The State of Minority- and Women- Owned ... - Cleveland.com

III. Defining the Relevant Markets
A. Introduction
Defining the Relevant Markets
The U.S. Supreme Court in Croson indicated that the U.S. Congress’ national findings of
minority business discrimination in construction and related industries were not geographically
specific enough, or “narrowly tailored” enough, standing alone, to support a MBE program in the
City of Richmond. The first step in our evaluation of M/WBE availability and participation for
the City of Cleveland must therefore be to define the relevant market area for its contracting and
procurement activities. Markets have both a geographic dimension and a product, or industry,
dimension, both of which are considered. 196 For this Study, we define Cleveland’s market area
based on its own historical contracting and subcontracting records. We define the geographic
market dimension by calculating from zip code data where the majority of Cleveland’s
contractors and subcontractors are located.
Narrow tailoring also applies to product markets. The extent of disparity may differ from
industry to industry just as it does among geographic locations. 197 Documenting the specific
industries that comprise the City’s contracting and procurement activities and the relative
importance of each to contract and subcontract spending is important because it allows for: (1)
implementation of more narrowly tailored availability estimation methods, (2) contract-level
goal-setting, and (3) overall M/WBE availability estimates and annual goals that are a weighted
average of underlying industry-level availability estimates, rather than a simple average. The
weights used are the proportion of dollars awarded or paid within each industry and allow the
overall availability measure to be influenced more heavily by availability in those industries
where more contracting dollars are spent, and less heavily by availability in those industries
where relatively fewer contracting dollars are spent.
We define the product market dimension by estimating which North American Industrial
Classification System (NAICS) codes best describe each identifiable contractor, subcontractor,
subconsultant, or supplier in those records. 198 In both cases, the definitions are weighted
according to how many dollars were spent with firms from each zip code or NAICS code,
respectively, so that locations and industries, respectively, receiving relatively more contracting
dollars receive relatively more weight in the estimation of M/WBE availability. Once the
geographic and industry parameters of Cleveland’s market area have been defined, we can
restrict our subsequent analyses to business enterprises and other phenomena within this market
area. Restricting our analyses in this manner narrowly tailors our findings to Cleveland’s specific
market area and contracting circumstances.
196 See, for example, Areeda, P., L. Kaplow, and A. Edlin (2004).
197 See Wainwright (2000), documenting that, in general, the similarities in the amount of discrimination present in
different industries and geographic locations significantly outweigh the differences.
198 Executive Office of the President, Office of Management and Budget (2007).
NERA Economic Consulting 57