LAVONNE GRIFFIN-VALADE IMAGE: WW Photo Illustration

Pitched 13 years ago as a strategy to address discrimination against minority and female contractors competing for publicly funded projects, the City of Portland’s 1997 “sheltered market” program has mostly helped white men, a new audit reveals.

At the time of the program’s inception—under then-Mayor Vera Katz and her chief of staff, now-Mayor Sam Adams—the city faced numbers that showed African-American contractors were the only minority group in the Portland area facing a statistically significant disparity in both the number of city contracts received and the dollar value of those contracts.

But the new report from city Auditor LaVonne Griffin-Valade, her office’s first controversial audit since she won the election in May, shows 51 percent of the $13.7 million in contracts awarded through the sheltered market program for minorities and women have gone to Caucasian male contractors. By comparison, 11 percent of that sheltered market money went to African American contractors since 1997.

That outcome is at odds with the public perception of the program’s design, according to the audit released Jan. 6. But the difference between the public perception and what’s actually happened appears to stem directly from advice given by the city attorney’s office around the time of the program’s creation.

Although city leaders designed the program to be race-conscious, the city attorney’s office decided the legal risk of using race as a factor in awarding publicly-funded contracts was too great.

“[T]he City Attorney’s Office concluded that a race-based contracting program utilizing race as a factor in contract award decisions was not legally supportable,” City Attorney Linda Meng wrote in response to the new audit. “Accordingly, the City Attorney’s Office advised against adoption of such a program.”

The new audit arrives at a critical juncture for elected leaders looking at the sheltered market program. In August, they voted to award an $831,000 contract to Denver-based BBC Research & Consulting to re-assess how badly minority and female contractors continue to be underrepresented in the awarding of city construction contracts.

The last time city leaders did that was 1996. They then used that report, called a disparity study, to help justify the sheltered market program.

The new $831,000 study is due in October. Commissioner Nick Fish, an employment-rights lawyer, will oversee the outside contractor’s work. Fish says the new data should allow the city to refocus the program to address whatever racial or gender-based disparities exist in a way that is legally supportable.

“The data will drive our policy,” Fish says, calling the effort overdue.

Or it could all be for naught, if the city attorney’s office has already concluded race can’t be taken into consideration. “If the results of the study are not going to be used to guide the focus of the sheltered market program, then the city should seriously consider the practical value of spending about $1 million,” Griffin-Valade says. “We are not calling on them to not do the disparity study. We are calling on them to use the information to make clear decisions about how they want this program run.”

The question is: Should the program remedy discrimination faced by minority contractors or help all emerging small businesses, even those owned by white Portlanders?

Tom Bergin of SBS Construction falls into the latter category. He’d like to see Portland keep a broader focus for the program. “If it [the pool of applicants] were any smaller, it would be a giveaway,” he says.

That bigger focus is fine with Griffin-Valade. But if that’s the desired outcome it might not make sense to spend nearly $1 million on a problem it doesn’t intend to address.

“It’s not supposed to be $1 million of background information,” Griffin-Valade says.

Adams did not issue a written response to the audit. He also did not respond to WW’s questions about the audit.

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FACTS: Minority contractors owned about 12 percent of Portland-area firms but were awarded less than 3 percent of city contracts when the sheltered market program was created. Of the six contracts awarded between 1991 and 1994 to minority contractors, two went to firms owned by Asian-Americans and four to Hispanic-owned firms. Female contractors faced similarly bad odds.

Commissioner Randy Leonard led a 5-0 vote last month to require that a minority representative sit on panels reviewing bids for public contracts over $20,000.