Report: MnDOT fails to meet contracting goals with women-owned and minority-owned businesses

CATHY WURZER: It is time for some business news. There's a recent report from Minneapolis St Paul Business Journal that shows that the Minnesota Department of Transportation consistently misses goals for contracting with women and minority-owned companies. Those goals are mandates set by the National Department of Transportation. With the details on this story and other business news from the metro area, Minneapolis Saint Paul Business Journal reporter Kelly Busch is with us. Hey Kelly, welcome back.

KELLY BUSCHE: Hi Cathy, thanks for having me.

CATHY WURZER: All right. Now, let's try to parse this out a little bit. Now, the US Department of Transportation has mandated that agencies like MnDOT reduce the hurdles for minority and women-owned businesses by setting contracting goals with them, right?

KELLY BUSCHE: Correct, yeah.

CATHY WURZER: OK. So what specific goals has MnDOT missed?

KELLY BUSCHE: I'll set the scene a little bit. So the US Department of Transportation launched the Disadvantaged Business Enterprise program, the DBE program, in 1983. And like you said, the program requires that government agencies, who rely on federal transportation funds, have goals set for spending with smaller companies owned by people of color, women, and other historically disadvantaged groups. These are called DBE companies.

So in 2020, out of all the federal highway funds that MnDOT planned to spend that year, it wanted to award at least 12% of those funds to DBEs. And it missed this goal and spent only around 8% of the 829 million in funding on DBEs. It's worth noting that this 8% is the smallest percentage that MnDOT has allocated to DBEs since 2015.

CATHY WURZER: So how far off was the agency in these goals?

KELLY BUSCHE: The Business Journal measured a total of 128 million in contract awards that should have gone to DBEs, had the agency kept its goals. So this is the 10th highest gap in the country. And it's a figure that puts Minnesota behind more populous states like California and new York, but still ahead of states like Texas and Illinois. And we took a look at these figures nationwide as well. State departments of transportation, they hit their goals for spending federal highway administration funding, about 55% of the time. And if states had hit their spending targets during that time frame, DBEs could have earned an additional 3.6 billion in revenue.

CATHY WURZER: How has MnDOT responded to the data?

KELLY BUSCHE: That's a great question. So they did respond to Business Journal reporters. But they didn't say much in response to questions about why the agency hasn't hit its DBE goals. A MnDOT spokesperson, over email, pointed to the steps that MnDOT is taking to close this gap, like a mentorship program its running and state grant initiatives. And the spokesperson also said that MnDOT is considering how it can provide better and more clear information and processes. Because some DBEs may not be super familiar with MnDOT's processes.

CATHY WURZER: Who is holding the agency accountable? It missed this goal for a number of years in a row, right? So is some other agency trying to remedy this?

KELLY BUSCHE: Right. So MnDOT itself does this shortfall analysis on the topic. But the analysis, again, doesn't give specific reasons why it fails to meet the goals. Nationwide, US transportation secretary Pete Buttigieg told the business journals that the US Department of Transportation is proposing a rule to increase opportunities for DBEs, so potentially giving the program a little more oversight.

And this rule from the Department of Transportation, it wouldn't institute harsh penalties for states that fail to hit DBE goals. But it will aim to address some of the other top concerns cited by contractors and create a more robust support system for these young companies. And this rule is going through the bureaucratic process right now. And the DOT recently concluded a public comment period for the rule. So be on the lookout for ways that this could be better enforced.

CATHY WURZER: Let's talk about other business news in the metro. There is this new Prior Lake business. It's a startup called UzObi So tell me a little bit about that. I understand it was chosen as one of a handful of national startups for Northwestern Mutual's newest cohort of its Black Founder accelerator program.

KELLY BUSCHE: UzObi is a virtual clinic platform that allows ethicists to help patients with their advanced care planning. This includes end-of-life decisions. And it also provides virtual ethics consultations. So UzObi CEO and co-founder is Dr. Nneka Sederstrom. And she told the Business Journal that her startup service helps people ensure their values and voice are at the center of conversations with clinicians. And so through this, they hope to change the way that health care is practiced as well as patient outcomes.

CATHY WURZER: Tell me a little bit more about the Black Founder accelerator program.

KELLY BUSCHE: So, like you mentioned, it's run by Northwestern Mutual. And it's ran in partnership with Generator, which is a venture capital fund. So UzObi is one of five startups in the new cohort. And as part of the program, they're going to receive an investment of $100,000. And they're also going to go through a number of programs and support services. This includes a 12-week business training program. And they're going to be given access to individuals and venture capital, and receive coaching from insurance and finance professionals.

And this accelerator program is aimed at providing resource funding to promising black entrepreneurs and was created to help close the racial wealth gap. So UzObi's Sederstrom -- again, the CEO and co-founder-- she told the Business Journal that it feels wonderful to be part of a cohort of other Black entrepreneurs and Black founders that are being celebrated in a meaningful way.

CATHY WURZER: All right, good reporting. Thank you so much.

KELLY BUSCHE: Great. Thanks, Kathy.

CATHY WURZER: Kelly Busche is a reporter for the Minneapolis Saint Paul Business Journal. For more stories, check out bizjournals.com.