State agencies spent $4.8 billion in 2020, but Black-owned businesses were awarded only $11 million in state contracts and Hispanic-owned businesses got only $12 million, according to a new state report obtained by GBH News.
The Supplier Diversity Office report said that state agencies exceeded their goal of doing 8% of their contracting with minority-owned enterprises. That conclusion relies on counting hundreds of millions of dollars the state spent with minority-led nonprofits, plus work that non-minority firms working for the state passed along to minority businesses. Without those categories, all minority-owned firms combined received about 2% of the state’s spending.
The new report — quietly posted to a state website in the past few days — says that, in fiscal year 2020, the state spent just over $300 million in direct contracts with minority-owned businesses (known as MBEs) but Black-owned firms got just $10.8 million worth of work; Hispanic-owned firms got $11.5 million; and Asian-owned firms got $71.1 million.
The vast majority of the state’s $301 million in direct “MBE spending” — $204 million — went to minority-led nonprofits such as Brockton Area Multi-Services, Inc., and Action for Boston Community Development, large social services organizations that provide a wide range of services from mental health care to housing assistance.
The state has reported minority business expenditures every year for decades, but this is the first year the spending has been broken out by race, following reporting by the GBH News Center for Investigative Reporting last year that the state was intentionally inflating its minority business spending numbers by including sums that were not contracts to minority firms.
Travis Watson, chairman of the Boston Employment Commission that watches over minority hiring on city jobs, said the lack of state contracts going to minority-owned businesses is contributing the racial wealth gap.
“The state is spending 0.2% of all of their money on Black-owned businesses? You almost have to try not to provide opportunity for Black people to get that low,” he said. “I just don’t understand. It’s very frustrating.”
Watson also criticized the Supplier Diversity Office’s practice of counting state funds or grants given to minority-led nonprofits in its tally of spending with diverse suppliers.
“Minority-led nonprofits offer an invaluable service, but they’re not generating wealth the way a typical business does,” he said. “I just don’t think that that was appropriate.”
Trevor Mattos, an economist at Boston Indicators research center, said the latest report from the state reveals a major gap between the number of Black and Latino entrepreneurs in the state available to do work and the number actually doing business with the state.
“The gap, it really is significant,” Mattos told GBH News. “In Massachusetts we actually have a higher density of Black-owned employer firms than we do nationally. So, it’s not a question of whether or not these firms are out there.”
Black and Latino people own more than 3% of firms in the state with employees, according to census data, but the supplier diversity report shows just a fraction of them are actually registered with the state and certified as minority-owned businesses.
GBH News reported last year that the value of state contracts obtained by minority-owned businesses had dropped by more than 20% over the past two decades. But that reporting was based on state reports that did not distinguish between payments to private companies and payments to nonprofits. Based on separations of those totals in the 2020 report, minority-owned businesses seem to have been receiving a much smaller share of state contracts than prior public reports implied.
In November, Gov. Charlie Baker, facing criticism from minority business advocates, elevated the Supplier Diversity Office to a cabinet agency, more than doubling its budget and promising a renewed emphasis on expanding contracting opportunities for minority-owned businesses.
Officials at the SDO did not immediately respond to a request for comment on this story. In the introduction to the report, Execuive Director William McAvoy wrote that the Baker administration “has issued FY2021 legislative and policy changes that will have a tremendous impact on diverse and small businesses, including … mandating that Secretariats and Agencies appoint SDO Liaisons and submit Spending / Procurement Plans, starting in FY2022 [and] directing the SDO to aggressively and intentionally promote upcoming procurement opportunities to diverse and small businesses.”
Paul Singer contributed to this story.