Political Insiders Benefit from Program Intended for Disadvantaged

Posted on October 14, 2009 | Type: Press Release
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Phoenix--A federal program intended to help disadvantaged business owners win contracts at Sky Harbor International Airport in Phoenix is benefiting a small group of political insiders who are anything but disadvantaged.

The federal Airport Concession Disadvantaged Business Enterprise program (ACDBE or DBE) sets guidelines requiring minimum levels of participation by small businesses owned by minorities and women in airport concession contracting. At Sky Harbor, the City of Phoenix deals mainly with large national retailers, which are required to bring in disadvantaged businesses to meet their city-imposed goals for DBE sales. 

A three-month investigation by Mark Flatten, Goldwater Institute investigative reporter, shows that far from being disadvantaged, many of the DBE owners at Sky Harbor have a net worth in excess of $1 million and hold multiple city contracts, both on and off the airport. The investigation's findings were released today in "High Fliers: How Political Insiders Gained an Edge in Sky Harbor Concessions."

"The evidence is clear that this program as it's currently run is broken," said Mr. Flatten. "Small business owners who are not DBE certified have very little chance of getting a concession contract at Sky Harbor."

Of the $52 million in sales attributed to disadvantaged businesses at Sky Harbor in fiscal year 2008, $15.4 million was generated by five DBEs owned by people active in politics, according to city records. And of the more than 140 individual concession storefronts at Sky Harbor, city records identify only two that are not operated exclusively by a master contractor or owned, at least in part, by a certified DBE. Both of those businesses are part of national chains.

Public records show one of the top beneficiaries of the DBE program is Maricopa County Supervisor Mary Rose Wilcox. Ms. Wilcox entered into a joint venture with Host International in December 2004 to co-own a Chili's franchise in Terminal 4.

In violation of federal and city guidelines, Ms. Wilcox did not bring any money to the partnership and had no real role in running the restaurant. Her primary responsibility was to maintain her status as a disadvantaged business owner so her participation could be counted toward meeting the DBE requirements set for Host by the city.

The Goldwater Institute recommends reforming how airport concession contracts are awarded. The recommended reforms include that contracts should be open for bidding on a regular basis; that the bidding process be completely transparent; and that contracts are awarded to small businesses based on objective criteria that do not consider the race or gender of the owner. The city could ensure even more competitive bidding by opening contracts for bidding one-by-one, instead of bundling them and awarding mega-contracts to one company.

"A regime of racial preferences in the awarding of government contracts is ugly enough. A regime of political preferences in the guise of helping small, disadvantaged businesses is even worse," said Clint Bolick, director of the Goldwater Institute Scharf-Norton Center for Constitutional Litigation and author of the recommendations included in the report. "Serious reform requires removing race and gender from the contracting process, and ensuring that merit, not political connections, is the foremost consideration."

The Goldwater Institute is an independent government watchdog supported by people who are committed to expanding free enterprise and liberty.

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