Andres Bernal, Vice President of Disparity Research for MGT — Testimony (Disparity Studies)

Summary

Written testimony of Andres Bernal, Vice President of Disparity Research for MGT, a public sector consulting firm, dated May 6, 2024. Bernal reports nearly 20 years of disparity study experience and authoring or co-authoring more than 100 reports on state and local governments' use of minority and women-owned businesses in public procurement. The testimony explains the disparity index, which compares how much public entities use minority owned business enterprises (MBEs) with the availability of qualified MBEs in a market area. It states that disparity research almost universally shows MBEs are substantially underutilized across construction, professional services and goods, and that MBEs typically earn less revenue and are less likely to be self-employed than majority-owned businesses. It concludes that public agencies have significant opportunity to expand utilization of MBEs.

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Good morning. My name is Andres Bernal, and I am the Vice President of Disparity Research for MGT, a
na onally recognized public sector consul ng firm. Since 1975, MGT has provided strategic, opera onal,
and technology solu ons to government and educa on agencies in all 50 States.

I have nearly 20 years of direct disparity study consul ng, quan ta ve, and qualita ve experience
analyzing all aspects of public agency disparity research. In that me, I have authored or co-authored
more than 100 reports of findings for clients regarding state and local governments’ u liza on of
minority and women-owned businesses in public sector procurement of goods and services.

I have been asked to offer a few observa ons about historical trends that have emerged regarding how
minority -owned businesses are u lized by public en es.

Findings from hundreds of disparity studies conducted by MGT and across the industry underscore a
con nuing opportunity for targeted supplier diversity programs to address underu liza on of minority
owned business enterprises (MBEs). Almost universally, the results from disparity research con nue to
show that MBEs are substan ally underu lized, and that the markets where these MBEs are doing
business are under-realizing their opportunity to expand the entrepreneurial sector of their economies
and to broaden economic par cipa on among MBEs.

When it comes to analyzing public contrac ng data, it is a case law and industry standard to use what
the law refers to as a “disparity index” to determine, sta s cally, if the race of business ownership
influences a business’s likelihood of availing itself of government contrac ng opportuni es. This index
calculates how much public en es u lize minority owned businesses, rela ve to the availability of
qualified MBEs in a given market area.

Looking at procurement data across the na on, what you see throughout many jurisdic ons, historically,
is that, despite some progress, MBEs are substan ally underu lized across all goods and services
categories-- such as construc on, professional services, and goods. In those rare instances in which
there is either parity in MBE u liza on or overu liza on of MBEs rela ve to majority-owned businesses,
this is most o en a phenomenon in which u liza on of MBEs is concentrated among several companies,
rather than an indica on that government agencies are consistently and broadly drawing upon the total
pool of qualified MBEs.

Furthermore, when we examine private sector business ac vity and dynamics, the following
observa ons are typically seen:

       MBEs earn significantly less revenue than majority-owned businesses for similar business
        categories, even, when possible, influence from other characteris cs is taken into account (e.g.,
        level of educa on, business experience).
       MBEs are significantly less likely to be self-employed (i.e. owner-operated) compared to their
        majority-owned counterparts in nearly all market areas analyzed.
       Studies consistently find that race of firm ownership is sta s cally correlated to MBE vs.
        Majority-owned enterprise u liza on.

The culmina on of my research, including qualita ve studies, disparity studies, regression analyses,
con nue to support the conclusion that public agencies across the na on have significant opportunity to
expand u liza on of MBEs, thereby strengthening their local economies and communi es through
broader u liza on of qualified minority owned businesses.


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