It’s Time to Invest in the People of Los Angeles. They are the Future of Los Angeles.
Earl Warren, former U.S. Supreme Court Justice and Governor of California, once said “I always turn to the sports pages first, which records people’s accomplishments. The front page has nothing but man’s failures.”
Decades later nothing has changed. News headlines continue to highlight our society’s collective inability to provide enough affordable housing units, educational resources and healthcare services, the core essentials to a quality of life, to every person that calls Los Angeles home.
Yet, I remain optimistic.
The Narrative
For the past 10 years the narrative in L.A. has been built around the great success the region has had with investments in large-scale public infrastructure projects, real estate developments and new business growth, that have helped L.A. become a trillion dollar economy and “ground zero” for entrepreneurs turning their ideas into reality.
For the next 10 years a new narrative is developing around L.A.’s role as a host to a number of large-scale sporting events, which include the MLB All-Star Game (2020), the Super Bowl (2022), the College Football Playoff National Championship (2023), the 123rd U.S. Open Golf Championship (2023), the FIFA World Cup (2026) and the Olympic and Paralympic Games (2028).
According to available data from the L.A. Sports and Entertainment Commission the events mentioned above, excluding the Olympics, will generate $1.3 billion for the region and data from the Los Angeles County Economic Development Corporation shows that the annual economic impact of L.A.’s sports industry is estimated at $6.2 billion. LA2028 estimates their budget for the Olympic and Paralympic Games to be $6.9 billion.
There is little doubt that these sporting events will generate a large amount of news headlines on the athletes’ victories and defeats and a smaller amount of stories on initiatives that direct dollars into the region’s businesses, government treasuries and nonprofits. The NFL’s Business Connect program comes to mind as one great example of the positive impact the Super Bowl could have on L.A.’s local communities in 2020.
The program was established 28 years ago to identify the best, local diverse special event production vendors in a Super Bowl city, and then serve as an advocate for women-, minority-, veteran-, and LGBTQ-owned businesses who have the experience and skill sets to be event-ready and competitive in the marketplace.
What remains unclear is how journalists will use these grand events to juxtapose the image of L.A. as a tale of two cities, where L.A.’s underserved communities remain in the shadow of the region’s historic economic expansion.
Fortunately, L.A.’s leaders have the power to shape a new narrative.
The New Narrative: L.A.’s “Buying Power” Fosters Economic Growth and Good Paying Jobs
One of the most powerful and overlooked economic development tools our public institutions have is their multi-billion dollar annual procurement spend or to use a better phrase their “buying power” in the marketplace. L.A. County, LAUSD, UCLA, the Federal Government and the City of L.A. are not only our region’s top employers, they also spend cumulatively more than $20 billion annually on buying goods and services. Billions more are also being spent to upgrade our region’s economic infrastructure – LAX, Port, DWP, Metro, etc.
When you add in L.A.’s top private sector employers, like USC, Northrop Grumman, Kaiser Permanente and the region’s sports and entertainment events, the region accumulative “buying power” easily surpasses $30 billion annually.
The Problem
The problem is not enough of these dollars are flowing into the heart of L.A.’s fastest growing communities – women-owned and minority-owned businesses. According to the National Association of Women Business owners, there were more than 544,000 women-owned firms in the Greater L.A. area in 2018, which was a more than 24 percent increase since 2002. Of all the businesses in the greater L.A. region, more than 55 percent are minority-owned.
According to a 2018 report commissioned by LISC LA Supporting Economic Inclusion in Disadvantaged Communities, A Case for Inclusive Public Procurement Policies of the $1.5 billion the City spends annually on professional services, small business owners, particularly of color, received less than 10 percent of the awards. (Though I have have been told the number is more likely 2 percent.)
In the South L.A. Transit Empowerment Zone, a federally designated Promise Zone, businesses received less than half of one percent of City contracts between fiscal years 2014 and 2016. Other resources show that 90 percent of the City’s procurement spend on small businesses that employ less than 50 people goes to vendors outside the City. Fifty-eight percent of the spend goes outside L.A. County.
One caveat – some agencies and organizations, both public and private, are doing better than others on leveraging their buying power, but a lack of publicly available data limits the ability to see how improvements and collaboration across entities could make a difference in L.A.’s underserved communities.
At the County level, Supervisor’s Mark Ridley- Thomas and Hilda Solis recently reaffirmed they want 25 percent of the County’s $3.9 billion in eligible annual procurement awards to go to Local Small Business Enterprises by 2020 and have set a goal of $1 billion in small business contracts by 2020.
Yet, their ambition is running up against reality. The latest Economic Development Report Card showed that Local Small Business Enterprises (LSBEs) were awarded $355 million in the fiscal year 2017-2018, equating to a 9 percent utilization rate. Though the first half of fiscal year 2018-2019 showed some progress, as $321 million has already been awarded to LSBEs.
The Challenge
- Each public and private sector institution manages their own procurement system, effectively creating a siloed marketplace that creates an inefficient and ineffective way of engaging a large majority of appropriate businesses with real-time contract and service opportunities; preventing economies of scale; and
- A labyrinth of disparate rules, procedures, and organizational structures make the acquisition of goods and services a lengthy nightmare; thus excluding a large population of small businesses from participating in the system. These conditions reduce the pool of qualified candidates yielding a less competitive marketplace, while impeding cost savings; and
- A lack of real-time data and metrics inhibits targeted outreach programs to identify and support small women-owned, minority-owned and disadvantaged businesses to help improve their buying opportunities in the marketplace, thereby, organizations cannot meet their business inclusion targets and cost saving opportunities.
A Solution
The biggest steps forward the public sector can take to engage more small businesses is through the introduction of better technology and more streamlined internal processes.
The work started by the Mayor’s Operations Innovation Team, the public private partnership between the L.A. Coalition, the Mayor’s Office and Mayor’s Fund continues to advance within the City’s departments with improvements being made to the procurement manual and training program, data collection methodologies, timely contract payments and contract management system.
In January of 2019 the City of L.A. announced a new online business certification system, that replaced its paper based system, to streamline the business application and approval process The system also makes it more inclusive for other public entities to add their business certifications and notifies a business that there are other available certifications for which they maybe qualified.
This new technology was built by a L.A. based entrepreneur and the best way to describe it is similar to a LinkedIn for procurement. This newly introduced technology provides L.A. a great opportunity to create a Regional Procurement Market Place to better leverage the region’s $30 billion in “Buying Power.”
The Market Place would be a centralized system that allows public and private sector entities to post their procurement opportunities on one platform that would host hundreds of thousands of small businesses, most of whom have been historically locked out of the procurement system.
The benefit of the technology is that it automatically identifies any requirements (bonding, insurance, etc.) of the procurement that a business needs to be able to compete and suggests ways to meet those requirements. Then the system automatically matches a business with a real opportunity based upon their services. That is just the type of innovation the public sector needs to foster economic growth and good paying jobs in a 21st century economy.
Procurement is not a sexy topic and it definitely doesn’t make headlines but it is the backbone of an efficient and well-run economy. The impacts of procurement decisions are felt far and wide across every sector and industry from transportation and construction, the very foundation of our region’s quality of life.
With the recent Mayor Garcetti appointment of a new Chief Procurement Officer, Shannon Hoppes, and the great work of her predecessor Michael Owh, who is now leading procurement system improvements at L.A. County, I am hopeful for the future.
The time is now to be bold and that requires changing the status quo. When successfully implemented, with the support of all the major players in the region, this idea could go a long way in showing that we are ready to invest in the people of L.A. because they are the future of L.A.