Local governments spend billions of dollars annually on goods and services, from major construction projects to food, supplies, consulting, and repairs. Federal and state funding can add to this total: the 2021 Infrastructure and Jobs Investment Act, for example, will deliver $550 billion in new investment over five years. This public spending is a valuable lever for fostering more equitable economic development. Through equitable contracting and procurement policies, cities can ensure that historically underutilized businesses have access to these contracting opportunities. Underutilized businesses include minority-owned business enterprises (MBEs; defined as at least 51 percent owned by people of color) and disadvantaged business enterprises (DBEs; owned by people of color, women, and other economically disadvantaged groups).
Equitable public spending is critical to the strength of cities, as businesses owned by people of color are more likely to hire people of color than other firms and generate increased economic activity in communities of color. However, local governments often fail to provide fair contracting opportunities for MBEs and DBEs, who compete with larger companies that are politically connected, able to access financing, and more familiar with navigating the bureaucratic processes of working with governments. For example, in Chicago, where Black residents make up nearly one-third of the population, Black-owned businesses were paid just 7.7 percent of city construction contracting dollars, according to a 2021 Disparity Study. To increase equity in contracting and procurement, cities should develop comprehensive strategies such as setting equity targets for MBEs and DBEs, streamlining certification processes, breaking up large contracts into smaller subcontracts, helping subcontractors grow into prime contractors, and removing onerous financial burdens for small businesses.
In addition to the PolicyLink resources listed on the right, see the Democracy Collaborative, the Emerald Cities Collaborative, Urban Institute, Government Alliance on Race & Equity, the National League of Cities, and the National Minority Supplier Development Council for more resources on equitable contracting and procurement.