Defining diversity down: GLWA’s effort to promote inclusion relies on expansive definitions
Detroit-based water provider says it awarded 65% of its big contracts, last cycle, to small or minority businesses — but check the fine print
The Great Lakes Water Authority, the Detroit-based water provider to about 40% of Michigan’s residents, is selling bonds right now. On its roadshow presentation to investors, the authority says it has “awarded 65% of eligible contracts to disadvantaged, minority-owned, women-owned and small businesses.”
That covers a timespan from Feb. 1, 2021, to June 22, 2022.
Those are incredible numbers, especially since they amount to $121 million in contracts. And it only took one contract cycle.
Michigan Capitol Confidential reached out to learn what GLWA did to achieve the diversity in contracting that has dogged other Michigan firms.
This was especially compelling, given Michigan’s 2006 ban on affirmative action, which voters approved. Without being able to offer demographic preferences, how did the water authority get to 65% so quickly?
But interviews with GLWA officials showed that statistic, the 65%, is not what it appears to be at first glance. It comes from an expansive reading of the numbers and relies on categories such as “disadvantaged” and “small-business,” which are themselves expansive.
Of the 34 eligible contracts — those above $1 million — 22 met all four diversity criteria GLWA used. That’s where the 65% number comes from.
Three of the four criteria are scored, and they’re geographic in nature. If the business is Michigan-based, it gets a point. If it’s in the GLWA service area, another point. In a “disadvantaged community” within the service area, such as Detroit? Another point. On GLWA's 100-point scale, the geographic criteria account for three points.
The other 97 points are awarded on merit. But there is one more standard to account for.
The fourth criteria is not scored; it’s a box to be checked. The non-scored criteria is whether a contractor — or subcontractor — holds a state or federal certificate attesting it is a disadvantaged business, or minority-owned, or woman-owned, or a small business.
GLWA did not create its own diversity certificate and does not want to, officials said.
That part about subcontractors is important.
When GLWA says that 22 contracts make up the 65%, it means that between the main contract and all the many subcontracts, the various businesses met four criteria met: the three geographic criteria and the diversity certificate.
For instance If a woman-owned business gets a $100,000 piece of a $20 million contract, another subcontractor is based in Michigan, yet another is based in the GLWA footprint, and another is in a disadvantaged community — or if one firm accounts for all three — that’s scored as four for for, a win for diversity.
“There's no one concern that can do all of the work,” said Nicolette Bateson, GLWA’s chief financial officer and treasurer, on the importance of subcontractors. “There's no one vendor who can do everything.”
CapCon spoke to several GLWA officials this week via Zoom.
Contractors are also required to submit a diversity and inclusion plan, detailing their efforts to bring in a more diverse base of subcontractors. These are graded on a pass-fail basis.
“We’ve had companies get contracts that were given a failing grade,” said Michael Lasley, a procurement manager for GLWA.
Due to the state ban on affirmative action, GLWA’s diversity efforts are mostly social, or by means of social pressure. In some cases, it’s a simple matter of creating the networking opportunity where big-job contractors can meet with potential subcontractors.
The social pressure comes in conversations with bidders, after they submit their diversity plans. A failing plan might not cost a contractor money, for now. But small businesses tend to listen when the big businesses they contract with apply pressure.
GLWA is looking to hire a program manager for the diversity effort, Bateson said.
“I’ve been looking for nearly a year because I’m trying to look for somebody who can be both entrepreneurial, but also very organized and data driven,” Bateson told CapCon. “And so when we talk about the next evolution of the program over the next year, quantifying that vendor participation in the larger contracts is our is the next mountain that we want to climb.”
The 22 diversity contracts were valued at $121 million. But GLWA awarded a total of 34 contracts during the time period studied, and they totaled $340.4 million. This means the “65% of contracts” that GLWA cites to investors only account for 35% of the money.
Even with expansive readings and expansive categories, an organizational belief that diversity matters, and financial incentive to prove its diversity to Wall Street, 12 of 34 contracts, and all the subcontractors on $219 million of work, lacked either a diversity certificate or the geographic qualifications. Bateson said it's a "mix." As GLWA is Michigan-based, it seems most likely it was the certificate that was missing.
GLWA’s diversity push is still in its infancy. But for now, there is much to read in the fine print.
James David Dickson is managing editor of Michigan Capitol Confidential. Email him at email@example.com.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.