Utilizing Affirmative Action in Public Sector Procurement as a Local Economic Development Strategy

Abstract

Using detailed spending and survey data of a large local governmental authority, this study analyzes how actual preferential procurement policies affected minority business enterprises (MBEs) selling to government clients. Current public sector preferential procurement policies have evolved in an environment of legal constraints in which procurement spending targeting MBEs has often been viewed as reverse discrimination. The objective of achieving a “level playing field” was adopted in response to this legal environment. Preferential procurement policies often miss their objectives, achieving perverse outcomes such as minimal assistance to MBEs and negligible local economic development impacts. Strategies for simultaneously achieving fundamental fairness in government procurement while increasing MBE capacity and job creation are identified.