Minority contractors’ growth chances limited by revenue caps – Crain’s Chicago Business


Electrical contractor Cristina Beran is benefiting from the billions of dollars pouring into Chicago megaprojects. With jobs at the O’Hare 21 project and Lincoln Yards, her company has grown to about $10 million in revenue and is employing a team of more than 60.

For Beran, whose Chicago Voice & Data Authority is a minority- and woman-owned contractor, the opportunities are life-changing. She expects to double in size over the next five years as long as the projects continue, which also enable her company to provide jobs to the firm’s Near Southwest Side community.

Over the next decade, megaprojects such as O’Hare 21, Related Midwest’s The 78 and Sterling Bay’s Lincoln Yards have the potential to lift dozens of small minority- and women-owned firms. There’s also the proposed Chicago Transit Authority Red Line extension, reconstruction of DuSable Lake Shore Drive, the Obama Presidential Center in Jackson Park and Bally’s River West casino.

The large developments underway have set goals of at least 26% participation by minority firms and 6% by women-owned enterprises. With billions of dollars of work ahead, the leading developers and the city of Chicago are nurturing small companies, breaking off varied-size chunks of work to fit their capacity.

But while the opportunities could be life-changing for small businesses, they won’t necessarily create the generational wealth for Black and Hispanic families. That’s because the federal, state and local certification programs for minority and women contractors — known as Minority Business Enterprise, or MBE; Women Business Enterprise, or WBE; and Disadvantaged Business Enterprise, or DBE — have limits on eligibility based on revenues and personal net worth. DBE certification applies to transportation projects that receive federal funds.

The caps vary by trade, such as construction, electrical and plumbing. For city of Chicago-funded projects, the range for most trades is company revenue of $28.5 million to $67.5 million, based on maximums set by the U.S. Small Business Administration. Those caps are lower for federally funded projects. When contractors grow too large, they no longer qualify for the support programs.

While it may be achievable for a startup company to grow quickly to the $20 million to $25 million range, it’s much harder to break into the big time — to reach the $100 million, $200 million or $300 million in revenue needed to compete with majority firms that have been in business for decades.

“My company is too big to be small, and too small to be big,” says electrical contractor Mike Evans, who heads Evans Electric, one of the city’s largest minority electrical contractors. He recently has done work at Lincoln Yards and O’Hare International Airport and manages his annual contracts in the $20 million range to stay under the cap limits. In theory, minority certification provides the opportunity for small companies to grow, establish expertise, graduate and compete with majority-owned firms. But will a contractor who loses certification still be attractive to a builder looking to fulfill mandated goals for minority participation?

“If I’m not certified, (the large general contractors) don’t get the credits. And I don’t get the phone calls,” Evans says.

Logic would suggest raising the revenue caps substantially to give minority contractors more room to grow. But that’s not going to happen because of the risk of legal challenges arguing that race-based incentives are unconstitutional. “We’re stuck with these size caps because the federal courts have said we must have them,” says Colette Holt, an attorney specializing in affirmative action law who has advised the city of Chicago on its programs.

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March 20, 2023 at 07:00AM

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