Rep. Gilda Cobb-Hunter, D-Orangeburg talks with legislators in the House chamber on Thursday, Jan. 11, 2024. (File photo by Mary Ann Chastain/Special to the SC Daily Gazette)
In the nearly 40 years since Diane Sumpter founded her business consulting firm DESA Inc., she’s held millions of dollars’ worth of federal government contracts all over the country. But it’s been years since she’s done any business with her home state of South Carolina.
“South Carolina state government has not been one that’s been open to us,” she told the SC Daily Gazette. “That’s just been a hard nut to crack.”
So, she and other leaders of minority business organizations largely shrugged off last week’s order by Gov. Henry McMaster directing state agencies to disregard state law that was supposed to help minority-owned businesses.
After all, agencies already ignored the decades-old sections. They weren’t bringing business anyway.
The last time DESA — initially formed as Diane E. Sumpter and Associates — did work for the Palmetto State was about 15 years ago. The state Department of Transportation hired DESA to ensure construction subcontractors were following the proper accounting and auditing processes. She can’t remember the contract amount. Any state work she’s done with state agencies since has been as a subcontractor under another company.
“You can’t continue chasing after something that’s never going to amount to anything,” Sumpter said.
“We stopped bidding,” she added.
Citing a potential loss of federal funding, the governor signed an executive order last week essentially directing all state agency heads to ignore sections of state law dating to 1981 titled “assistance to minority businesses” until the Republican-dominated Legislature can remove them next year. Agencies should not enter any new contracts based on race, he said.
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McMaster called that unconstitutional; 44 years ago, the General Assembly called it opportunity.
“Business firms owned and operated by minority persons have been historically restricted from full participation in our free enterprise system to a degree disproportionate to other businesses,” reads a policy statement in the law. “The General Assembly, therefore, takes this leadership role in setting procedures that will result in awarding contracts and subcontracts to minority business firms in order to enhance minority capital ownership, overall state economic development and reduce dependency on the part of minorities.”
Companies wishing to do business with the state can apply for a certification — good for five years — as a minority-owned enterprise.
The law directs state procurement officials to provide those businesses added assistance in placing bids. The businesses also were to be added to a database, detailing the products and services which they provide, that agency staff could access when looking for contractors.
At first, Sumpter said, lots of businesses completed the certification forms. But over the years, she said, many stopped re-applying when the hope for state contracts never materialized.
“It was just paperwork,” she said. “Having it is one thing; having it work is another.”
The law requires every state agency to make a plan annually for spending 10% of its discretionary budget with businesses certified as minority enterprises.
Progress reports toward meeting that goal are due every quarter. But there’s no punishment in the law for noncompliance. Beyond that, 10% is a goal, not a requirement.
More than 40% of 114 agencies and public colleges listed in the latest report compiled by the state’s minority affairs commission failed to turn in a plan for the fiscal year that ended June 30. One-third didn’t bother to turn in a single quarterly report.
“That speaks volumes,” said Evelyn Lugo, founder of the South Carolina Hispanic Chamber of Commerce.
Lugo, who has operated the business organization for 18 years, could think of just one Hispanic-owned company with government contracts. That’s Mercom Corporation, a Pawleys Island IT firm that’s held numerous federal contracts, she said.
For smaller companies without a lot of liquidity, the wait for government payments to come in after providing a service can be too difficult.
Under the state law, agencies were supposed to break contracts into more manageable chunks for small, minority-owned companies, but Lugo hadn’t heard of that happening.
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“If you are one of the little guys, forget it,” she said.
In his order to end any semblance of complying with what he called “race-based spending quotas,” McMaster cited Trump administration changes in federal rules.
Executive orders from President Donald Trump hinge on a 2023 U.S. Supreme Court ruling declaring Harvard’s admissions policy on race unconstitutional. The president, and now the governor, used that ruling to strike all diversity-related mandates in government.
The longest-serving Black legislator in the General Assembly called the order unnecessary.
“You’re telling people, based on the Supreme Court’s decision, to not make exceptions for businesses of color,” said Rep. Gilda Cobb-Hunter. “My argument is that wasn’t being done in the first place, not to the extent that it could have been done.
“You’re now saying the two or three crumbs that are going to these businesses of color, we’re going to take that down to zero crumbs,” continued the Orangeburg Democrat, saying the order is also misleading.
It implies the state is “giving minorities this and giving them that,” she said. “Let’s see what the numbers show.”
According to the report for the fiscal year that ended June 30, only two agencies with big discretionary budgets met their 10% goal: the Department of Transportation awarded $7 million worth of contracts to certified minority firms, and the adjutant general’s office awarded $5 million total.
Among colleges, Clemson University reported awarding almost $3 million worth of contracts, or 4% of its “controllable dollars.” Colleges not reporting anything last fiscal year include the University of South Carolina, the Medical University of South Carolina, and South Carolina State University, the state’s only public historically Black university.
USC has filed in the past, according to spokesman Jeff Stensland. MUSC is in communication with the commission about the reporting, according to a statement provided in response to the Gazette’s questions. It did not address past filing or whether the college was aware of the rules. Spokespeople for Clemson and SC State did not respond.
Juan Luvene, owner of All Clean Mobile Wash, has held state contracts for more than a decade, including one pressure washing the state foster care agency’s fleet of vehicles.
The Anderson business is state-certified as minority-owned, but Luvene said the competition for contracts remains fierce and requires vast amounts of paperwork.
“I don’t think it gave me a leg up or a leg down,” he said about the certification.
“You earn business based on how well you do a job,” said David O’Shield, the owner of Envirogreen in Greenville.
O’Shield has held several contracts as a minority-owned firm over the last five years, hauling rock, sand and even oyster shells. He considers the certification more of a marketing tool.
“So you’re at least on the list to be looked at,” he said.
Both owners told the SC Daily Gazette they’re less worried about the loss of the minority-focused program and more concerned about potential changes that could impact small businesses in general.
“It’s hard to get in front of the right people,” Luvene said.
“I don’t want the small businesses to be kicked out of the state network,” O’Shield added. “That’s where I’m afraid it’s going to go.”
Meanwhile, the agency charged with enforcing the reporting requirements has very little staff or state funding to carry out this law along with its other duties, Cobb-Hunter said.
She’s referring to the former minority affairs commission, which the Legislature renamed the State Commission for Community Advancement and Engagement in May as part of a law responding to a federal lawsuit.
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How many states agencies complied with the reporting rules in the past could not be determined.
As of Thursday morning, the commission did not provide the Gazette records requested last Friday on fiscal years other than 2024-25. The commission also did not provide information on how many businesses are certified in South Carolina as minority owned.
However, a search of businesses registered with the state procurement office showed about 540 companies as minority owned.
The law also provided tax credits to private companies that hired minority-owned subcontractors to help fulfill government contracts.
Just nine firms statewide applied for that credit on their 2023 taxes, according to data from the state tax agency.
According to Stephen Gilchrist, founder and chairman of the South Carolina African American Chamber of Commerce, only about 10% of the organization’s more than 2,000 members have benefited from minority certification.
And about eight years ago, the chamber stopped recommending the program altogether.
Gilchrist said his members were spending enormous amounts of time participating in seminars.
“What I found is that it was just a lot of hope,” he said. “Window dressing rather than a real opportunity to do business with the government.”
Gilchrist believes minority-owned companies have actually had more luck getting state contracts without bothering with a certification.
At the same time, Gilchrist is not suggesting there shouldn’t be a system in place to track whether minority-owned companies are earning a fair share of taxpayer-funded contracts. But until the order went out, he said, no one in state government had ever asked him about the effectiveness of existing state law.
