For 45 years, Kansas City’s Minority- and Women-Owned Business Enterprise program helped minority and women entrepreneurs get a foothold in an industry where connections, capital and a track record can determine who gets a chance to compete.
Now that program is gone.
The Kansas City Council voted 12-0 Thursday to repeal the city’s MWBE program and replace it with a race- and gender-neutral program aimed at small and locally owned businesses. City leaders say the new approach is designed to preserve opportunities for many of the businesses the old program helped while protecting the city from mounting legal challenges.
Kansas City established its MWBE program in 1981 to address documented barriers that kept minority- and women-owned companies from receiving a fair share of city contracts. Its most recent goals called for 14.7% of contract dollars to go to minority-owned businesses and 14.4% to women-owned firms.
Over the decades, the program helped minority- and women-owned construction companies, engineering firms and other businesses gain experience on public projects, build portfolios and develop the capacity needed to compete for larger jobs. Mayor Quinton Lucas pointed to opportunities connected with the new Kansas City International Airport terminal as a more recent example of the city using contracting to help smaller businesses grow.
“Kansas City has spent more than four decades working to ensure City contracts reach businesses and people in every corner of our community,” Lucas said.
Why the City Changed Course
The immediate pressure came from Missouri Attorney General Catherine Hanaway, who sued Kansas City in July, arguing that awarding contracting preferences based on race and sex violates the Equal Protection Clause of the 14th Amendment. City officials also cited recent U.S. Supreme Court decisions limiting government use of race in programs intended to remedy historical discrimination.
Lucas has made clear he doesn’t agree with the legal challenge.
“It’s ridiculous. I think this is something that is unjust, and I think it’s something that harms our community long term,” he said.
But the city chose to redesign the program rather than risk having a court dismantle it.
The replacement removes race and gender as qualifying factors and instead concentrates assistance on businesses based largely on their size and local presence.
A Different Kind of Small-Business Program
The new structure includes three primary tiers.
Local Business Enterprises can participate in goals on major construction contracts of $25 million or more. Local Small Business Enterprises can participate in goals on contracts of $400,000 or more. The smallest companies, designated Emerging Business Enterprises, can benefit from set-asides and bid incentives on contracts under $400,000.
Some of the provisions aimed at emerging businesses could be particularly significant. They can receive up to 10% of a contract upfront, won’t have retainage withheld and can be paid every two weeks — provisions that could help small companies that lack the cash reserves to finance payroll and materials while waiting for government payments.
The city also will continue mentor-protégé and joint-venture opportunities and assistance with bonding, financing and technical support. Existing MWBE and Small Local Business Enterprise certifications are expected to transition into the new system.
The Old Program Wasn’t Perfect
Even some defenders of MWBE say it needed improvement.
Gabe Perez, president of Unified Contractors, said certification and enforcement had evolved in ways that often benefited the same established certified companies, while newer and smaller contractors struggled to compete. He also said minority- or women-owned subcontractors sometimes were included to help a larger company meet city requirements during bidding, only to be dropped after the prime contractor won the job.
Those problems point to one potential advantage of the new Emerging Business Enterprise category: Instead of treating all qualifying businesses alike, it specifically targets the smallest companies with smaller set-aside contracts, financial assistance and faster payments that could help them establish a track record.
Still, Perez cautioned that replacing “minority and women” with “small business” doesn’t automatically address the barriers those businesses face.
“You can’t simply change the title of an ordinance and take the minority and women out and put ‘small business’ and expect it to work,” Perez said.
Other business owners complained that the city moved too quickly and without enough input from the people who had participated in the old program. The council responded by requiring public engagement and an advisory group as officials work out details of the new system.
Joe Davis, CEO of Custom Engineering and a member of the Kansas City Society of Black Engineers and Architects, said meaningful community involvement could strengthen the final policy and ensure those affected have a voice.
Lucas is optimistic that the replacement can survive legal scrutiny while continuing Kansas City’s tradition of creating opportunity.
“The goal is to continue to support the types of contractors we’ve supported for years,” he said, while building a permanent program that addresses “the constitutional challenges that exist before us today.”
Whether the new approach can reproduce the success of a program specifically designed to overcome racial and gender barriers will depend heavily on how Kansas City implements it — and whether the city’s smallest businesses actually become the companies winning the work.
