Internal strife at a tiny agency that certifies small and minority-owned businesses to compete for billions in public contracts put some of those companies at risk of missing out on three lucrative airport concessions contracts this year.
To make sure they had the opportunity to bid, the City of San Antonio granted a last-minute request in early January from the South Central Texas Regional Certification Agency (SCTRCA) to delay the bid deadline.
The contracts required prime bidders to include a percentage of local food, beverage and retail “concepts” in their packages, which meant partnering with local businesses. To be eligible, however, those businesses needed a specific federal certification required for projects that include federal aviation funding.
Jay Terry, a veteran and CEO of 3 Jays Enterprise, said a prime contractor had considered one of his companies to be part of a bid package but passed when it learned he didn’t have his certification. Now, thanks to the city’s delay, he was certificated in time to join another bid package.
“That was a stressful time,” he said. “Large contracts like that, you only get one opportunity, one bite at the apple. And if you miss it, it doesn’t come around again for years.”
Landing public contracts can be life changing for small-business owners like Terry. In 2021, federal, state and local contracting opportunities in the San Antonio area represented more than $9 billion — $4.2 billion of that from local government contracts alone.
Against that backdrop, City Manager Erik Walsh said Friday in a statement to the San Antonio Report that delaying the airport contracts deadline was an easy decision.
“Knowing what a big opportunity this could mean for a small, minority- or women-owned businesses, when we were asked to delay the deadline two weeks, we extended it by more than a month,” Walsh said.
To prove their eligible status, companies get certified — and in the Bexar County region, those have been handled by the SCTRCA since 1998. As a nonprofit agency, it was formed through an interlocal agreement among the city, Bexar County and 11 other public entities that also use certified businesses in contracting and procurement.
The agency administers 13 different certifications: 11 for local contracting opportunities and two federal.
When the SCTRCA board of directors fired its executive director on Dec. 1 last year, citing performance issues, it didn’t have an immediate plan for keeping federal certifications moving through the system.
Panicked businesses began reaching out to agency board members, alerting them of the looming airport concessions deadline.
Emails obtained through open records requests show that in the days leading up to and after Christmas, several board members were frantically searching for a solution to complete the federal certifications. Ultimately, the board asked the city to delay its deadline to give the new interim executive director, who would begin in mid-January, time to review and complete the certifications.
While the city’s delay resolved that immediate fire drill, problems within the agency have been percolating for years.
Problems within SCTRCA
In an interview, board member Renee Watson said she believes the agency has been underfunded for years. That has led to a lack of training at both the staff and board level and mishandled certifications, depriving hundreds and potentially thousands of small businesses of eligibility for bidding on government contracts.
“I hear from companies all the time who are struggling to get certified,” said Watson, who helped found the SCTRCA in 1998 and rejoined its board two years ago. “Some of them just give up.”
Just two employees review hundreds of applications each month, said Watson, whose day job is serving as director of Bexar County’s Small Business and Entrepreneurship Department.
Local business owners have complained about certification delays — one local business owner said it took her a year to get recertified — as well as unclear policies and procedures and calls and emails that go unanswered.
“This organization is a nightmare and an embarrassment,” wrote Jorge Canavati, the owner of a San Antonio-based logistics and trade consulting firm, in a Nov. 21 email to the agency’s chairwoman. “I am trying to renew, and the system is an absolute failure. I have renewed with ease three times in the past and it is impossible now.”
Jeff Bass, owner of JL Bass Construction, described “a back and forth of meaningless proportion” in his Oct. 13 email complaint. “I would also like to file a grievance.”
Watson said she’s been sounding the alarm, trying to avoid “a PR crisis.” When it was time to vote on a new board chair for 2024, she said she nominated Michael Sindon, who had been the city’s alternate representative on the board, because “he’s very competent, and I wanted to get the city’s attention.” He will chair his first board meeting on Monday.
A 2022 certification audit identified staff shortages, training challenges and significant deficiencies in policies and procedures. The agency’s own procurement processes were described as “ambiguous.”
The audit also described a board with a role that is not clearly defined.
Watson championed the recent hiring of Sheena Thomas, a certification consultant with 25 years of experience who will serve as an interim executive director potentially through the end of 2024. Thomas has already largely cleared the backlog of delayed certifications, including those of Canavati and Bass, and is auditing past certification decisions, according to her Feb. 28 presentation to the board.
Watson is now serving as the board’s treasurer, working with an accounting firm to get the agency’s books in order. She worries about how the agency will pay for Thomas, whose contract costs more than what the agency was paying its executive director, and cover the costs of the accounting firm and ongoing legal fees of the agency’s attorney.
Thomas, citing her recent arrival to the agency, directed questions to Sindon, an administrator in the city’s Economic Development Department. He acknowledged the challenges facing the small agency and added that stabilizing it is a priority, as did Walsh.
Helmed by Sindon, the board “will evaluate membership dues, staffing plans and various policies to strengthen the agency so that it may continue to best serve our community,” Walsh said.
Businesses frustrated by delays
The agency’s struggles have also caught the attention of Supply SA, a collaborative initiative among the city, Bexar County and the CEOs of more than a dozen public entities.
Underway since 2022, Supply SA aims to streamline and standardize the procurement process among these disparate organizations to help more local small businesses bid — and win — contracts.
Leo Gomez, president and CEO of Brooks Development Authority and a member of Supply SA, said he’s putting together a committee to hear from Thomas and learn what steps will be necessary to shore up the SCTRCA, whose members largely overlap with those of Supply SA.
These public entities, including CPS Energy, the San Antonio Water System, Alamo Colleges, Brooks, Port San Antonio and University Health, collectively spend billions of dollars outsourcing goods and services through procurement contracts each year, using certified companies when possible.
As a CEO of one of those entities, “I’m prepared to take some of the responsibility for letting it get to this point,” Gomez said. “But we’re all partners in this agency, and it plays a critical role for small businesses. That’s who we’re trying to help here.”
Longtime San Antonio politician and former U.S. Housing and Urban Development Secretary Henry Cisneros, who is assisting with the Supply SA effort, acknowledged the agency’s “ragged history” but called its work “critical” to the success of local small businesses — and to Supply SA’s effort to simplify procurement and strengthen small businesses’ ability to win contracts.
“One of the important initiatives of Supply SA was to get the certification process squared away: get it fair, get it accurate, get it competent, get it professional,” Cisneros said.
Virtually all public contracting opportunities, whether local, state or federal, have a small-, minority- or disadvantaged-owned business component to them, although the ways they achieve those goals vary widely.
For the City of San Antonio, many contracts are issued under the city’s Small Business Economic Development Advocacy ordinance. That often means including a certain number of points for small, women-, veteran-, disabled- and minority-owned businesses, which help them compete.
For contracts with federal funding, like the airport concession contracts, the city cannot set a percentage of local business participation, so it instead included a requirement for a certain percentage of “local concepts” — think La Gloria and Smokeshack, two local businesses with outposts at the airport.
The Eatery Culinary Group, owned by Denise Hernandez, was one of the local business owners whose ability to partner with a prime contractor for the airport concessions contract was put at risk by the certification delays.
In addition to the federal certification Hernandez needed for the airport contract, her company holds several local certifications. Those helped the Eatery win corporate dining contracts for the San Antonio Independent School District and SAWS.
For those, the Eatery is a subcontractor to Aramark, a food services giant with a presence in 14 countries. Competing against companies like Aramark isn’t feasible, Hernandez said, but partnering up “gives us small local businesses the opportunity” to get a share of major contracts.
Certification also paves the way for businesses to be included in the city’s central vendor registry, which then allows them to be considered for relevant contracts. Federal certifications are required for projects whose funding includes federal highway, aviation and transportation funds, such as the airport concessions contract.
To prove that they qualify for the certifications they seek, businesses share tax returns, revenue, company size and even birth certificates with the SCTRCA. Site visits are also required.
The SCTRCA is one of only two nonprofit certification agencies in Texas. Many cities do their own certifications — as San Antonio did before the formation of the agency.
Turning things around
Despite its importance to the thousands of businesses in the region hoping to land public contracts worth billions of dollars, the SCTRCA does its business in relative obscurity, rarely piercing the public’s consciousness.
The last time the SCTRCA made the news was in 2017, for its decision to certify Go Rio as a small business, which won the city’s 10-year, $100 million River Walk barge contract. A competing bidder challenged the certification, since the additional points it earned as a small business gave it the highest score. The agency, which was going through leadership changes at that time, as well, upheld the certification.
The state’s other regional certification agency, which serves the Dallas region, faced questions about performance and transparency after it sought to keep its records from the public. Changes were made in 2014 after The Dallas Morning News reported problems with the NCTRCA’s management, oversight and operations.
In San Antonio, stakeholders within SCTRCA’s board know it’s time for a change.
During the agency’s Feb. 28 board meeting, Thomas led the board through her action plan to review the agency’s policies and procedures top-to-bottom, while keeping certifications moving. Between Dec. 1, when the previous executive director was fired, and Feb. 22, the agency approved 620 applications of all types, including recertifications, she said.
In 2023, it processed more than 5,800 applications. Board member Maurice Bridges, who represents VIA Metropolitan Transit, noted that the volume of applications “has tripled” in recent years.
“As it should,” he continued, indicating the increase is a sign of both a robust small business community and more contracting opportunities.
But the agency’s budget, which is funded largely by the dues paid by each organization, has not increased commensurately. Dues, ranging from $7,800 to $51,000 annually, have not been raised in at least a decade. Several big companies also sponsor the agency, including construction and contracting firms such as Joeris, Guido, Zachry and SpawGlass.
More money would allow the agency to attract and hire more staff. Under the current budget, Thomas said she’s working to better train the agency’s two staffers, who face “significant deficits in certification application accuracy,” according to her presentation. One staffer was hired to be an intake clerk but now reviews applications.
Thomas also noted that, as she reviews past certification decisions, she likely will find some businesses that did not actually qualify and will need to be decertified.
In describing potential roadblocks to successfully completing her work, Thomas chose her language carefully — touching on the 2022 audit’s finding that the board’s roles and responsibilities are not clearly defined.
She asked board members to stay “in their lanes of genius,” or areas of expertise, which will allow them to “understand where you fit into that overall plan.”
On Monday, the board will hold its monthly meeting at 2 p.m., reviewing Thomas’ action plan, the agency’s finances, policies and procedures. According to the agenda, Sindon will also talk about the “guidance” Supply SA’s new subcommittee will provide for the agency’s “improvement plan.”
The power the agency holds was illustrated recently by several business owners who declined to speak with the San Antonio Report on-record about delays they’d experienced. Others wanted to emphasize their gratitude after finally receiving their certifications.
Once Thomas arrived, said Terry, “They were all hands on deck, supporting me. And I’ll be honest with you, they really made sure that I was successful.”
Disclosure: Leo Gomez is a member of the San Antonio Report’s board of directors.
