Beyond the Rhetoric: Minority Business Programs – How Much is Fake?
By HARRY C. ALFORD
Since I was in high school my conscience was about bettering the lives of fellow African Americans. As a teenager I would work at housing construction sites. Spotting drywall and clean up were my niche. At the same time, I would recruit my friends and relatives. Most of the guys would lay around during the summer but I convinced them to make that extra change. Construction bosses loved it because they would pay us less than normal wages even though we could do the work equally as well as grown men. In retrospect, I would wonder how many husbands and fathers we were keeping from making income. That part I regret. We were cheating or as they say now “fronting”.
When I turned 18 and began being recruited by college football coaches, I requested summer work. That was no problem. I was soon contacted by a manager for the California Department of Transportation – CALTRANS. He introduced me and my cousin to a union official who quickly got us union cards. Presto! We were in the highway construction union making good wage. Here we were again “fronting” as union labor. When it was time for me to go to the University of Wisconsin, I requested a transfer to the Madison, Wisconsin union hall. Instantly I received membership and began working the next summer in housing construction in the Madison area.
In reflection, I guess we were blocking hardworking family men from making their deserved income. All we wanted was extra cash for clothes, car and chicks. It was nice living at the expense of some deserving family. Fronting is fraud and it is evil.
25 years later I got into the Minority Business Development arena. I became Deputy Commissioner for Minority Business Development for the state of Indiana. The job was tailored made for my background. I had Fortune 100 experience in sales management with Procter & Gamble, Johnson & Johnson and the Sara Lee Corporation. Also, I served as a First Lieutenant in the US Army – Finance Branch. My job was to assist minority businesses in winning contracts from the Department of Administration for the State of Indiana. Immediately I excelled at the job. I took minority business percentage from 0.6% for state procurement to 6.2% within 18 months.
In verifying the numbers, I quickly notice a high amount false reporting for minority business activity. Many of the agencies would send in false participation numbers. Most were duped by prime contractors who would lie about the minority participation. It didn’t take long before I noticed there were majority owned subcontractors who were portraying themselves as minority. My auditing showed that 40% of the incoming numbers were false. My office would clean the false reports up and punish the perpetrators. Most notably, we had the largest prime contractor, Huber, Hunt and Nichols, banned from state contracting for five years. That set the example. So that 6.2% level that I referred to was real and verified. You had other agencies such as the cities, school systems and major corporations infested with these false numbers via the use of fronting. False claims of “minority business” is still alive today. I can detect it at the federal and state level and, most apparently, at the major corporation level. Agencies such as the Small Business Administration, National Minority Supplier Development Council, states, counties, cities and major corporations are infested with a certain amount of fronting activity. Bona fide and qualified firms are being denied equal opportunity because of the out of control evil activity. Many entities will stress proper certification processes to prevent such activity. Well, you can find the certification process can be fraudulent itself via bribes and false reporting. There are scandals popping up throughout the nation.
So, when you read about minority participation being reported by governments and private corporations please remember – fraud does exist more times than not. I have found it in the federal 8a program and the programs of some of our major cities – Atlanta, Chicago, Cleveland, Los Angeles and Washington, DC – just to name a few. These agencies are under pressure to produce impressive numbers and many of them will cut corners or be deceived by those reporting their performance to them.
There will be cities like Chicago that will claim set-asides for minority owned firms that will range in the 23 - 30% levels. The reality is they are infested with false reporting through the activity of front companies and outright fraud. They want to please the public but much of it is “smoke and mirrors”. Just like we would block good construction workers from receiving quality work, these front companies are blocking bona fide firms from receiving the good work that was intended for them.
I pray that some day we will clean this up. America deserves better.
Mr. Alford is the Co-Founder, President/CEO of the National Black Chamber of Commerce ®. Website: www.nationalbcc.org Email: firstname.lastname@example.org