Developing and upgrading minority construction contractors: The Houston and Atlanta experiences

An empirical study of minority business enterprise in construction, this paper is based on interviews with 119 minority general and specialty contractors in Houston and Atlanta as well as 112 other individuals, including civil rights leaders, union administrators, government officials, and other knowledgeable persons. The study includes consideration of the characteristics of existing contractors and their firms, the aspirations of the contractors, analysis of the problems they face in upgrading their businesses, and an examination of alternative approaches to improving and expanding minority business enterprise in construction. The contractors surveyed operate small firms which are predominantly proprietorships and usually employ three or fewer workers. Seven out of 10 contractors in Atlanta and nine out of 10 in Houston are specialty contractors. Virtually all but a handful work primarily in the residential sector. Although minority contractors tend to have more formal education than their counterpart groups in the population, their current capabilities as contractors are limited due to their lack of business experience and training. Three-fourths of the contractors interviewed expressed a desire to expand their businesses. However, only a fourth of these are aiming at the market for the larger commercial construction projects. Problems the contractors face in upgrading their businesses vary according to the type of contracting firm, the age and size of the firm, the volume of work, and the size of projects undertaken. However, financial problems -- especially locating interim financing -- were of foremost concern to the contractors surveyed. Other problems of major concern to the contractors were inability to find and keep qualified workers, inability to obtain bonding, lack of management skills, debt collection, cheap competition, and (in Houston) scarcity of jobs. Three approaches to upgrading minority contractors are examined: (I) government assistance, (2) joint venturing, and (3) the minority contractors association. With respect to government assistance, it was found that although several government programs aimed specifically at assisting the minority contractor exist, these programs have resulted in more promise than fulfillment. Furthermore, minority contractors appear not to be well served by any government programs, including the employment service efforts, vocational education programs, and contract compliance endeavors such as the "Atlanta Plan." With regard to joint venturing, it was found that although this technique offers upgrading potential for minority contractors, it is a complicated matter and should only be undertaken with certain precautions. Finally, the minority contractors association can assist its member contractors by helping to bring them into contact with the mainstream construction industry, to educate and train them to better operate their businesses, and to focus community resources upon them. Recommendations are offered for public and private organizations wishing to assist the future development of minority firms in construction.