Board of ContributorsToday?s business buzz word is ?supplier diversity.? It refers to an initiative within government agencies and the private sector to offer contracts to minority- and women-owned businesses. To be awarded such contracts, the more then 13 million minority- and women-owned U.S. companies must obtain a document certifying that they are who they say they are.
This initiative appears to have begun during the Nixon administration as part of affirmative action. Today, given the significant increase in minority- and women-owned businesses, supplier diversity has taken on a life of its own in both government and private industry. Promotions and raises are now often tied to the achievement of supplier diversity goals in terms of the percentage of contracts awarded to minorities and women.
According to the U.S. Department of Commerce, 3.04 million minority-owned businesses in this country generate some $590 billion in annual sales. That?s in addition to the 10.1 million women-owned businesses that produce $2.3 trillion in sales. In New Jersey, estimates put the total number of firms in the state at more than 600,000, of which 102,295 are minority owned and 285,000 are owned by women.
Despite this strength in numbers, less than 10%?and more like 5% or 6%? of all contracts go to women- and minority-owned companies. To understand why, consider these factors:
? Certification To qualify for set-aside contracts, women and minorities must be classified as either Minority Business Enterprises (MBEs) or Women-Owned Business Enterprises (WBEs). Each state sets its own criteria for issuing this certification. In New Jersey, entities such as the Port Authority of New York and New Jersey, NJ Transit and the Department of Transportation have individual certification programs. Corporate America only uses certification standards set by the Women Business Enterprise National Council (WBENC) in Washington, D.C. If your business is vying for contracts from private companies and the agencies mentioned above, you may have to be certified four or five times. This is an expensive and time-consuming process with no guarantee of payback. But how much proof is really needed, and shouldn?t there be some standardization?
In New Jersey, a court ruling last year threw out the state?s existing set-aside program for women and minorities. In response, the Department of Commerce now draws applicants for the certification of MBE and WBE from a pool consisting of all small businesses, which can range in size to up to $500 million. This makes it difficult for smaller companies with few resources to compete.
? Financial strength Approximately 40% of minority- and women-owned firms have receipts of less than $10 million. This all but freezes them out of the bidding for bundled contracts?the common practice of combining several small contracts to create a single large one. And even when a small business wins a contract, it can have difficulty securing the funding to complete the project.
? Relationships People do business with the people they know and trust. Certifications may get your company on a list, but not through the diversity door. A PSEG representative once remarked, ?Market your business to everyone in the corporation.? Whom do you need to meet? Find them and build the relationship. If you are asked whether you are certified, say it is in the works. When the contract is imminent and the certification is vital, get it. Building relationships helps on all levels.
Women- and minority-owned companies still have many hurdles to overcome to achieve success. To really get a fair shake, where do we go from here?
Marlene J. Waldock is owner of 1st Impression Communications and founder of Because We Are Women. She can be reached at [email protected]