who support education and training, employ minorities and women, and mentor small minority- and women-owned businesses, among other goals.

Through the initiative, the area's major construction players are seeking to close what they say is a gap between the intent of current diversity programs and the reality.

"There are a lot of reasons why the existing system works well for some people, but I don't think it chairman of the ICR group that authored the diversity initiative, along with John Lambert, locally based Eli Lilly and Co.'s executive director of global facilities delivery.

Currently, goals of employing minorities and women in construction focus on determining what percentage of a project's total cost should go to contractors owned by minorities and women. A typical target might be 10 percent to 15 percent.

While that's a worthy and necworks well for the community as a whole," said Doug Morris, vice president of operations and facilities for locally based Clarian Health Partners. Morris is co- essary goal, Morris and others said, in reality contractors have found loopholes. For instance, some contractors develop "pass-through" relationships with certified minority- and women-owned businesses, where checks are written to a minority contractor but most of the money goes to a larger, non-minorityowned business.

"There's all kinds of games that contractors can play to meet quotas or meet goals, but they're not really building that firm or that industry to be viable on their own," said Steve Young, ICR chairman and director of facilities management for Indianapolis Public Schools.

Part of the problem, contractors say, is there simply aren't enough minority- and women-owned businesses to meet demand. Further, many such businesses are small startups that lack capacity to handle million-dollar contracts.

But the existing standards do little to encourage formation of new minorityand women-owned businesses, the initiative's authors said. One key way to do that is to encourage companies, regardless of their ownership, to hire, train and advance minorities and women. While some contractors already have such initiatives in place, current industry guidelines don't encourage or reward such efforts, they said.

"We do not believe that the construction industry is racist or operating out of prejudice," wrote the authors in the initiative. "It is merely responding normally to market forces."

With a new set of recommendations, ICR is hoping to introduce new criteria into the mix. And by enlisting some of central Indiana's most active users of construction services-including Clarian, Lilly and IPS-to adhere to the recommendations, ICR hopes its guidelines will become the new standard in the industry.

Some of ICR's recommendations include:

Setting up a point system to evaluate a contractor's minority participation, rather than setting a fixed percentage of dollars to go to minority-owned firms

Establishing broader criteria for what constitutes minority involvement. For instance, majority-owned companies could win points for employing and advancing a significant number of minorities or by mentoring a small minority-owned firm

Encouraging contractors to make training programs available to employees and to contribute to outside educational programs

ICR's next step is to begin convincing project owners to agree to adopt at least some of the initiative's recommendations. Without that buy-in, "the whole thing stops right now," Morris said.

At the same time, ICR will set up committees to "work out the nuts and bolts" of putting the recommendations into practice.

The general idea is this: Companies and government entities will voluntarily agree to adopt some or all of ICR's guidelines when they seek bids for construction projects. They set a scale to award points on, for instance, minority or women ownership or a bidder's training programs. Contractors, in turn, have an incentive to adopt the programs that will win them points when they bid on large construction projects.

Although the diversity initiative is still in its infancy, the presence of some of the industry's heavy hitters makes it likely to be more than a flash in the pan, said William Shrewsberry. His Indianapolisbased environmental consulting firm, Shrewsberry & Associates, is an ICR member and a minority-owned business.

"To have Doug Morris from Clarian and John Lambert from Lilly as champions is a great start," Shrewsberry said. "But I don't think it will be done overnight."

Although ICR's initiative is born of the private sector, the authors hope government entities will take notice and change their practices as well, since minority-hiring requirements are in place on every public project.

Some of the recommendations are already being adopted at the state level, said Claudia Cummings, deputy commissioner of the Indiana Department of Administration, which oversees involvement of minority- and women-owned businesses in state procurement, construction and public works.

A mentor program is being used on the $625 million stadium project, for instance. The state is also auditing past contracts to make sure minority- and women-owned subcontractors were actually used as promised, Cummings said.
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