Minority firms struggling after I-200

Published 9:00 pm Saturday, November 3, 2001

By Peggy Andersen

Associated Press Writer

SEATTLE — Former Seahawk Fred Anderson’s concrete-construction business flourished for years, taking in between $4 million and $5 million a year with 10 to 15 people on the payroll.

Leajak Concrete Construction did mostly government work since its founding in 1992, fitting into the "minority" slot created by programs to ensure opportunity for those historically left out of the "old boy network."

A sheaf of letters from satisfied general contractors attest to Leajak’s efforts.

"As long as you do good work, they’re going to ask you to come back," Anderson theorized.

But three years after voters approved Initiative 200, which eliminated state preference for women and minorities in education, hiring and contracting, Leajak is struggling to bring in $1 million a year. Its payroll has been slashed to three: Anderson, a supervisor and a part-time bookkeeper.

When he calls now about bidding a job, he’s often told, "Gee, Fred, we don’t need a minority contractor on this job."

He’s still reeling from his failure to snag work on the new Seahawks stadium. As a former defensive end with Seattle’s NFL team and the Pittsburgh Steelers, "it hurt me to my soul not to be involved in that job," Anderson said.

Before I-200 took effect in 1998, the state encouraged use of minority outfits — usually subcontractors — on state construction projects.

The program "helped us grow," said Reginald Frye of Seattle, whose Three A Industries predates affirmative action. "It gave us opportunities to participate."

The state’s goal was to hand off 9.6 percent of the work to minority-owned companies.

In fiscal 2001, just 3.1 percent of the $884.6 million in contracts from executive agencies — $27.6 million — went to minority-owned businesses, down from 4.9 percent — $56 million of $1.15 billion — in 1999. The program’s best showing was 1998’s 10.8 percent — an average that obscures shortfalls in some areas, officials said.

While I-200’s goal was to eliminate preferences, "the preference for big business hasn’t gone away," Frye notes.

That’s the key point in a federal lawsuit filed last summer by the Pacific Northwest Chapter of the National Black Chamber of Commerce, which cites I-200 in alleging blacks are being illegally shut out.

"I think everyone is struggling to try to figure out how do you continue to have this participation by minority-owned businesses," said James Kelly, head of the Urban League of Metropolitan Seattle.

Getting started in construction is tough. Big companies offer economies of scale that start-ups can’t match. Longtime players have relationships that ensure them a piece of the action.

These factors were part of the equation that produced national and local affirmative action programs.

Affirmative action helped minority contractors get started and begin forming relationships — "but it’s not enough" to counter the advantages offered by more established operations, said William Bradford with the University of Washington’s business school program. And the only recourse now is "moral suasion."

Or, as Anderson puts it, getting people to "do the right thing."

Anderson looked into Seattle’s new Boost program, intended to help bridge the gap with help for businesses at an economical disadvantage. But the earnings cutoff for eligible firms is $15 million a year.

"How can I compete with a $15-million-dollar-a-year company?" Anderson said.

City officials say the fledgling program is still being fine-tuned. It’s one of several efforts being made to keep minorities in the loop.

While the city can’t require use of minority contractors, it encourages the practice. The state’s Office of Women and Minority Business Enterprises is also working to help.

"We’ve stepped up our efforts to make firms aware of the opportunities available to them," said Kathy Canorro. There are still mandatory goals for federal projects, and her agency works with the Small Business Administration and the U.S. Transportation Department.

Canorro says the number of companies registering with her office has dropped nearly 40 percent — from nearly 4,700 companies to about 2,900. But that doesn’t necessarily mean they’ve failed, she says. Many simply don’t see any reason to sign up.

Some suggest minorities were hurt by the system created to help them.

Various affirmative action efforts "did get minorities work, but it didn’t make them very failsafe," said David Allen, who oversees marketing and development at McKinstry Construction, a 45-year-old company that touts its diverse workforce and mentoring programs.

At McKinstry, "we’re striving to get our costs down, productivity up, constantly. That’s a motivation that’s not there if you’re dealing with set-asides," said Allen. "This is a high-risk, low-margin business. The rate of failure is second only to restaurants and bars."

Banks and insurance companies are well aware of that, so David Tyner at Tyrisco helps smaller operators secure commercial insurance and bonding. He’s not surprised by minority contracting’s struggles since I-200.

Many big operators saw affirmative action "as an added cost and a pain in the neck," Tyner said. "Why share the gravy?"

Initiative sponsor Tim Eyman — best known for a series of popular tax-cutting initiatives — was having difficulty when he got an assist from conservative radio host John Carlson, Republican candidate for governor in 2000.

Carlson billed the measure a "civil rights" initiative, which drew catcalls from opponents but helped sell it to voters. And he remains a believer, saying affirmative action was "a classic case of trying to make two wrongs into a right."

Carlson says denying minorities a fair share of government contracts and other benefits is wrong — "It’s a felony and should be aggressively punished" — but cites his own blue-collar origins in dismissing the goal of a level playing field: "There’s no such thing."

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