How Local Governments Can Help Minority-Owned Businesses Gain Access to Public Contracts
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Procurement of goods and services by localities totals $2.5 trillion annually, but people of color struggle to gain access to lucrative public contracts, according to the National League of Cities.
Procurement of goods and services by local governments, public universities and hospitals and other institutions totals about $2.5 trillion annually, but businesses owned by people of color struggle to gain access to these lucrative contracts, according to the National League of Cities. The NLC said local governments need to create more inclusionary procurement programs and policies, and created a guide with recommendations and examples.
During the 1980s there was an explosion of city government contracts reserved for minority-owned businesses through set-aside programs, but over the years, many inclusive procurement policies have been challenged in court or preempted by state governments, NLC says. And, in some places, programs and policies have been watered down, made too complex or dismantled.
Nevertheless, NLC’s Municipal Action Guide says local governments are working around restrictive state legislatures to expand procurement opportunities. Examples presented in the guide include strengthening data collection processes to understand supplier diversity; building up small contractors so they can bid on larger projects; unbundling large contracts into smaller ones: and working with local hospitals, universities and utilities to increase their spending with minority-owned businesses.
The guide notes that while there is no one-size-fits-all policy or program, that every city can take steps to address racial inequities in procurement, including:
- Strengthening data collection processes and disaggregating by race by collecting and maintaining up-to-date demographic information on city vendors.
- Conducting outreach and playing matchmaker by connecting qualified minority business enterprises to willing buyers.
- Streamlining bidding and payment processes by simplifying burdensome, inefficient bidding and ensuring subcontractors are paid promptly.
- Unbundling contracts by breaking large contracts, when appropriate, into smaller ones to create bidding opportunities for small businesses.
- Creating sheltered markets by limiting bidding to small businesses on contracts under a prespecified contract threshold.
- Creating subcontracting goals by working with prime contractors to establish targets for using minority- and women-owned subcontractors on specific types of projects.
The guide states that inclusive procurement practices are important tools for helping minority-owned businesses thrive. When possible, they should be implemented with targeted supports and a capital program that helps entrepreneurs of color grow their companies. Also critical is having leaders in the public, private and civic sectors championing the efforts and committing to monitoring progress towards “ambitious, measurable goals.”
Congress is poised to enact sweeping legislation addressing the nation’s crumbling infrastructure, which presents opportunities to connect minority-owned contractors to federally funded projects, the guide says. “This represents a historic opportunity to increase the flow of dollars to [these] businesses, even in states where race-conscious procurement policies are preempted.”
Lastly, while the NLC says its recommendations appear to be “zero-sum,” that is, helping business owners of color at the expense of white business owners, “city leaders should choose to widen their perspective [because] achieving economic parity is an enormous opportunity for all residents.”
The NLC studied eight cities participating in its City Innovation Ecosystems program, and says the resulting guide includes examples of evidence-based interventions city leaders can implement. For more information in the guide, click here.
Jean Dimeo is managing editor of Route Fifty.
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