The federal agency that is supposed to promote minority business picked a white-dominated group over three minority organizations for a quarter-of-a-million-dollar contract, one of the rivals has complained to the General Accounting Office.
The contract, to run a minority business development center in Phoenix, Ariz., was awarded Dec. 29 by the Commerce Department's Office of Minority Business Enterprise.
Under a competitive bidding system based not on cost, but on competence to do the job, the $288,000 contract went to the Arizona Business Resource Center, a nonprofit agency tied to established businesses, which are mostly white-operated.
The decision has been appealed to the GAO by the National Economic Development Association (NEDA), a large Hispanic business organization based in Washington, and one of three Hispanic firms that lost out in the bidding.
As a result of the decision, NEDA - and the two other groups - will lose federal funds for the operations in Arizona.
NEDA's executive director, Ricard Salvatierra said the decision was "inconsistant with OMBE. To be consistent you ought to have minority firms involved."
He complained that the point system used to award the contract was "skewed" to benefit the firm that won and gave no credit to minority community affiliations.
The winning group underbid NEDA by $10,000 and scored 85 out of 100 points on the rating system, compared to NEDA's 80. "If the difference is that colse, five points, and one of us is minority and one isn't, that should be a factor as well."
NEDA, which is the largest of dozens of minority business organizations financed by OMBE, has had a branch office in Phoenix for seven years. It is one of four groups in the area financed by OMBE.
Under a plan to consolidate minority business promotional activities and cut costs, OMBE is setting up what it calls "one stop business development centers." All four of the OMBE agencies in Phoenix bid for that role there.
The group chosen, Arizona Business Resource Center, is a five-year-old nonprofit group that provides minority business contacts with established firms.
"We have backing from majority and minority companies," said Marty Corral, deputy director of the group. He argued that connections with the majority business community are vital for minority firms.
The center has white and Hispanic staff members, and he added, "English is my second language, I'm as Mexican as can be."
Allan Stephenson, OMBE's deputy director for operations, said he couldn't discuss the details of the Phoenix contract because of the protestto the GAO.
Defending selection of what he called a "biracial organization" for the job, Stephenson said the dispute is part of a major fight over the restructuring of OMBE, which has been criticized for being ineffective in promoting minority business.
For several years, OMBE has poured most of its $50 million budget into a group of nonprofit minority business promotion agencies and trade associations, giving them largely unrestricted grants.
Now it is switching to contracts for specific activities, and in many cases forcing agencies that once got federal aid automatically to compete for funds.
NEDA is the biggest agency financed by OMBE. Its $3.5 million a year in federal aid represents 7 per cent of OMBEs budget and 9 per cent of the field staff supported by OMBE.
NEDA also "produces 48 per cent of OMBE's production figures" for loans arranged for minority firms, Salvatierra pointed out.
Sephenson said he had "no quarrel" with NEDA. "They are a salutory outfit, as such they should be able to compete."
When four different groups in a city like Phoenix get OMBE, funds, "an unusual amount of money goes into overhead." Instead of spending 20 to 25 per cent on administration expenses, "Our primary goal is to use money for services that relate to our clients' success" in business.
"The problem is we're talking about competition," said Stephenson. "The pot is small and we've got a lot of organizations. Some of them are not going to be around."
OMBE's goal is aiding minority business, not supporting minority business organizations, he said.