In an effort to close budget gaps, the City of Chicago has asked its contractors to voluntarily slash their invoices by 3% — a move that has rattled the local construction industry and sparked concerns about the long-term impact on small and minority-owned businesses.

In a letter sent last month, Sharla Roberts, Chicago’s chief procurement officer, asked vendors to “consider providing a cost reduction of no less than 3% on all invoices submitted to the City for the next 12 months” on any current contracts held as prime contractors. The request, aimed at generating savings across city departments, applies even to contracts that have already been negotiated and signed.

The letter took many by surprise, especially smaller firms operating on slim profit margins. Jacqueline Gomez, executive director of the Hispanic American Construction Industry Association (HACIA), said the request didn’t seem equitable given the legally binding nature of contracts already in place.

“We don’t think it’s a fair ask,” she said.

Impact on Contractors

The city’s request comes as Chicago grapples with significant fiscal challenges, including a $175 million budget shortfall tied to a missed reimbursement from Chicago Public Schools for pension payments. To close broader budget gaps, the city has raised fees on items such as parking, streaming services, and grocery bags. In December, the city council approved a $17.1 billion budget that initially included a $982 million deficit.

Despite the financial urgency, many in the construction industry argue the city is passing the burden onto the businesses that help build and maintain its infrastructure — without prior notice or adequate flexibility.

Henry Lopez, president of Accel Construction, a Chicago-based contractor that performs a majority of its work through public contracts, was stunned by the request. Accel has worked with the city for over a decade, with around 70% of its business tied to public projects.

“When he first received the letter, he initially thought it was a joke,” the report says. “He said that his company’s profit margin is often 3%.”

“To ask for, essentially, 100% of our profits back is an insult,” Lopez said. He added that he told the city he would not be complying with the request and hasn't heard of any other contractors who plan to participate.

City Response and Historical Context

In a statement to media, Sheila Marionneaux, director of public affairs for the city’s procurement department, defended the request, noting that it’s not unusual for municipalities to seek cost savings during budget crises.

“The purpose of the cost reduction request to vendors is the rollout of the budget commitment to support the department budget goal,” Marionneaux said in an email.

Gomez acknowledged that similar appeals have been made by prior city administrations, including those of former mayors Rahm Emanuel and Richard Daley — but in those instances, contractors were given some level of warning and input. This time, she said, the request puts businesses in a difficult and potentially risky position.

“Particularly [for] small businesses that feel that, ‘If I don’t do it, will I get future work?’” she said.

The letter does not require vendors to comply but does request a response “even if you are not able to accommodate the request at this time.”

Still, Gomez warns that if some firms agree to the 3% cut and attempt to pass that cost down the supply chain, the damage to smaller subcontractors could be devastating. Many already operate on razor-thin profit margins and have little room to absorb additional losses.

“We’re talking about small businesses potentially going out of business,” she said.

As contractors weigh their options, many are left wondering whether the request signals a one-time plea — or a new normal in how the city manages fiscal strain.

Originally reported by Matthew Thibault in Construction Dive.