How the City of St. Paul is Reforming its Procurement Policies to Open Opportunities to Inner City Businesses

A study by the Economic Policy Institute released in July 2012 highlighted what St. Paul policymakers already knew too well: the region faced a massive racial disparity in unemployment rates. Approximately five percent of white residents in the metropolitan region were unemployed, versus a staggering 18 percent of black residents. In order for St. Paul and all of its residents to truly thrive in the years to come, a radical intervention was required.

The situation became so dire that in 2013, Mayor Chris Coleman went as far as calling racial equity the “top priority” of his administration. As a first step, Mayor Coleman required staff in City departments to undergo racial equity training. In 2015, all departments were required to create a racial equity work plans that consider policies, services and program decisions from an equity and fairness point of view.

Some of the most remarkable progress to this end has been in the city’s Purchasing and Contract Compliance Division.

The work began with the assistance of Bloomberg Philanthropies’ “What Works Cities” initiative, which seeks to enhance the use of data and evidence in the public sector. As a part of this initiative, the City of St. Paul was selected to receive pro-bono consulting services; one of the program’s top priorities was to assist the City in adopting results-driven contracting strategies and other procurement best practices. Through this effort, the Government Performance Lab at the Harvard Kennedy School helped the city better understand why it wasn’t adequately reaching small, minority-owned businesses despite having targeted spend levels for each of these traditionally underserved groups.

The process revealed that many vendors felt that the City’s procurement processes were closed off. “They felt we had preferred vendors and that was that,” explained Jessica Brokaw, deputy director of procurement, contract compliance and business development for the City.

Structural barriers also impede the ability of minority- and women-owned businesses (MWBEs) to access government contracts. For example, the Insight Center for Community Economic Development reports that people of color are less likely to grow up in a household where someone owned a business, resulting in less intuitive knowledge about how to run a business or how the government contracting process works. People of color also tend to have fewer savings and more debt, meaning that they have fewer assets to invest in their businesses than white peers. Minority business owners also typically have weaker ties to prime contractors, which makes it harder to become a sub-contractor on a government-funded project.

These realities informed the city’s rollout of a new, more transparent procurement process.

That process included rewriting all of the city’s procurement guidelines to ensure that even those with basic reading skills could understand them. A new online bidding platform made the process more transparent, and allowed vendors to download bids free of charge.

An annual procurement fair hosted by the City also helps make opportunities more visible for potential vendors. In 2017, 350 vendors showed up within the first three hours of the fair.

St. Paul also teamed up with neighboring communities to offer multi-jurisdictional MWBE and small business certifications. The traditional certification process, which is required for small businesses and MWBEs to receive preferential treatment for government contracts, used to be burdensome. A firm that wanted to do business in Saint Paul, Minneapolis or surrounding communities would need to be certified by each of those local governments. Now, an accelerated, one-day Central Certification Program (CERT) workshop allows vendors to become certified as a small business or MWBE. This certification is recognized by government bodies at the City and County level across the region.

Since not everyone can attend these workshops, the city trained AmeriCorps volunteers to navigate the city’s online vendor system. AmeriCorps workers staff the public libraries so they can assist MWBEs and other business owners who may need assistance outside of the dedicated workshop time.

Larger contracts have also been unbundled to create smaller-scale opportunities for small businesses and MWBEs. The process involved opening up many of the City’s long-standing contacts, some of which had been held by a single vendor for up to 20 years.

Reopening the bidding process to new vendors helped the city save millions of dollars, and the “relationship with the community is so much stronger because vendors can see that we are open to them,” says Brokaw.

These efforts have made it easier for St. Paul to meet its inclusive contracting goals. The City aims to award 25 percent of public contracts to small businesses, and within that, 10 percent to women-owned firms; and 5 percent to firms owned by people of color. In 2016, the city exceeded or met these contracting goals, with over 30 percent of total business awarded to small businesses, 12 percent awarded to women-owned businesses, and 5 percent awarded to businesses owned by people of color.

St. Paul’s ability to promote equity through contracting has had a ripple effect in the City. Eight other organizations have subscribed to the city’s online vendor tool that includes a database of certified small and MWBEs so that other organizations can diversify their own purchasing. Additional subscribers include the Minnesota Sports Authority, the Port Authority, the University of Minnesota, District Energy and the Minnesota Council of Foundations. The City also hosts subscriber roundtables and organizes events to connect subscribers to local small and MWBE vendors.

More interventions are still required to fully address the staggering racial disparities in St. Paul. Yet, change doesn’t happen overnight. The progress the City has made in a short time is impressive, and its efforts should undoubtedly serve as a model for other cities in search of ways to increase opportunity for inner city businesses and residents.