A new initiative seeks to help Chicago’s minority- and women-owned small businesses grow in the marketplace.

On Jan. 19, Mayor Rahm Emanuel announced the Graduation Phase-Out initiative to help transition businesses out of the city’s Minority and Women Business

Enterprise program.

MWBE sets annual goals for awarding city contracts to minority- and women -owned businesses. The Graduation Phase-Out program offers assistance at a reduced level for three years after they “graduate” from the program.

“From day one, [Emanuel] has been looking for ways to improve small minority- and women-owned business opportunities in the city of Chicago,” said Jamie Rhee, chief procurement officer for the City of Chicago. “He looked at this and said, ‘Wait a minute, let’s allow them to grow and graduate, but then continue to phase out of the program on a reduced participation level over a three-year period.”

Melinda Kelly, executive director at Chatham Business Association, said Graduation Phase-Out encourages large firms to partner with and mentor small businesses after they reach the graduation requirements, which provide additional opportunities to the businesses.

“It’s a stepping stone from which you can enter into a field and become competitive,” Kelly said. “Before, you were either in the program or you were out of the program, but now there is a middle ground.”

A strong minority- and women-owned business community is important for the Chicago marketplace because small businesses provide economic opportunity, according to a written statement issued by the Mayor’s Office.

However, very few businesses actually graduate from the MWBE program, and many who do request MWBE certification again within several years, according

to Rhee.

Graduation Phase-Out is an effort to provide the incentive to grow beyond the limitations of the program and the additional assistance businesses still need upon graduating, Kelly said.

“If a company doesn’t feel comfortable graduating from the program or doesn’t concentrate so much on the program, then they get what I might call ‘stuck,’” she said. “This [initiative] encourages them to have a stair step so that they proceed through the program.”

According to a 2011 follow-up review of the MWBE program issued by Chicago’s Office of Inspector General, a city agency that investigates corruption and mismanagement, the MWBE program was investigated 16 times in 2010 and 2011 for “widespread fraud, abuse and mismanagement.”

Jonathan Davey, spokesman for Chicago’s Office of Inspector General, said the IGO issued a report detailing violations by Allied Waste Transportation Inc. The company, which handles waste hauling contracts for the city, admitted to lying about placing contracts with MWBE-certified businesses since 2001 in order to receive benefits through the program.

Rhee and Kelly said the initiative is one of many reforms and new programs that the mayor has established to increase city oversight of the MWBE program.

“The program is excellent; it just has to be tweaked so that it works,” Kelly said. “It’s constantly being looked at [and] no one in this administration is afraid to make a change for the better.”