If you want legitimate small and minority businesses operating in the government side of the construction trade you have to build the infrastructure for it

Photo by Darrow Montgomery, WCP, showing a small house-based office building used by multiple contractors.

The cover story in last week's Washington City Paper, "Construction Companies Open East-of-the-River Offices to Win Lucrative Contracts," is a nice piece about how despite claims by Events DC about how. in building the new professional basketball practice facility in Ward 8, large amount of work directed to contractors and workers based in the city's most economically impoverished areas, the reality is more nuanced.

It turns out that the companies are usually based elsewhere with only minimal ancillary operations in Wards 7 or 8, often having little more than a desk or two in small buildings shared by one half dozen or more businesses. And only small numbers of employees end up coming from the immediate area of the project.

From the article:

A City Paper review of DSLBD’s quarterly Entertainment and Sports Arena reports identified millions of dollars’ worth of contracts that went to businesses that are local by the District’s standards, but are actually headquartered outside of wards 7 and 8. Some of their D.C. locations are sparse, if they exist at all.

One company, JJ Prime Services, received a $1.7 million contract for work on the Ward 8 arena. The business does not appear to have a website—just a Facebook page, which does not describe what kind of work the company specializes in. But a quarterly report from DSLBD shows that JJ Prime Services was hired for “excavation” at the Entertainment and Sports Arena.

Public records from D.C.’s Department of Consumer and Regulatory Affairs show that the company is a Maryland-based LLC, with headquarters in Silver Spring and a separate office in Prince George’s County. But D.C.’s DSLBD records show that it’s also registered as a Ward 7 local business. City Paper visited the company’s Ward 7 address, an office park off of Bladensburg Road NE, just shy of the Maryland border.

The article features an extended interview with Adam Sacks of Saxon Collaborative, and he outlines the various difficulties in the way of truly small businesses making a go of it from construction contracts on government-funded projects and problems with basing offices East of the River:

Sacks says that, in his experience, it’s difficult to find CBEs based in Ward 8 that are financially stable enough to navigate the obstacles involved in working on larger D.C.-funded projects, which are often slow in reimbursing general contractors for work and stacked with burdensome hiring requirements. (“We know that’s been an issue,” McDuffie says of delayed payments.)

Sacks cites infrastructure work Saxon has completed on the St. Elizabeths East campus, and the beleaguered Parkway Overlook project (“truly a disaster,” Sacks says) as examples of poorly run D.C. projects in terms of timely repayment and subcontractor hiring.

Creating different business forms to support business development. In culture planning, I have discussed a report, Cultural Infrastructure: An Integral Component of Canadian Communities, by the Creative City Network of Canada, outlining the necessary infrastructure for artistic endeavor.  It outlines six elements including multi-use hubs, incubators, and creative production habitats.

Similarly, public market type buildings and retail cooperatives are ways to support the development of small retail operations or ways to provide the equivalent of grocery stores but through bringing small businesses together.

Similarly, in start up business development, there are all kinds of various business incubator operations.  Although a big problem with "incubators: is that they focus on providing assistance for a relatively short period of time, and often most businesses need more time and support in order to become successful and as importantly, stable, especially those working in the government sector, where margins can be very small.

-- "Business incubators models of the USA and UK: A SWOT analysis," World Journal of Entrepreneurship, Management and Sustainable Development

But traditionally there aren't such initiatives in construction. More than ten years ago, the Abdo Company of DC didn't create an incubator exactly, but in a city where it is hard to find industrial space, they purchased a site for staging and storage, and made it available to their contractors. 

This provided the contractors an in-city place to locate their businesses that was stable and at a lower cost than finding or buying space elsewhere in the city or the region.

Construction business incubator in Greater Indianapolis.  While incubators primarily focus on development of new technologies, and some exist in the construction industry too, in Fishers, Indiana, there is a construction business incubator under development called the Hub & Spoke Design Center ("Indiana's skilled-trades workers are in short supply. A Fishers jobs incubator could help," Indianapolis Star).

It has multiple goals: (1) to provide lower cost space for businesses in the construction and design fields; (2) to provide access to peers for business development, technical assistance, and innovation; and (3) to provide training for potential employees to address labor shortages in the trades. From the article:

The center will be anchored by about 10 home-building-related businesses, with four scheduled to move in first: OnPoint; About A/Co, a Carmel-based flooring and cabinet dealer; Franklin Window and Door, of Carmel; and Battersby Danielson Azbell and Associates, of Westfield.

Decker said the center will offer a potpourri of goods and services.

“There will collaborative desks and offices, event space, showroom space where people can see the latest best projects and a dedicated “maker” space with tools where visitors can build things,” Decker said.

The tenants will work with higher education institutions and Hamilton Southeastern High School to develop a teaching curriculum that is likely to include students working on projects or gaining internships at a company at Hub & Spoke or elsewhere.

Government contractors also need help with finance.  Given the delays that are often experienced with payment, and the reality that payment isn't made in advance, so businesses need money to front operations and performance, there also needs to be access to financing and related technical assistance too, perhaps with the aid of what are called CFDIs, Community Development Financial Institutions.

But different from construction project finance, which many CFDIs already do, construction vendor finance and support, which I don't think any CDFI is doing.

Performance bonds.  Although there are some programs that assist with bond financing--performance bonds are one of the requirements for government contractors.

Microenterprise development.  Another way of looking at this is termed "microenterprise development" as part of the five step model outlined in the Community Economic Development Handbook by Mihalio Temali.  (Another of the steps is "workforce development.")

If you want local employees and local employers, provide contracts isn't enough, partly because the system is gamed, but also because the capital and organizational requirements are considerable and onerous, even if you're getting special considerations as a certified (minority) small business enterprise.