Disparity Studies

Cities and municipalities are increasingly concerned with determining whether minority contractors receive disparate treatment in the general contracting environment. Contractors employed by a city use a variety of subcontractors, many of whom are minorities. For non-city engagements, contractors have less stringent requirements placed on them regarding subcontracting. The question is whether minority subcontractors are used at the same incidence rate and for similar compensation rates for non-city jobs as for city jobs.

A second question arises as to whether the business environment in which minorities operate fosters growth. One hypothesis regarding the business environment relates to the availability of capital in the community for new business development. If capital is less available to minorities to nurture their businesses, then their growth is hampered and it becomes difficult for them to pursue business opportunities. If they receive fewer opportunities than would be expected when all other conditions are held constant, then there is no opportunity for sustained growth.

We conduct economic and statistical analysis to address these questions. We use data from the Federal government, from the city itself, and from surveys of contractors, banks, and other entities involved with the minority community to find whether minority businesses receive disparate treatment in contracting.







Case Examples:


For the city of Birmingham, Alabama, we conducted a disparity study that consisted of five distinct parts:

1) A study of contractors and subcontractors employed by the city of Birmingham,

2) A study of capital availability through analysis of bank filings with the Federal government in response to the Home Mortgage Disclosure Act,

3) A study of small business formation through use of the Public Use Microdata Samples (PUMS), a five percent sample of the 2000 Decennial Census,

4) A study of relative concentration of minority businesses through use of the 1992 and 1997 Surveys of Minority- and Women-Owned Business Enterprises (SMOBE/SWOBE).

5) A survey of the contractors and subcontractors determined through item one.

The five pieces worked together to provide a picture of contracting not only in Birmingham but also in the seven county area surrounding Birmingham. Many of the resources needed for significant construction jobs came from these other counties and so were the pool of available labor to be studied. In our research, we also considered whether contractors were able to effectively do the work required under different contracts. The granting of contracts is contingent on being able to demonstrate that the work required could actually be performed. This makes the analysis of disparity complicated, because hiring of minority firms needs to be in proportion to their capabilities, not just their numbers, if the city and county are to be effective stewards in selecting contractors to perform work for them.