New construction projects will test Indy's diversity requirements

An overstretched labor market could set back Indianapolis' efforts to include contractors of diverse backgrounds in city construction work.

Driving the news: Downtown Indianapolis is slated for $9.5 billion in construction projects over the next decade, including about two dozen each priced at $100 million or more over the next five years, per the IBJ's count.

• Major projects include a new Indiana University Health hospital, a hotel adjacent to the convention center and the Elanco Animal Health headquarters at the former GM stamping plant site.

Why it matters: The building surge will spread contractors thin, testing the city's commitment to enforcing diversity as project leaders seek leniency to hire whoever is available to do the job.

State of play: Prime contractors doing business with the city must hit four targets, collectively referred to as XBE goals, when hiring subcontractors:

• 15% minority-owned businesses
• 8% women-owned businesses
• 3% veteran-owned businesses
• 1% disabled-owned businesses

Flashback: Indianapolis in 2020 set penalties, including withholding pay and future work from prime contractors, for failure to meet those goals.

What they're saying: City officials acknowledge difficulties ahead, while insisting they intend to maintain the targets.

• "We continue to have the same goals in all of our economic development projects," Scarlett Andrews, the deputy mayor of economic development, told Axios. "As always, we hold (contractors) to account."

Yes, but: The city has been lax in enforcing XBE participation in the past, which, in part, is why the City-County Council created penalties.

• A 2019 disparity study found XBE contractors were widely available, yet under-used, for city projects.

The intrigue: Given the city's recent failures to distribute work to XBE firms when subcontractors were plentiful, it remains to be seen how Indianapolis will achieve its goals in a tight labor market.

What's next: The city is recruiting firms to participate in the XBE program and will consider breaking up bid packages to make chunks of work more accessible to smaller firms.

• David Fredricks, director of the city's Office of Minority and Women Business Development, said he sees hope in a trend of diverse construction workers leaving big firms and starting their own companies.
• "Most of these workers came from firms that have traditionally dominated the market," he told Axios. "They have set up their shop during and after COVID and haven't had that breakthrough project."