Less Than 1% of Santa Clara County Contracts Go to Black and Latino Businesses, Study Shows

If you had asked Walter Wilson to tell you whether Santa Clara County does a good job of spreading its many lucrative contracts out to a diverse set of businesses, he’d have given you a short and simple answer: No.

“This is a huge crisis,” Wilson said.

Wilson, a co-founder of the Minority Business Consortium and longtime civil rights advocate, said he’s been pushing the county to diversify its contracting base for more than a decade, even taking on an analysis of their procurement strategies in the past to help highlight the problems.

However, a recently completed study, more than two years in the making, shows what Wilson said he and many others already knew: Santa Clara County only awards a small sliver of its contracts to businesses owned by people of diverse backgrounds and women.

The $500,000 study, by consultant MGT, examined $2.4 billion worth of contracts the county awarded from July 2016 through June 2021 in various industries, such as construction, information technology, laundry, landscaping and equipment purchases.

Just over 15% of those contracts went to what the county calls diverse business enterprises, which are firms owned and controlled by Black people/African Americans, Asian Americans, Hispanic Americans, Native Americans or nonminority women, the study showed.

The overwhelming majority of contracts — roughly 85% and worth about $2 billion — went to firms owned by nonminority men or to firms MGT could not confirm as being a diverse business.

“This racism is so obvious, it’s just sickening, really,” said Wilson, who identifies as African/African Ancestry. “At the end of the day, this is systemic racism.”

In the study period, the county spent about $365 million with diverse businesses, though the largest chunk, about $172 million, accounting for about 7% of the contracts, went to Asian American-owned businesses. Nonminority women-owned businesses took in about $168 million, just under 7% of contracts.

Hispanic American-owned firms, meanwhile, took in nearly $16 million, and African American-owned firms collected nearly $7 million, together accounting for only 0.93% of the contracts. Native American-owned firms received just over $3 million, or just 0.13% of contracts.

The study report indicated the county could have nearly doubled its spending with those various categories of businesses, noting there was 28% availability overall of diverse businesses willing and able to do the work the county contracted for in that period.

James Williams, the county’s CEO, said at a recent board meeting where the study results were being presented that the study was long overdue.

“I think it’s to no one’s surprise that there’s very, very significant disparities in our contracting relative to the availability of minority and disadvantaged businesses in our community,” Williams said.

Williams and other leaders said this is the first time the county has studied its contracting for disparities, and though there are some severe limitations on the data — including the exclusion of any COVID-19-related expenditures — the county needed a baseline of information to begin addressing the issues.

Susan Ellenberg, president of the county Board of Supervisors, said she doesn’t feel the county ever intended to be exclusionary in its contracting.

“But I think that’s a very common justification, for many examples beyond the county, of unintended consequences being so ingrained into the system that at some point you have to say, ‘Is it really unintended, or was it actively not prevented?’,” Ellenberg said.

“We have not sufficiently actively prevented that kind of disparity, and I think it’s our obligation to do significantly better,” she said.

Supervisor Otto Lee said the report was upsetting to read.

“This underutilization of diverse business entities is disappointing, especially in light of the fact that our county has this constant refrain of how progressive we are, how we support our diverse communities,” Lee said. “This report shows that we are clearly not putting the money where our mouth is.”

The study’s authors also said the current county systems and software could “preclude both staff and vendors from participating in a transformative procurement culture” and noted that the county does not collect demographic data on its vendors or subcontractors.

And though the study said the county does well in outreach and has well-attended informational events, it hasn’t translated into more equity.

“While we can document many, many outreach efforts over decades to more deeply engage our minority business community, if the impact has not been more contracts, then to some extent, our outreach efforts are, I don’t want to call them meaningless, but are not significant,” Ellenberg said.

The county plans to take several steps to address the inequities, including updating its procurement systems to collect vendor demographic data and creating a one-stop online dashboard for contracts and procurements, which would show a forecast of upcoming bid opportunities.

The county wants to strengthen its outreach strategy “to municipal and ethnic chambers of commerce and local business advocacy organizations” and develop a small and local business enterprise program.

Officials said programs encouraging more small business participation in contracting would help support greater diversity without running afoul of Proposition 209, California’s ban on affirmative action, which prohibits quotas or preference in contracts based on race, gender or ethnicity.

The United States Small Business Administration Office of Advocacy estimated that in 2022, racial minorities owned 27.3% of all small businesses in California, the report said, and that women owned 43.1% of small businesses in the state.

The county administration plans to bring specific policy recommendations to the Board of Supervisors’ Finance and Government Operations Committee for discussion in August, officials said.

Supervisor Sylvia Arenas said she hopes to see quick action to address the disparities.

“This has been going on for a really long time. So either we do something about it now, or we’re going to study this away, and our small businesses are going to continue to disappear,” she said.

Wilson said he hopes to see aggressive action from the board.

“There has got to be an earnest, honest effort to really address this, and it’s got to happen immediately,” Wilson said. “Now that the facts are known, there are no more excuses, none.”