Industry, Government Draft Poverty Program

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Industry, Government Draft Poverty Program

Extra federal dollars could be diverted to poor areas

By Neil Munro, Staff Writer

The Clinton administration is putting the final touches on a program that will steer some government contract dollars toward contractors based in poor areas.

But lobbyists and officials are still hammering out the details of the so-called Empowerment Initiative, said Larry Parks, a senior policy advisor at the Department of Commerce. "If the preferences go to everyone, then the large companies will suck up everything" and curb the growth of small companies, he said.

Also, officials at the Commerce Department and the Office of Federal Procurement Policy are trying to balance the competing interests of minority contractors - who already get a 10 percent break on federal contracts - versus officials' desire to promote business in poor areas.

Government officials expect the program to begin in March, following the submission of industry comments, which were due Jan. 6.

The exact dollar value of the program - and the number of jobs created in poor areas - has yet to be determined.

In the first, six-month stage, government officials will earmark specific contracts for the program. Companies in poor areas will get a 10 percent bonus when bidding for these contracts, each of which will be worth $100,000 to $30 million.

Government officials are still deciding what can be awarded via the Empowerment Initiative. For the first phase, officials will select up to 15 business sectors, each of which has its own government-devised Standard Industrial Classification code, for inclusion.

Among the sectors being considered are telephone services; computers, peripherals and software; computer facilities management; electrical apparatus; repair services and special warehouses, as well as accounting, concrete and other non-infotech work.

In the second, five-year phase, more business sectors may be included and more contracts may be awarded, said Parks.

The government buys roughly $200 billion each year in goods and services, via 500,000 awards worth more than $25,000, said Bob Dornan, an analyst with Federal Sources Inc., Vienna, Va.

Once in operation, pending contracts will be earmarked for the program. When bidding, companies based in poor areas will receive up to a 10 percent bonus, said Parks. However, the 10 percent bonus may be reduced for particular sectors if it creates too great a hurdle for companies outside poor areas, he said.

To minimize its impact on existing affirmative action programs for minority-owned businesses, said Parks, the Empowerment Initiative will operate alongside existing programs, including the Small Disadvantaged Business program or the Small Business Administration's 8(a) program, which directed $4.5 billion to more than 5,000 minority-owned contractors in 1996. This feature will allow SDB companies located in poor areas to gain a 20 percent bonus.

Lobbyists for minority business contractors have resisted the initiative, fearing it would dilute the SDB and 8(a) affirmative action programs.

According to Henry Wilfong, president of the Los Angeles-based National Association of Small Disadvantaged Businesses, new proposals "diffuse efforts to concentrate on laws already in place."

But the initiative has been designed for minimal impact on the existing affirmative action programs, said Weldon Latham, general counsel for the Washington-based National Coalition for Minority Business. The program has been tailored to help residents in poor areas, and does not threaten affirmative action programs that help minorities living outside the poor areas, he said.

Lobbyists for various companies are also arguing over what companies would be eligible for the program. To participate, large companies must meet two of three requirements to win a place in the program, while small companies employing less than 500 people need only meet one requirement, according to Parks. The three requirements are:

Companies must have more than 25 percent of their real estate in census tracts afflicted by poverty rates of at least 20 percent.

Companies must buy at least 15 percent of their goods and services from subcontractors in poor areas.

Between 15 percent and 25 percent of company employees working on an Empowerment Initiative contract must live in poor areas.

The required percentage of employees drawn from poor areas will be decided during the next few weeks by officials at the White House's Office of Federal Procurement Policy, Parks said.

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