It took an enormous mobilizing effort of men, materials and machinery, but within six months after it acquired the Washburn Wire Co., the holding company of the Harlem Common-wealth Council had placed a successful bid to produce $8.7 million in steel wire strands for concrete railroad ties.
The East Harlem company is one of 12,000 minority-owned firms attempting to do business with the nation's federally subsidized railroads. A requirement for minority participation -- "minority" was defined to include white businesswomen as well -- was written into the legislation that reorganized the nation's failing railroads. The Federal Railroad Administration's minority contracting effort, begun two years ago but slowed in part because of resistance within the railroads, is finally beginning to get on track, federal and railroad officials said recently.
The railroads have promised to do more than $200 million in business this year with firms headed by women and black, Hispanic, Oriental and other minority group men.
It is not a lot in the context of the billions being spent on the railroads, but it is miles ahead of some government agency efforts. The best record last year in the government, for instance, was the Department of the Army, which did about $140 million in business with minority contractors.
In the private sector, U.S. corporations and institutions bough more than $1.8 billion in goods and services from minority business firms in 1978, the National Minority purchasing Council estimates.
It has taken some time for railroad procurement officers to get the message, according to insiders. Old line relationships between buyers of the reorganized railroads and their sup pliers continued to predominate last year, these insiders said. With approximately 80 percent of the purchasing conducted over the phone, minority vendors have complained they were unable to obtain written requests for bids in time. But railroad officials say they have built up their lists of potential minority bidders and will draw from them increasingly this year.
Washburn Wire, for one, geared up quickly to make a kind of product it had never fabricatedbefore because it was anxious to share in the $1.75 billion Northeast rail corridor improvement program. Largely because of its expanded role as a subcontractor to a supplier of concrete rails for the National Railroad Passenger Corp. (Amtark), Washburn was able to hire more than 200 new employes for its plant on 118th Street, an economic spinoff to the minority community that was one of the objectives of the legislation.
The company's biggest problem now, says vice president George Spriggs, is the prime contractor's insistence on a fixed-price bid, a requirement that fails to recognize the continually escalating price of steel. It is a problem that is plaguing railroad subcontractors at a time when the lines are asking for increased federal appropriations because of increased construction costs, Spiggs said.
The railroad effort has been hailed as the biggest minority business opportunity to come along in history. It was set up to serve as a model for industries with heavy federal involvement. A similar provision was added to energy legislation last year to initiate minority involvement in programs administered by the Energy Department.
Among the railroads, the biggest potential for minority business lies with the Consolidated Rail Corp. (Cqnrail), which was established -- with more than $2 billion in government aid -- to rehabilitate bankrupt rail services in the Northeast. A hybrid of six failing lines, it began business in 1976 and has been eating up $1 million a day in losses. Those losses are mostly subsidized by the taxpayers.
Some say the real federal hope for minolrity firms this year lies in the reorganization of the Small Business Administration, also authorized under new legislation, but that agency continues to come under fire for its loan guarantee programs. Also still surfacing are charges that minority business people have been "fronting" for white owners in order to get set-aside contracts from the government.
"While there is a lot of progress being made in mionorit business," said Ken Guscott, a management consultant in Boston working for Amtrak, "there is a danger that Congress will roll back programs because of these blatant abuses."
In the area of government procurement, President Carter's goal had been to triple minority businesses' share in the $81 billion in goods and services agencies buy each year. The purchasing effort is expected to fall short of that $3.3 billion goal by about $1 billion this fiscal year. (Most successful among the government agencies was the Interior Department, which kept its promise to place 15 percent of its procurement orders with minority firms.)
The SBA legislation authorized that agency to select any contract it wants in a designated agency for special minority set-asides during a two-year trial period. The President this week picked the Department of the Army. The Army's total procurement request last year was $6.6 billion.
The White House is also considering issuing an executive order that would direct government agencies to step up their procurement from female-owned businesses, a proposal made last year by a government task force on women business owners.
In hearings earlier this year, businesswomen and minority contracting organizations accused the railroads of reneging on their pledges to the government. The contract set-aside provisions that assured minority participation in recent public works construction has been missing in the railroad work, the groups said.
Since then, an advisory committee headed by Jesse Hill, an Atlanta insurance executive and Carter insider, drew up plans for 23 "outreach" centers to help place railroad business with minority contractors. It also secured $8 million in venture capital for small firms, to be placed with seven minority enterprise investment corporations.
Hill said he has also taken preliminary steps, "with the assistance of contacts in the Federal Reserve System, the American Bankers Association and the 'big eight' accounting firms," to facilitate lines of credit. Aware that railroads had practically no women and minorities in purchasing jobs, the committee is also helping develop a student intern program to develop a "cadre of minorities and women" familiar with rail operations, Hill said. Ten years from now, he said, these trainees could be working inside the railroads in purchasing. "Their sensitivity could make it easier when the government program is probably phased out," he said.
Jack Sullivan, head of the Federal Railroad Administration, wants to focus government energy on the formation of minolrity-owned ventures that can build big-ticket products, such as much-needed railway cars. Helping a minority firm acquire the expensive environmental protection equipment needed to keep such a venture in business "would be a great use of our funds," he said.
Small firms have to be prepared to seek business outside of the railroads so they won't be vulnerable when the railway improvement project ends, he said.
"The smart businessman doesn't let any one customer become more than 25 percent of his business," he added.
Railroad procurement tends to be rather stable, said former Conrail consultant Howard Moore; there are 80,000 to 125,000 different items in the railway system's purchasing system at any one time. "If you can grow with the railroad, there is a pretty good prospect for a long-term market," he said. Railroad needs range from freight cars, spikes and ties to construction and right-of-way maintenance to paperclips, printing and other office services.
But the railroads were not enthusiastic about the requirement that they increase their envolvement with minority evendors; they felt they were being asked to do something they weren't equipped to do, Moore said. At the same time, the vendors were looking for traditional set-aside contracts, but found the railroads "had to spend very slowly and in a competitive way," he added.
Marketing representatives working for consultant firms have been placed in railway procurement offices by the Federal Railroad Administration. To qualify minority firms for bidding lists, the railroads often send procurment specialists to review their plants and capacity, said resource center director Kenneth Bolton. Most of the contracts awarded minorties to date have been small, he said, with half of the bids from minolrity firms accepted by the railroads.
In all, minority firm bids account for only 2 1/2 percent of those made to the railroads.
FRA officials say that about half the minority contracts have gone to female-owned firms, a percentage that advisory committee chairman Hill thinks is too high. Hill thinks the emphasis of the program should be on firms owned by minority males, with no more than 30 percent of the contracting with women.
The raillroad effort has been hailed as the biggest minority business opportunity to come along in history .