Memphis’ educational institutions must stop running on automatic and get creative if they want a more equitable contracting system that benefits minority and women-owned businesses.

That means connecting these entrepreneurs to capital, encouraging the community to patronize these businesses and changing the mindset of leaders (or even replacing them). That was the message panelists sent to about 40 people Thursday night at Show MEM the Money: Education Edition panel at Freedom Preparatory Academy’s Whitehaven campus.

The conversation carries more urgency as the 50th anniversary of Dr. Martin Luther King Jr.’s assassination draws near. In his last speech, delivered April 3, 1968 at Mason Temple, King called for the city’s black residents to support black-owned businesses and boycott companies that did not employ a share of black employees matching the city’s black population.

Black-owned companies outnumber white-owned companies in Memphis. Yet in 2012, the most recent year for which federal data is available, black enterprises earned less than 1 percent of business receipts citywide. Among municipal agencies, Memphis Light, Gas & Water is a standout. In 2015, the public utility awarded 35 percent of its contracts to minority and women business enterprises, or MWBEs, in industry parlance.

The rest of the public sector — including school systems — have room to improve.

For starters, said Jonathan Logan, president of Castle Black Construction, both the public and private sector must break down MWBE contracts by race and gender. Lumping them together often hides the fact that black-owned businesses still don’t get a fair share of contracts.

“For that number to get right, it must be two separate numbers,” Logan said. “That’s the only way we’re going to get a true picture of how those dollars are spent.”

For example, he said, if a $20 million contract was awarded to a woman-owned business, it might fulfill a company’s MWBE goals, but “the minority piece is not there.”

Thursday’s panel, coordinated by MLK50: Justice Through Journalism, High GroundNews and Chalkbeat Tennessee, was the third in a series focused on expanding MWBE contracting opportunities in the public and private sector. It followed the November 2017 release of Shelby County Schools’ disparity study, which revealed the district’s dismal track record with MWBEs. The study found that SCS — Tennessee’s largest public school district and the fifth-largest employer in Memphis — awards a disproportionate share of contracts to businesses owned by white men.

Panelists were Melvin Jones, executive director of the Memphis Business Contracting Consortium; Beth Phalen, chief of business operations for Shelby County Schools; Logan, whose company earned a $1.1 million contract with Freedom Prep to build out its elementary school; and Mike Brown, Freedom Prep’s chief schools officer. Wendi C. Thomas, editor and publisher of MLK50, served as moderator.

For too long, too little results

In 1994, an intergovernmental study found that legacy Shelby County Schools did virtually no business with MWBEs. Comparatively, legacy Memphis City Schools awarded more contracts to MWBEs, though a disproportionate share still went to companies owned by white men. In 2012, the districts merged, and MCS’ minority contracting program was disbanded due to budget constraints, current SCS district leaders have said.

Setting a percentage goal of contracts awarded to black-owned businesses would present legal challenges, Jones said — but if school leaders made it clear that was their goal, employees would follow suit.

“The biggest thing we’re missing is the willingness (of leaders) to simply say, ‘This is what I want to see.’ … If they don’t issue mandates, directly or indirectly, nothing’s going to change.”

“The biggest thing we’re missing is the willingness (of leaders) to simply say, ‘This is what I want to see.’”

Melvin Jones, executive director of the Memphis Business Contracting Consortium

Phalen agreed and said she was optimistic about the path SCS will take, because she’s now responsible for addressing the disparities identified by the 2017 study. Of course, SCS will follow laws governing contracts, but she said goals set by SCS Supt. Dorsey Hopson would trickle down.

“We can require a certain level of participation to include minority and protected classes,” Phalen said. “It’s about communicating to the market and growing the market touch points, so we can engage more people for the contracts that we have.”

Freedom Prep models action

It’s part of the culture at Freedom Prep, a black-led charter school, to seek out minority-owned companies with which to do business. Exhibit A is its $1.1 million contract with the black-owned Castle Black Construction, which recently turned a church into Freedom Prep’s Whitehaven Campus.

Logan ran into a Freedom Prep administrator who suggested he bid for the project. It ended up being a game changer for Castle Black, Logan said.

“That was the single-largest prime contract we had done to date,” he said. “It was because of this project that provided us a catalyst into other projects. Since this one project, the entire revenue we did last year, we have contracted for the new year.”

Memphis residents have a role to play in demanding black-owned businesses get a fair share of educational contracts, panelists agreed. Be it educational institutions or corporations, residents should expect institutions to spend money in their communities.

“We have 33 Shelby County charter schools,” Freedom Prep’s Brown said. Before a charter application is approved, why not ask how the school plans to work with MWBEs? Brown asked. “I would love for that to be a question people have to explain if they intend to open a charter in Memphis and not work with minority contractors.”

The upshot: If Memphis wants something to change, it’s got to do something different on making sure black businesses get a fair share of contracting dollars that can include professional services and construction.

Logan suggested that government agencies change the bonding requirements, which can be cost-prohibitive for smaller companies. The city of Memphis is self-insured, he pointed out, and could provide this bonding coverage for companies that need it.

“Lobby your local officials for that because I think that’s doable,” Logan said.

Education leaders of all races are afraid to veer from existing contracting practices, Jones said, because they believe they won’t be supported if they press too aggressively for changes.

And some of the responsibility lies in the hands of African Americans, who have tremendous buying power in Memphis, yet spend too little of their dollars with black-owned businesses.

“We have to do away with that fear and invest in our own communities.”

This story is brought to you by MLK50: Justice Through Journalism, a nonprofit reporting project on economic justice in Memphis. Support independent journalism by making a tax-deductible donation today.