AN ANALYSIS OF THE ATTITUDE OF MINORITY AND MAJORITY SMALL CONSTRUCTION CONTRACTORS IN THE PUGET SOUND REGION OF WASHINGTON STATE Roosevelt Butler, Trenton State College ABSTRACT The acceptance of minorities into the construction industry of the Puget Sound Region (Pugetopolis) of Washington State was the focus of this study. Questionnaires were sent to majority and minority owners/managers. These questionnaires were aimed at determining the perception each had of the other's abilities, skills and knowledge of the trade. This paper also emphasizes the importance of the Northwest Minority Contractors and Business Association as well as governmental agencies. INTRODUCTION The latest census conducted in Washington State revealed a population of 4,481,000 people. This population is largely concentrated in the Puget Sound Region. The Puget Sound Region (Pugetopolis) extends south in Western Washington from the British Columbia border to Oregon (Clark, 1979:23). Largest cities in the Puget Sound Region Are Seattle, Tacoma, Bellingham, Everett and Olympa (Tacoma News Tribune, 1987:B4). The population is largely concentrated in the cities of Seattle (490,000) and Tacoma (161,599), counties of King-Snohomish (2,284,500) and Pierce (538,000), respectively. The population in these counties total 2,822,500 which is more than 50% of the overall population of the state. This study is concerned with Minority Ownership in the Construction Industry and the problems encountered in obtaining a proportionate share of contracts resulting in financial stability and success in the Puget Sound Region. Background of the Problem During the past decade, the minority population in the state of Washington has shown a marked increase. With the Korean War bringing many military members into the Puget Sound Region, the population which was at one time transient has become permanent (Wade, 1977:2). In addition to the number of minorities that settled in the Puget Sound Region subsequent to the Korean War, the after-math of the Viet Nam War brought even more minorities. Each month, an average of 190 refugees arrive in Washington and about 120 settle in the Puget Sound area. The state now has about 38,000 refugees, two-thirds of them living around the Sound. During the past decade, more than 70 percent of refugees coming into the state are from Asia (Tacoma News Tribune, 1986:Al). Minorities in the Puget Sound Region are a unique group. They have a diversified background and many badly needed skills to boost a floundering economy (Tacoma Facts, 1978:5). Most of the minorities involved in business ventures are classified as small business owners/managers. The ratio or percentage of small businesses in the Puget Sound Region is very close to the national average, that is, 97 small businesses to every
large business. Of the 97 small businesses approximately 10% are minority owned and operated. There are 1054 minority construction firms in the State of Washington as of October 1986 (U.S. Department of Commerce:1986). Of that number 948 are located in the Puget Sound Region. The distribution is as follows: Minority
Number of Businesses
Asian (Chinese, Japanese, Korean and Asian Indian identities)
113
Black
75
American Indian and Alaskan
11
Hispanic
56
Pacific Islanders
59
Others (Not identifiable in the above groups)
125
Women (All ethnic groups)
615
(All women of minority ethnic groups and those considered to be disadvantaged were considered in this group by the United States Department of Commerce). Minority Business Development Agency reported in the summary of Fiscal Year 19761986 that $69 billion of federal funds were obligated for minority business development. During this same period Federal Funds obligated for minority business enterprises increased from a low of $1.5 billion to a high of $12 billion. The summary further showed that minority business enterprises percentage of federal procurement increased from 1.40% to 4.80% over the ten year period. In Washington State total federal procurement for fiscal year 1985 was $4,915,451,000 with $63,415,000 or 1.3% going to minority businesses. In fiscal year 1986, Washington State total federal procurement was $3,706,088,000 with $73,535,000 (2%) going to minority businesses for an increase of 0.7% (U.S. Department of Commerce Report Fiscal Year 1986). With large sums of money available for loans to minority contractors and other minority businesses in the Puget Sound Region, the anticipated success has not materialized. In May 1975 the United States Commission on Civil Rights found this situation to be prevalent throughout the United States, and attributed it to oversight on the part of contracting officers.
The Federal Government has enacted legislation in an effort to establish equality in dispensing government dollars for work done. The Small Business Administration has served as the "Watch Dog" to assure the small business person and minorities are included in the awarding of contracts and contract dollars. The efforts of the Small Business Administration, Department of Justice, and the Courts System have not been enough to assure equality in business and enforce business ethics (SBA Pam #15:12). The Problem Minorities constitute approximately 14% of the total population of Washington State. Yet, there are many areas of employment and expertise that minorities are not welcomed or encouraged to seek a livelihood by persons who have established themselves in the profession (Moss, 1979:3). A limited amount of success has been evident over the past ten or more years. In order to gain insight on how individual owners/managers of construction businesses perceive their position in the Puget Sound Region of Washington State, the following questions were set forth for research: 1. Have Minority Construction Contractors received an equitable share of the business in the Puget Sound Region of Washington State? 2. Does past experience with Minority Construction Contractors reflect an unfavorable opinion in the minds of the Majority Construction Contractors? 3. Are Minority Construction Contractors taking advantage of the many forms of training, seminars and college/university courses available through the Small Business Administration and Department of Commerce at the local, state and federal level? 4. Is the Northwest Minority Contractors and Business Association effective in its attempt to provide needed assistance in the form of counseling, legal service, administration, and training to the member firms? The Northwest Minority Contractors and Business Association (NMCBA) The Northwest Minority Contractors and Business Association is an organization whose specific function is to assist minority business persons. This assistance is not limited solely to the construction industry, it provides assistance to all minority owned businesses. The word minority in the title has the following meaning: an individual who has been declared to be Oriental, Chicano, or Spanish Surname, Black or Native American; a non-Anglo-Saxon; the smaller of two groups constituting a whole; a part of a population differing from others in some characteristics and often subjected to differential treatment (U.S. Dept. of Comm., 1982:III) Related Studies Some related studies have been conducted by the State of Washington Office of Minority and Women Business Enterprises, The Small Business Administration, The Interagency Committee on Minority Enterprises, The United States Comptroller General and The
General Service Administration. Each of these studies has generated some fallacies in the system, but no one has recommended a solution or a cure for the system that is ailing or has failed. The Federal Contracting Regulations and Executive Orders 11625 and 12432 directed the implementation of the Minority Business Enterprise Programs, but these have not successfully established a system where everyone is in agreement. This includes the President and Congress. Newspapers, radio, television and other forms of the media have all related cases of unethical practices of awarding construction contracts. There is reason to suspect that minority business persons have been literally locked out of consideration for many contracts and contractual services they were entitled to. The method instituted by large contractors, whereby sub-contracting is utilized, has directly affected the award or buy-in by MBE and WBE. It has also affected the award of construction contracts to minorities as primary contractors. It also must be considered that some of the minority contractors have been involved in unethical practices also. As recent as July 1987, an article appeared in the Tacoma News Tribune where a minority contractor had been cited for unethical practices. This particular individual had over the years been awarded several construction contracts based on the fact he had assured the contracting agency that he would employee a given number of minorities and disadvantaged persons. He initially employed these persons only to fire them or lay them off two or three days after the project was started. Those that were laid-off were never recalled and the firing occurred without reason. This incident showed that unethical practices do not occur only on the part of majority construction contractors. There are also many similar incidents that have occurred (Tacoma News Tribune, 1987:B1) DESIGN OF THE STUDY The study took two different approaches. The evaluation of perception of majority and minority contractors was conducted in the form of a survey. Two sets of questionnaires were prepared. The second approach was through interviews. The Director of Northwest Minority Contractors and Business Association and his staff at the Seattle headquarters were interviewed. Personal interviews were conducted in an office setting with a prepared list of questions focusing on knowledge, experience, and ability to contribute to the success of the membership. Questionnaires for Minority Owners/Managers In order to assess the attitude and perception of a representative population of the minority owners/managers the researcher developed and administered a survey of the total membership of the Northwest Minority Contractors and Business Association (See Questionnaires at Appendix I). The questionnaire was designed to determine if minorities in the construction industry: a. Have a thorough understanding of their rights under applicable laws.
b. Believe they receive a fair share of the jobs and dollars available. c. Feel that their success is hindered by the failure at the local, state and federal level to enforce applicable laws. Questionnaire for Majority Owners/Managers This questionnaire was designed to test the perception that majority construction contractors have of their minority counterparts. These questionnaires provided an evaluation for an unbiased view of the existing situation (See Questionnaires at Appendix II) The questionnaire was designed to determine if majorities in the construction industry: a. Are aware of the right of minority contractors under the applicable laws. b. Believe minorities receive a fair share of jobs and dollars available. c. Feel that minorities receive preferential treatment in the awarding of contracts. d. Feel that minorities are qualified to perform as construction contractors. e. Are willing to share the work on a competitive basis. Interview of Director and Staff NMCBA This interview assessed the qualifications of the Director and Staff NMCBA. It focused on: a. Education preparedness. b. Experience in the construction industry and other primary areas of responsibility. c. Contribution to membership, rapport with local, state and federal agencies to include the Small Business, Administration. The interview sought to determine if the NMCBA staff: a. Feel that owners/managers are capable of providing competitive leadership in a dynamic industry. b. Have a thorough knowledge of their responsibilities as trainers and management consultants. c. Feel the association has contributed in a positive manner to the success of its membership. Subjects Questionnaires were mailed to approximately 250 subjects from each group, that is, majority construction contractors and minority construction contractors. Those mailed to the minority contractors included members of NMCBA and non-members.
The interview was conducted at the Seattle Headquarters of NMCBA. Present were the Director, his assistant for Tacoma-Pierce County, and other staff members of the Seattle office. The questions asked were: a. How does NMCBA contribute to the well being of its members? b. Has the membership increased or declined during the past 5-10 years? If so why/why not? c. What qualifies you to function in the capacity/position you now hold? d. What is the average number of contracts awarded to each member firm on an annual basis, dollar value of each, and profit margin? e. Has the local, state, and federal governments abided by the applicable laws and regulations in dealing with minority construction contractors? How many challenges have been registered and settled in the courts? f. Are the owners/managers qualified (academically, experience and expertise) to meet the challenge of a dynamic industry? RESULTS OF THE STUDY The data were extracted from information provided from 136 returned questionnaires from the Minority Construction Industry Owners/Managers and 136 returned questionnaires from the Majority Construction Industry Owner/Managers. Demographic Data The sample population selected was taken from the respondents of the Seattle-King County and Tacoma Pierce County areas. To eliminate bias in the results of the research fifteen (15) representatives of each type of firm were selected. Consideration was given to the following factors: a. Years of Experience. b. Ownership. c. Number of full-time employees. d. Number of part-time employees. e. Annual gross income. f. Number of contracts received 1975-85, Dollars amount of contracts for same period. g. Membership in the NMCBA was considered for Minority Contractors.
Type of firms selected for this research analyses were (See Chart at Appendix III). a. Plumbing b. Painting c. Electrical d. Masonry e. Mechanical Of the 272 respondents the five types of firms mentioned above had the largest representation, largest number of employees (full-time and part-time), and the largest number of contracts awarded over the period 1975-85. Heavy construction, highway construction and underground utilities had insufficient number of Minority Contractors to be considered. From an analysis of the findings of this study four main results are indicated: 1. Minority Construction Contractors must strive to improve their image in the business world in order to become a competitive force. They must take advantage of the opportunities available through education, training and other forms of assistance to improve their knowledge, skills and ability to produce a timely and quality product or service. They must adhere to the attitude of Andrall E. Pearson in his article entitled, The Muscle-build The Organization. Pearson stated, "The only way to make a business live up to its potential is to get tough. Only an aggressive approach can make a difference quickly. The manager who succeeds establishes a higher performance standard across the board."(Pearson, 1987:51) 2. Local, state and federal agencies have enacted rules and regulations that are designed to assist the minority construction contractors. In 1983, Governor Spellman of Washington State informed the Washington State Economic Agencies that, "Owners have to operate their businesses profitably" (WA State Dept. of Comm. & Econ. Dev., 1983:3). To accomplish this he asked these agencies to provide training and retraining for workers, managers and owners. This was accomplished through the Community College Small Business Program. Monthly, classes were held at the Community Colleges and individual instruction at business location, for small business owners. This was also designed to reduce the 80% failure in the first year of operation (DCED, 1983). In the counties of King and Pierce including the cities of Seattle and Tacoma respectively, Affirmative Action Programs and Human Rights Departments have established policies, written regulations and passed ordinances (King County Ordinance No. 5983 and Pierce County Ordinance No. 81-121) to assist minority business-persons. Sections of these documents pertain only to the construction industry.
The counties and cities have the following established annual goals: Cities Seattle
Counties King MBE goal - 15%
MBE goal - 11%
WBE goal - 3%
WBE goal - 4%
Tacoma
Pierce
MBE goal - 15%
MBE goal - 12.2-15%
WBE goal - 5%
WBE goal - 6.9%
These goals are separate from those for the nonprofit organizations (City of Seattle-King County and City of Tacoma-Pierce County-WMBE Utilization Report, July 1, 1983-June 30, 1984) (HRD, 1984:10). 3. The laws, regulations, ordinances etc., have been enacted but not fully enforced. As late as July 1984, the WBE Program had attained only 78.76% of its goal (WBE Utilization Report, 1984:4). MBE goal was attained for the first and only time in 1984. This was a result of several departments exceeding 100% of the goal whereas others attained 0% of the assigned goal. 4. The majority construction contractors perceive minority construction contractors as lacking ability to perform at an acceptable level and that they, the minorities, receive too many special privileges. CONCLUSIONS On the basis of the analysis and findings of this study, the following conclusions can be made: 1. Although there is not total agreement between Minority Construction Contractors and the Northwest Minority Contractors and Business Association on the need for additional training, this researcher thinks that additional training is a necessity for increased success by minority businesspersons. The lack of skills and training in specific areas related to the art of managing in the construction industry has been and continues to be a detriment to the minority contractor. The needed training is available through the Community College System. There has to be initiative on the part of the minority owners/managers to avail themselves of this training at the colleges or request assistance at the individual business location.
2. The Northwest Minority Contractors and Business Association has to establish a better rapport between its membership and staff. This is necessary for the membership to develop more confidence in the abilities and value of the staff to the organization. 3. The various agencies at the local, state and federal levels have not been successful in their attempt to meet established or mandated goals. 4. There is a lack of confidence in the various programs by the minority contractors. This lack of confidence can be attributed to the fact the present system has only been sporadically successful. 5. Minority Construction Contractors are still experiencing difficulty in finding capital to finance projects, acquisition of surety bonds and successful acquisition of contracts through competitive bidding. 6. Majority Construction Contractors and building unions have presented obstacles to the success of minorities in the construction industry. 7. The attempt of the Improved Construction Practices Committee to increase minority participation in the construction industry by eliminating requirements for payment and performance bonds on public work will increase the number of minorities obtaining contracts. It can also lead to additional incompetency by contracts being given to the lowest bidder. 8. Larger contractors need to take the initiative in implementing Public Law 95-507, which requires them to increase subcontracting with small and/or disadvantaged firms in bidding on federal contracts. 9. It is possible for harmony to exist between the two groups, however, members of each must be willing to accept, assist and trust each other in the effort to provide quality service and be financially successful. With cooperation both groups can succeed and be profitable as stated by a former governor of the state of Washington. 10. Time and success will disprove and eliminate the strained relationship that presently exists between the two groups. This industry in years to come will be a source of pride to businesspersons and political leaders in the state of Washington. APPENDIX I Survey of Perception of Owners/Managers The following statements are intended to assess your perception and understanding of laws and regulations pertaining to Minority Construction Contractors. This also provides an opportunity to evaluate and express your opinion about the type and nature of assistance available through the Minority Contractors Association, Small Business Administration, and the Government- City, State and Federal level.
There are no right or wrong answers. The correct answers are the ones you feel or think at the time. Please indicate your agreement, or disagreement with each of the statements by selecting the appropriate response from the following list: a. Strongly Agree b. Agree c. No Opinion d. Disagree e. Strongly Disagree f. Don't Know Type of Firm___________________________________________________ Years of Business Experience___________________________________ Owner_________________________ Manager_________________________ Number of full-time employees__________________________________ Number of part-time employees__________________________________ Approximate annual gross income of your company________________ Number of contracts awarded 1975-85____________________________ Amount of contracts for the same period________________________ a. Strongly Agree d. Disagree b. Agree e. Strongly Disagree c. No Opinion f. Don't Know _____1. Being a member of the Minority Contractors Association has been an asset to me as an Owner/Manager. _____2. Training provided by the Minority Contractors Association has been valuable to the success of my business. _____3. I have fully used all available training services provided by the Minority Contractors Association. _____4. I need additional training, but I am unable or reluctant to attend additional courses, seminars, etc. a. Strongly Agree d. Disagree b. Agree e. Strongly Disagree c. No Opinion f. Don't Know _____5. There is a shortage of needed knowledge and skills among the members of the Minority Contractors Association Staff.
_____6. Assistance provided by the Minority Contractors Association has improved over the past ten years in terms of delivery of service, competency of staff, amount, availability and clarity of information. _____7. My continued membership in the Minority Contractors Association is dependent on stability of membership cost. _____8. My membership is based on improvement in organization, training, availability of consultant service and unlimited use of each as needed. _____9. I have read and understand those provisions of the Small Business Administration 8a Program as they pertain to my business. _____10. Consumerism is important to the success of the Minority Construction Contractors, therefore, it would be advantageous to be affiliated with an association that represents a contractor's industry. _____11. Service Corps of Retired Executives (SCORE) has been available to assist Minorities in the Construction Industry through the local Small Business Administration Field Office. _____12. Sound management recognizes that occasional borrowing is one of the accepted tools of the construction industry. It is therefore necessary that properly prepared financial statements be on hand when negotiating for a Small Business Administration loan. _____13. Small Business Administration should have authority to audit financial records of businesses listed in the SBA records. _____14. Financial planning is the prelude to effective borrowing. This planning must be based on facts that come from your records if you are to secure loans and use them profitably. _____15. Legal Assistance or representation is available to Minority Construction Contractors, through the Federal and Local Government. _____16. Through the use of SCORE and other agencies the Minority Construction Contractors find it increasingly easier to obtain contracts. _____17. There is a lack of confidence that is shared by most agencies in awarding contracts to Minority Construction Contractors. _____18. There are adequate progression opportunities for Minority Construction Business owners.
_____19. The quota system presently in effect for Minority Construction Contractors is adequate. _____20. A pooling of resources is an effective method to capture a proportionate share of the construction market. _____21. The success of Minority Construction Contractors is encouraging to new entrants to the industry. _____22. The Affirmative Action Programs administered by the Federal and local Governments are enforced in accordance with applicable laws and regulations. _____23. Court cases with regard to suits, mechanics, liens, etc., are handled expeditiously. _____24. Officials hearing the cases or challenges are sensitive to the needs of the Minority Construction Contractors. _____25. Appeals are prepared with the assistance of a qualified legal representative from the Small Business Administration Field Office or local legal office. _____26. Lawsuits, appeals and challenges are a waste of valuable time. _____27. The appeals or challenges ruled on through the legal system have been in favor of the Minority Construction Contractors. APPENDIX II Survey of Perception of Majority Contractors The following statements are intended to assess your perception of Minority Construction Contractors in the Puget Sound Area of Washington State. This survey will also assess your perception of the competency of Minority Construction Contractors and their staff as far as quality and timeliness are involved. There are no right or wrong answers. This survey is soliciting your answers based on experience and or observations. Please indicate your agreement or disagreement with each of the statements by selecting the appropriate response from the following list: a. Strongly Agree b. Agree c. No Opinion d. Disagree e. Strongly Disagree
f. Don't Know Type of firm___________________________________________________ Years of business experience___________________________________ Owner_________________________ Manager_________________________ Number of full-time employees__________________________________ Number of part-time employees__________________________________ Approximate annual gross income of your company________________ Number of contracts awarded 1975-85____________________________ Dollar amount of contracts for the same period_________________ a. Strongly Agree d. Disagree b. Agree e. Strongly Disagree c. No Opinion f. Don't Know _____1. The Minority Contractors Association has been a source of information relating to Minority Contractors. _____2. I have willingly subcontracted jobs to Minority Contractors. _____3. Most Minority Contractors produce quality work in a timely manner. _____4. The quality and timeliness of work performed by Minority Contractors need to be improved. _____5. There is a lack of knowledge and skills available through Minority Contractors. _____6. The quality of work performed by Minority Contractors will improve with experience. _____7. The enforcement of laws and regulations pertaining to Minority Contractors is not one of my major concerns. _____8. Most Minority Contractors lack the resources, that is, personnel, finances and equipment to perform at an acceptable level. _____9. I have used competent Minority Contractors in the past and will continue to use their services in the future. _____10. I am familiar with the laws and regulations that pertain to the rights of Minority Contractors as they relate to the industry. _____11. There are too many special privileges given to Minority Contractors. _____12. Federal, State and Local Agencies do not enforce the rights of Minority Contractors.
_____13. Minority Contractors are poor managers and basically poor business persons. _____14. I do not use Minority Contractors in my business. _____15. Minority Contractors should be allowed to compete on the same basis as Majority Contractors. _____16. There are too many Minority Contractors in the Puget Sound Region of Washington State. _____17. There are too few Minority Contractors in the Puget Sound Region of Washington State. _____18. I have recommended Minority Contractors for specific jobs. _____19. I have actively bidded against Minority Contractors for jobs. _____20. Most Minority Contractors are reliable. APPENDIX III The number of years of experience for each group by type of firm was as follows: Type of Firm Plumbing Painting Electrical Masonry Mechanical
Min 3 6 5 4 4
Minority Max Avg 16 8.8 24 9.3 17 8.3 14 6.4 9 6
Min 15 12 17 15 12
Majority Max Avg 38 19 23 16.4 35 20.3 37 22 27 18
Ownership of each firm was sole-proprietorship. Number of contracts received 1975-85 Type of Firm Plumbing Painting Electrical Masonry Mechanical
Min
Minority Max Avg
Min
Majority Max Avg
20 10 6 12 10
51 20 10 18 14
35 28 22 38 24
87 46 40 65 42
30.3 14.6 9.8 14.6 9.4
Number of full-time employees were as follows:
48 36 31 46 26
Type of Firm Plumbing Painting Electrical Masonry Mechanical
Min
Minority Max Avg
Min
Majority Max Avg
2 1 3 8 4
10 12 7 14 7
5 9 8 12 14
16 20 12 18 20
9 10 4.6 8.6 6.7
15 12 9 14 16
Name of part-time employees were as follows: Type of Firm Plumbing Painting Electrical Masonry Mechanical
Min
Minority Max Avg
Min
Majority Max Avg
1 4 1 4 1
3 6 3 5 2
2 7 2 6 2
6 12 6 7 3
Min
Minority Max Avg
Min
Majority Max Avg
37K 10K 38K 150K 120K
720K 250K 257K 420K 214K
187K 325K 172K 325K 425K
1.15K 565K 365K 580K 808K
2 4 2.1 3.8 2
4.2 6 3.6 5.6 2.1
Gross Income (1985) Type of Firm Plumbing Painting Electrical Masonry Mechanical
100K 63K 97K 153K 95K
832K 312K 201K 332K 473K
Specific ethnic group of the respondents was not considered in this demographic data. REFERENCES Clark, Norman H., Washington: A Bicentennial (New York: W.W. Norton Company Inc., 1976). Pearson, Andrall E., "The Muscle-build the Organization." Black Enterprise, March 1987: 51. Robert, Gilbert, "Concern Grows: Increased Number of Recent Refugees Going on Welfare." Tacoma News Tribune, August 3, 1986: Al. Wade, William, "A Study of the Population Growth of Washington State." Seattle, WA: 1979.
City of Seattle WMBE Utilization Report. July 1, 1983 - June 30, 1984, Prepared by the Seattle Human Rights Department. "State and Counties Disagree on Population." Tacoma News Tribune, July 27, 1987: B4. "The Economic Status of Minorities." Tacoma Facts, December 16, 1978: 5. Moss, Leonard D., "What is a Fair Share of Nothing?" Paper Presented to Minority Coalition, Tacoma, WA: 1979. "U.S. Department of Commerce, Economic Development Report." 1986. Washington, DC: Government Printing Office. "U.S. Department of Commerce, Fiscal Report." 1986. Washington, DC: Government Printing Office.
