Minority Business Bidding for Local Government Contracts: The Complexity of Availability

Abstract

SUMMARY While minority-business enterprises (MBEs) have gained some access to local government contracts during the last three decades, these firms continue to receive a small share of local government contract spending relative to the number of available firms. Researchers have suggested two general explanations for the low representation of MBEs in contract awards: (1) lack of qualifications and capacity among MBEs, and (2) public and private discrimination against MBEs in contracting processes. This study on prime contract opportunities in a Northern central city and county with a large minority population finds that low bid rates greatly contribute to the low MBE shares of prime contracts and that bidding is reduced by both local government processes and characteristics of the firms. Some implications of these findings are that local governments need to: (1) monitor MBE shares of prime contract bids by size of contract and use share of bids as one measure of program and organizational effectiveness; (2) identify MBEs that are qualified for prime contracts and encourage and help interested firms to submit competitive bids; and (3) ensure that local government policies and practices do not diminish access to information about prime contract opportunities for qualified and interested minority firms. Another implication is that bidders lists should not be a primary basis for determining MBE availability, since many qualified and interested MBEs do not bid because of perceived barriers in local government.