City of Houston considers changes to MWBE program eligibility

TX News - Published Mar 28, 2025

The City of Houston is currently contemplating possible changes to its minority subcontracting program (the M/W/SBE, or minority-owned, women-owned, and small business enterprise program). The program is operated by the City's Office of Business Opportunity (OBO), which recently finished a disparity study, and is now assessing the recommendations made by the study in deciding how to move forward.

The recently delivered study examined City spending from 2017 through 2022. The study found that while all minority- and woman-owned businesses (MWBEs) amounted to 34 percent of available firms in the area, they received only 29 percent of City spending. However, there were substantial variances depending on business ownership within this category. Black-owned businesses were found to have significant disparities between availability and utilization across all categories of spending; however, Asian- and Hispanic-owned businesses had no disparity within the field of professional services, and Hispanic-owned businesses also had no disparity in the construction field.

As a consequence of this finding, one recommendation made by the study was to remove these categories of businesses for eligibility for MWBE subcontracts within those industries. These companies would retain eligibility for the City's race-neutral small business program, given that MWBE eligibility criteria are similar to the small business criteria with the exception of ownership. This recommendation has been given urgency by a pending lawsuit against the City which claims that the MWBE program generally is illegal; ensuring that the program is tailored to the results of the disparity study is part of how such programs maintain their legal defensibility. If the City adopts the recommendations of the new study before the trial, that study will be considered in the trial; otherwise, the prior disparity study, completed in 2006 will be considered during the proceedings.

There have been critiques of the proposal to readjust MWBE criteria, based on the response rate to the most recent disparity study (of the 30,000 firms asked to participate, 800 responded, making for a 2 percent response rate), and asking for greater clarity about number of firms receiving work in the disparity study (as opposed to the dollar figure going to firms).

Find the City's page for the study at https://houstontxdisparitystudy.com/ as well as at https://www.houstontx.gov/obo/disparity_study.html.

Read a presentation on the study's recommendations at https://www.houstontx.gov/council/committees/econdev/20250319/COH-Disparity-Study-Recommendations.pdf.