Report yields mixed results on minority business contracts

August 06, 2005|By Andrew A. Green | Andrew A. Green,SUN STAFF

Gov. Robert L. Ehrlich Jr. announced yesterday that state contracts with minority businesses increased more than 20 percent in fiscal 2004, but the report he cites calls the figures "best guesses based on partial data known to be of questionable accuracy."

Ehrlich said in a news release that minority- and women-owned firms received about $513 million in state contracts during the budget year ending June 30, 2004, which would amount to 13.9 percent of total state contracts.

However, the text of the report, the head of the Governor's Office of Minority Affairs and the economist who helped compile the data say that number depends on a set of guesses about the accuracy of figures reported by state agencies.

Those involved in compiling the report say they believe contracting to minority-owned firms has increased, but they say it is impossible to know exactly how much.

The report presents a series of adjusted figures designed to compensate for what officials say is a longtime habit of state agencies to overstate their minority spending to come closer to the state's 25 percent goal.

The $513 million figure rests on the assumption that agencies still overstate their totals by 20 percent. The actual number the agencies reported was $641 million, or 17.4 percent of state spending.

Anirban Basu, economist and chief executive officer of Sage Policy Group, which helped compile the report, said the true figures are "a matter of conjecture" and acknowledged that the adjusted, lower figures are probably more accurate.

The initial version of a news release from the Governor's Office of Minority Affairs claimed $641 million in minority contracts, but after questions from a reporter, the office issued a revised version giving the $513 million figure.

Basu said both the raw and adjusted numbers suggest the government is making progress.

"Whether you're looking at the adjusted data or the raw data, the fact of the matter is more money is getting apportioned to minority-owned businesses," Basu said.

Using the adjusted numbers, minority contracting increased by 21.3 percent in 2004. Using the raw numbers, minority contracting still increased by 11.2 percent.

The report comes four years after a legislative audit found that state agencies inflated their minority contracting figures by as much as 40 percent.

After Ehrlich took office, he assigned Lt. Gov. Michael S. Steele to head a commission to study the state's minority business program and recommend changes.

Some critics say the governor's efforts have fallen short. Wayne Frazier, president of the Baltimore-Washington Minority Contractors Association, called yesterday's report "voodoo economics."

The laws passed by the General Assembly as a result took effect Oct. 1, 2004, too late to affect the figures in the report. But Office of Minority Affairs Special Secretary Sharon R. Pinder said she believes that agencies were already reporting data more accurately and making more of an effort to reach out to minority firms.

"It's been truly a culture change in state government," Pinder said.

Department heads are now required to sign off on reports of minority business numbers, which should increase accuracy, Pinder said. Another change is that the state is now measuring how much state money is actually paid to minority firms, not just the amount they are promised. Minority firms were paid $334 million in 2004, the first year for which such data was available.

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