The program, which aims to increase the market share of minority and women-owned construction company contracts with the city, succeeded in many ways, but it also failed to help some of the companies it was supposed to help.
"These problems led to a number of costly contract failures and left many participants ill-prepared to compete in the local construction industry," Griffin-Valade said in her report.
Since the program began in 1997, there have been 167 contracts valued at $13.7 million awarded to participating firms, as well as training.
There was no system set up to handle the training and mentorship programs, which left some contractors unable to manage contracts they were awarded. According to the auditor, members of the Bureau of Purchasing, who ran the program, believed hands-on work was the best way to train for the job. This practice resulted in a number of failed contracts and losses to the city.
Many contractors hired subcontractors to complete 100 percent of their work, despite policies limiting subcontract work to 50 percent of the job.
Over time, the program's participants declined, leading to less competition. Of the 306 firms that were admitted to the program since 1997, 66 have graduated, 123 were removed by the city and 56 dropped out. The Bureau of Purchases failed to track program graduates to determine whether they were benefitting from the services offered.
The auditor's report says even the basis for the program – reducing disparity in construction contracts for the city – was being ignored. About 51 percent of contracts went to Caucasian males and 11 percent to African Americans – the only minority group with a significant disparity in the construction field in 1996.
The city has entered a $831,000 contract to study current disparities to be completed in 2010.
Workhorse Construction owner James Posey, who was involved in the 1996 disparity study, says the Sheltered Market Program has done the minority contractors in this city more harm than good.
"Anytime the city does a half-handed job, it comes back to hurt the broader minority community," he told The Skanner. Posey is the former co-chair of the National Association of Minority Contractors – Oregon, but no longer represents that organization.
He says the real failure comes from the city's decision to treat minority contractors differently, which breeds contempt from traditional companies.
"They set aside a few contracts that were peanuts for $200,000," Posey said. "When White guys could have larger ones with no adverse consequences."
The audit report comes on the heels of a deal between the Alliance of Minority Chambers of Commerce and the City Council to include at least one minority on all panels that review and award non-low-bid contracts. Roy Jay, president of the alliance, is heading up the task of finding qualified members for these construction boards. It should be underway in the spring.