The Hudson Initiative: One step forward, two steps backBy Cheryl Hentz
During the 2005 regular legislative session 78 members of the Louisiana State Legislature signed on as authors to legislation that is popularly known as the “Hudson Initiative (HI).” The “Hudson Initiative’s” primary goal is supposed to be to encourage and enhance opportunities for local small and emerging entrepreneurs to become successful vendors in the state of Louisiana’s procurement process.
Under the bill, all departments, institutions, commissions, boards, offices, budget units, entities, agencies, and offices of the State of Louisiana, or any political subdivision thereof, shall include small and emerging businesses in the business offerings available for state procurement and public contracts. A measurable result of successful Hudson Initiative implementation would be a substantial increase in state procurement vendor participation by local small and emerging entrepreneurs. This result may be reached as a natural result of the implementation of HI’s mandatory directives to Louisiana’s state agencies.
However, after almost five years since passage of the legislation, required aspects of the law are not being fully implemented or substantively enforced by the very state entities which are charged with administering and overseeing HI compliance. It is not clear why this situation exists, but it is distressing and frustrating for many, to say the least.
“It is not working as well as we expected; not by a long-shot. We still have only 2 percent of state contracts going to Hudson Initiative businesses,” said Katrina R. Jackson, a lawyer with the Louisiana Legislative Black Caucus (LLBC). “So there were some things we were trying to implement to give some bite to it, but all of those things were voted down by the House Appropriations Committee.”
One state legislator who has sponsored some of the measures proposed by the LLBC is Rep. Girod Jackson III (D-District 87), a general contractor by profession. Just last month he had an amendment before the Appropriations Committee that would have amended the original legislation to create hard goals with penalties or at least negative repercussions if agencies failed to show good faith efforts in meeting the goals. It was basically killed in committee.
“It was very disheartening because that was a vote against Louisiana small businesses and veteran-owned businesses,” said Rep. Jackson. “At this point in our economy we should be doing more economic development gardening and sowing our own seed with our local small businesses and allowing them to grow, which would absolutely grow our tax base, absolutely provide more jobs for our local people and more contracts for our suppliers, and absolutely be a direct shot in the arm for economic development. So I really don’t understand that vote and why members of the Appropriations Committee would vote against Louisiana small businesses.”
Part of Jackson’s legislation would have increased the goals for both Hudson Initiative and Veteran Initiative companies – 25 percent for Hudson Initiative and 10 percent for Veteran Initiative companies for a total of 35 percent.
“But in speaking with Miss Denise Lee from the Division of Administration, who handles the compliance of Hudson, she thought those goals were too aggressive because they hadn’t met the 2 percent goals set in a previous year,” Rep. Jackson said. “So when we started getting into the nuts and bolts of how they go about getting Hudson Initiative certified companies involved, it seemed the whole process was off. So I’m thinking the reason HI is not effective is because the delivery of procurement opportunities to these companies is either wrong or not there at all.
“What they’re doing is letting the responsibility of finding HI companies be on the actual department’s desk who are looking for the procurement service itself. So if a department needs to buy materials, for example, and you tell them that the Hudson Initiative goal is 2 percent they have to go out and actually find a company, most departments will come back and say ‘We couldn’t find any so let’s go with the companies we’ve been using.’ Well, that’s wrong,” he continued. “For the procurement process, any certified small business company will tell you once they become certified, they’re supposed to be receiving emails or some type of letter from municipalities and any other governmental source saying (notifying them of upcoming bids). That’s a better delivery of procurement opportunities to the group that’s already certified. We have their information – their phone numbers, addresses, emails – we should be sending them what we’re looking for so the ones who qualify can aggressively go after those opportunities. But there’s a breakdown and there’s really no one in the department that’s fluent in small business development…We have more than enough companies certified under the Hudson Initiative in Louisiana that can provide a certain level of participation. But we have to get them the opportunities.”
One person who has personally experienced the breakdown is Larry Richard, president and CEO of L R & A Traffic Control. He became certified as a Hudson Business a couple of years ago with the intent that when needs arose in state government that could be fulfilled by his company, he would have the opportunity to bid for the job.
“Small business is the economic engine behind America’s growth. I’d love to be a part of it, much as I have been since 1999 when I started my business, but even more so,” said Richard.
But since the initiative has become law and he became certified, he has seen nothing change.
“I don’t get any correspondence from any agency within the government about upcoming bids and such. And that was my understanding of how it was supposed to work, but I personally haven’t seen anything like that,” said Richard. “I’m not saying this to bash any of those departments. Government is tough and there may be some areas where they need to work on something to enhance the initiative. There were a whole bunch of things that were a part of it and maybe they haven’t gotten the opportunity to put everything in place.”
To understand what’s happening with the Hudson Initiative today, and why, it may be important to step back and look at its roots.
The Hudson Initiative was unanimously passed by the Louisiana State Senate and the Louisiana House of Representatives, and subsequently signed into law on July 11, 2005 by then-Governor Kathleen Blanco. State Representative Roy Quezaire Jr. (D - Donaldsonville), who authored the bill with assistance from its namesake, the late Rep. Charles “Doc” Hudson, said at the time that the purpose of the Hudson Initiative was to enhance the stability of Louisiana’s economy, by giving small business owners meaningful and equitable opportunities to compete for contracts with state agencies.
The language of the law states that “given the magnitude of the state’s procurement and public contracting activity, state government is uniquely situated to create an environment where small entrepreneurships have an opportunity to thrive and ultimately enhance the stability of Louisiana’s economy.”
At the time Roy Mack with Louisiana Economic Development said the certification process would be a proactive way to ensure small businesses gained access to state contracts. Hundreds of small businesses excitedly completed the certification process, but that excitement soon turned to disappointment – for businesses and lawmakers alike.
“The members of the legislature were good enough to pass a bill that began and holds the basic essence of what my father was trying to do by creating more opportunities for small and disadvantaged businesses to procure state contracts, and by correcting the disproportionate number of large firms – many located outside of Louisiana – procuring and working on state projects, through legislation and education,” said Donovan Hudson, son of the late representative. “He was trying to get something more substantive passed. I don’t mean to diminish it at all, but they passed something with the promise that it would get more substance, authority and enforcement ability at the administrative level. Therein is where our problems begin. In other words, the passed some “feel good” legislation in his honor and it was a nice gesture, but they did not put teeth in the bill. But if they had really put stringent enforcement decrees within it, they probably wouldn’t have gotten it passed. So in order to get something on the books and to honor him at the same time, they passed a watered-down version of the bill.
“No one speaks against the bill – it is race and gender neutral. The bill only says that you have to help what is considered a small, emerging business. But in my opinion, small businesses today are not nearly as well-organized and don’t have the lobbying muscle that some of the larger entities do. So when legislators are faced with making choices and they have a well-organized, well-financed entity that is opposed to legislation, and they have another entity that is not making a lot of noise, and is not well-organized or well-financed, (they usually stand with the one with the loudest voice and strongest muscle.),” Hudson continued. “And quite honestly, the bureaucrats in Louisiana, the people who are actually involved in the procurement process, are very comfortable with the way things are. If my job is to find a contractor who will get something done and I find somebody who’s satisfying the needs, and I’m not in trouble for it, but then you come along and tell me I need to go shopping and find somebody else, that makes more work for me and I might get in trouble if I pick the wrong person. All of these things, just institutionally, work to create inertia and make it harder to institute change.”
The bill was passed saying that that state shall do more business with local small businesses. And it set up the procedures and the processes for small business to qualify as a ‘Hudson Small Business.’
“But what is lacking in the legislation, and we knew this was a problem when it was passed, is there’s no incentive to comply and no penalty if an agency fails to follow the mandates of the bill. It has a grand vision but it does not have any strong enforcement aspects to it. That was supposed to be promulgated at the administrative level, but there’s where we run into the bureaucratic problem,” said Hudson. “The governor who passed it and the current governor as well, love to point to the Hudson Initiative and say ‘Look what at what we’re doing,’ but the faceless, invisible empire of the bureaucracy has marching orders that this is not to be effective – and it’s not.”
Though it started out as something good, the Hudson Initiative is now starting to get a bad name with small businesses, he added.
“Small businesses have put out energy, they’ve spent time to qualify as Hudson businesses, but they’ve gotten nothing for putting all that effort out,” Hudson lamented. “They have a name and they’ve gotten a plaque that says that they’re qualified as a Hudson Business, but they’ve gotten no extra business because of getting that certification. Whatever business they’ve gotten, they’ve gotten through other means.”
The fact that Hurricane Katrina pummeled the area only a few months after the legislation was passed did not help because state agencies had much larger things to focus on at that point. But Hudson says Katrina also was an extraordinary opportunity that was missed.
“If they had started working on getting the legislation up to speed right after it was passed, it could have been in place in time for the recovery and a lot of money that flowed right through the state – or at least some portion of it – could have stayed and reverberated within the economy here. And now we’ve got the oil spill so there are even more opportunities being lost,” said Hudson.
Also disappointing is the fact that under the provisions of the Hudson Initiative as passed there is to be an annual report generated so it can be determined if the goals are being met and, if not, so adjustments can be made so the goals can be met in future years. Unfortunately, and in direct conflict with the law, there have been only two reports issued – one for FY 2007-08 and one for FY 2008-09. Neither showed much progress in meeting the established goals.
“I tried passing legislation that would have created a Hudson Initiative Task Force that would take the measure over from the Division of Administration to do its own study on how it can be more effective and how we can reach those goals at the state. When the Division of Administration saw (my proposal they never moved on it) and instead rushed to put their first annual report together,” said Rep. Jackson.
“I sit at the table with the Division of Administration and they tell me we don’t have enough businesses to meet the goals, but when I talk to the City of New Orleans, they have a DBE division and they have over 300 businesses registered with them. The state is giving me a very small number of businesses with the Hudson Initiative,” said attorney Jackson. “I tell them, number one, it’s a goal; number two, you are at some point responsible for getting the information out to businesses, which is what the Hudson Initiative said. If your data base is that weak and New Orleans has a data base that extensive, then the state is dropping the ball somewhere.”
Hudson says he does see one success of the Hudson Initiative so far, though he says it’s more on the bureaucratic side than the business side. In order to at least give the impression that they are doing something, the Office of Procurement in the Division of Administration has a person who is in charge of telling all of the agencies that they are supposed to be following the Hudson Initiative mandates of reaching out to more small businesses.
“I do know that some of the mindset has changed within some of the bureaucracies. A couple of the smaller ones have been much more receptive and proactive to reaching out to smaller businesses in trying to do business with Hudson entities. They seem to be aware of the need to try and do business locally with Hudson certified businesses. So that’s the one success that I can point to,” he said.
“If Hudson businesses want this to work, they are going to have to let their legislators know that this is important to them. The next legislative session will take place in an election year, and it is my plan to come up with ways to contact, organize and help give voice to these small businesses so that come the next session we will have legislation drafted that will give substance and some teeth to the enforcement of the initiative,” Hudson continued. “We’re going to have a small business entity – a non-profit or a PAC (political action committee), or it may be a combination of the two – with the intent of getting people to the table who are affected by this.”
Rep. Jackson is determined to bring back some form of legislation next year.
“At this time especially I think we should be embracing our local small businesses and opening our arms more versus offering incentives and big, lucrative tax credits to companies from out of the area that want to come in and do business, where when they come in they bring their own locals. And once the contact is done, they all move back out of the state with all the money they just made. So I will bring the legislation back, but I’m still going to work with the administration to try and get this task force established before I bring back the legislation,” he said. “We need to bring some stakeholders to the table
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