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February 23, 2024

4 ways to level construction’s playing field

4 ways to level construction’s playing field

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Andre Sappington is CEO of Columbus, Ohio-based construction firm BNS LLC. Opinions are the author’s own.

In the dynamic landscape of the construction industry, minority contractors often face unique challenges that hinder their growth and participation. Despite possessing the requisite skills and experience, these contractors frequently encounter obstacles that hinder their success.

Andre Sappington

Permission granted by BNS LLC

One of the most significant barriers for minority contractors is limited access to financial resources. A study by the U.S. Department of Commerce revealed that minority-owned businesses are less likely to receive loans compared to their non-minority counterparts, and when they do, the interest rates are often higher. 

This financial bottleneck restricts their ability to bid for larger projects, invest in advanced equipment or even sustain operations during lean periods.

Minority contractors often struggle with cash flow issues, limiting their ability to compete with larger, more established firms, according to a Small Business Administration study. This is not a reflection of their competency but rather a systemic issue rooted in unequal access to financial resources.

In addition, previous legal infractions, often minor or unrelated to their professional capabilities, disproportionately affect minority contractors. An article by Arizona State University professor Michael S. Scott highlights that individuals with a criminal record, a demographic disproportionately represented by minorities due to systemic biases in the justice system, face significant barriers in obtaining licenses, bonding and insurance — all critical for securing contracts in the construction industry.

Historical biases

The construction industry, like many others, has evolved with regulations and norms that inadvertently favor established players. These regulations often have roots in historical contexts that did not prioritize diversity and inclusion. For instance, stringent bonding requirements and complex bidding processes can inadvertently disadvantage newer, smaller firms, many of which are minority-owned.

It’s essential to recognize that all companies, including today’s industry giants, started small. Historical analysis shows that many of the now-dominant firms in the construction sector were once small businesses facing their own set of challenges. 

However, the regulatory and economic landscape of their growth period was markedly different. There was a time when these regulations were less stringent, allowing these now-large companies to establish themselves and grow.

Addressing the disparity

To create a more equitable industry, it is crucial to address disparities head on. This involves:

Reforming financial systems: Enhancing access to credit and financial services for minority contractors. Initiatives like the Small Business Administration’s 8(a) Business Development Program are steps in the right direction, offering assistance to small, disadvantaged businesses.

Revising regulatory frameworks: Adjusting bonding requirements and bidding processes to be more inclusive of smaller firms. This could involve setting aside a portion of contracts specifically for minority-owned businesses.

Providing education and training: Offering targeted education and training programs to help minority contractors navigate the industry’s complexities and compete more effectively.

Promoting diversity and inclusion: Encouraging larger firms to partner with minority-owned subcontractors, fostering a culture of diversity and inclusion within the industry.

It’s clear that the challenges faced by minority contractors in the construction industry are multifaceted. Addressing these issues is not just about fairness but also about enriching the industry with diverse perspectives and skills. 

It is imperative for industry leaders, policymakers and stakeholders to work collaboratively toward creating an environment where minority contractors can thrive, contributing to a more dynamic, inclusive and robust construction industry.

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