Lightfoot proposes six-year extension of construction set-aside program and new eligibility standards
Chicago’s Construction Set-aside Program for Minorities and Women is one of the latest programs in major cities across the country.
Mayor Lori Lightfoot plans to keep it that way for at least six years, while relaxing standards that push minority entrepreneurs prematurely out of the program – but not enough to satisfy some aldermen.
Armed with a new “disparity study” commissioned by a federal judge, Lightfoot wants to extend the set-aside program until December 2027 and change its eligibility conditions by:
• Allow minority and women-owned businesses to qualify for the program until they reach 150% of the standard size established by the US Small Business Administration.
• Average gross revenue over a seven-year period, instead of five years.
• Restriction factors used to calculate personal equity by eliminating illiquid assets which include real estate, retirement savings and owner’s interest in uncertified businesses.
Ald. Roderick Sawyer (6th), former chair of the City Council‘s Black Caucus, said the mayor’s proposed changes were “a good start” but not enough.
Sawyer supports lifting the caps on gross income and personal net worth.
“I don’t think once you hit a level of financial success you should be cut off. I’ve always thought there shouldn’t be a limit to anyone’s personal net worth, mainly because it hasn’t changed color, ”Sawyer said Monday.
“Once these people reach a certain level, they complete the program. They hover for a few years doing nothing. They cannot get jobs in the private sector. They can no longer grow up in the public sector because they have been kicked out. And they are in a legal vacuum. They end up going straight back to the program. It does not mean anything.”
Businesses are now required to “graduate” from the set-aside program when average gross receipts exceed $ 33 million in the previous three fiscal years and when the owner’s personal equity exceeds $ 2.4 million.
Ald. Gilbert Villegas (36th) described these ceilings as unrealistic, given the abundant supply of construction contracts to come. Instead, he wants the caps raised to $ 10 million for personal net worth and $ 100 million for gross income.
“We are in a construction boom. We have a capital bill at the city, state, and a capital bill at the federal government, at O’Hare airport as well as at [private] development that requires “the participation of minority and women-owned businesses,” Villegas said.
“We have to be as aggressive as possible, given that there is a ton of work ahead. We want to make sure that our communities participate in these projects. SBA size standards are a national average. We are the third most expensive market to work. Gross receipts should reflect this.
Villegas would also increase the reserved markets for minorities (now 26%) and women (now 6%) by one percentage point per year. Or, at the very least, half a percentage point.
The mayor’s office said the ordinance introduced by Lightfoot on Friday “makes changes to reflect the financial challenges small business owners face and the prevalence of larger competitors in the local market.”
“These changes should allow certified companies to stay in the program longer while continuing to grow and build their capacity and may also encourage [minority- and women-owned businesses] to participate in the program, ”the Lightfoot spokesperson wrote in an email to The Sun-Times.
In a summary distributed to aldermen on Friday evening, the mayor’s office said consultant Collette Holt’s latest disparity study found “ample evidence that race or gender continues to be a significant hindrance … full and fair opportunity. “for minorities and women looking for urban construction contracts.
“Stereotypes, biased perceptions, assumptions of incompetence and downright hostile work environments remain all too common. Industrial networks remain closed to [minority- and women-owned businesses]. The contractors who use [minority- and women-owned businesses] to achieve the government’s affirmative action goals, even rarely soliciting them to bid on work unrelated to the goals, ”the summary said.
“The city’s program remains essential to the success and often even the existence of these businesses. Without positive corrective intervention, it is likely that the city would become a passive participant in the market failure of discrimination.
Chicago’s fallow program is one of the last in the country, but the road to sustaining it has been difficult.
In 2003, a federal judge responded to a lawsuit filed by the Builders Association of Greater Chicago by describing a series of legal loopholes in the set-aside law and giving the city six months to correct them.
Under the revised ordinance, Asian Americans were no longer automatically included in a “presumptively socially disadvantaged” group that includes African Americans, Hispanics and women.
The redesigned order also included a five-year sunset clause.
In 2012, the city launched a “graduated graduation program” allowing minority entrepreneurs who exceed the program’s size standards to phase out over three years. These companies get 75% credit in the first year, 50% in the second year, and 25% in the third year.
Four years later, minority and female entrepreneurs demanding a bigger slice of the pie temporarily derailed Mayor Rahm Emanuel’s plan to extend the set-aside program by five years. The council finally approved the extension after Emanuel agreed to raise the bar by two percentage points for minorities and women.