Report: Chattanooga area minority-owned businesses gain little from VW

Report: Chattanooga area minority-owned businesses gain little from VW

September 24th, 2013 by Mike Pare in Business Around the Region

This aerial photo shows the Volkswagen plant at Enterprise South.

Photo by Dan Henry/Times Free Press.

BY THE NUMBERS

• $211 million - State and local money grant money spent to date on VW project less equipment funds

• $4.4 million - Value of contracts awarded to minority- and women-owned businesses for all government contracts at VW

• $58,385 - Value of contracts awarded at VW by the city to minority and women-owned businesses of the $38 million in city and county funds

Source: City of Chattanooga

Ric Ebersole

Photo by Staff File Photo/Times Free Press.

Minority-owned businesses in the Chattanooga area appear to have directly benefited little from the $211 million in local and state grant money spent to plan and build Volkswagen's auto assembly plant, a new report shows.

City figures show that just $58,385, or barely more than one-tenth of 1 percent of the $38 million in city and Hamilton County funds spent so far on the VW project, went to disadvantaged business enterprises such as black- or woman-owned firms.

If state contracts for VW-related projects are included, only 2.1 percent of the $211 million spent through Sept. 9 went to the minority companies, the report showed.

Ric Ebersole, chairman of the Chattanooga Industrial Development Board, on Monday termed the lack of participation by minority businesses "abysmal" and "disappointing."

Board member Chris Ramsey, who requested the city report over a year ago, said he was "expecting low, but not that low." He said he was hoping the numbers would fall in the 10 percent to 20 percent range.

"There's a disconnect somewhere," Ramsey said, adding he's especially interested about opportunities for minority companies if VW decides to expand to produce a new sport utility vehicle in the future.

The state and local money was provided as part of the incentive package given to the VW project, and the city and county have overseen the spending of the grant funds for items such as site preparation, infrastructure and VW's training center.

David Carmody, the city's purchasing agent, said he's only been on the job for three months and couldn't provide an explanation for the figures. But, he said, a revised procurement manual is being drawn up that should help boost the figures in the future.

Chattanooga Mayor Andy Berke said in an email that the revised manual will contain goals and accountability measures. While no figure is finalized, he said the city is looking at a goal of 14 percent disadvantaged business enterprise participation in the future, a number comparable to overall state levels.

"My vision for Chattanooga is an inclusive one and I'm committed to the success of our minority- and women-owned businesses," he said.

Photo by Tim Barber/Times Free Press.

J.Ed. Marston, the Chattanooga Area Chamber of Commerce's vice president of marketing, said the VW project that started about five years ago was "huge and had to be done quickly." He said there weren't a lot of local minority firms who had the capacity to handle work on the project in the compressed time frame that was required.

Still, Marston said, the level of minority participation isn't acceptable. He noted the Chamber in July 2012 kicked off a minority business development program headed by Maria Noel.

City Councilman Moses Freeman said the level of contracts with women- and minority-owned businesses "seem woefully inadequate."

"There has to be some analytical look at those numbers in depth...and come up with some concrete answers," he said. That should include what was done to recruit minority companies, Freeman said.

Moses Freeman

"We want to make sure the doors are open," he said. "We want to make sure everybody can do business with the city."

Jerry Hanner, who owns the J.M. Hanner Construction Co., said the figures relating to the VW project "seem very low."

But, he said, minorities are continuing to get just a small fraction of state and federal road projects. Hanner said that black contractors only receive 1.1 percent of federal highway funds.

"The numbers are unreal," he said.

Noel said part of her role at the Chamber is to boost construction opportunities for minority and disadvantaged businesses. She said a mentoring and partnership program has been created between purchasing officials for such companies as VW, TVA, and BlueCross BlueShield of Tennessee and smaller firms.

On Oct. 2, Noel said plans are for a Chamber-sponsored "Diversify 2013 summit" at the Convention Center to showcase business opportunities for women- and minority-owned contractors.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.