Economic Development

It’s time to blow up the minority contract status quo

The shortcomings of the current models spotlight the need for a new approach.

monkeybusinessimages/Getty Images

MWBE. SDB. WOSB. SDV. There is no shortage of acronyms for the programs designed to increase minority businesses' access to lucrative contracts issued by government agencies, nonprofit institutions and corporations. Organizations are looking for ways to increase their spending and improve their impact with minority-owned businesses, but there is a dearth of concrete opportunities to land the contracts necessary to reach the next level. Minority-owned businesses are ready for a better pathway forward. 

Because the current programs are not serving their intended purpose and have consistently failed to meaningfully create contracting opportunities for qualified minority-owned businesses, I propose that organizations serious about increasing minority-owned business spending should begin implementing a 100% Minority Contract Program, which would create millions of dollars in meaningful projects a year. 

Many programs set aside 10%, 5% or a similar fraction of larger contracts that consistently are awarded to prime contractors that are not minority-owned. Those prime contractors win projects year after year without meaningful competition and typically get ranked higher on request for proposal scoring sheets due to previously holding the same contract in the past.

The 100% Minority Contract Program would have a set annual monetary goal. In cases where the contracting organization is concerned about capacity, or final deliverables, the minority-owned business could be partnered with a previously established prime contractor to help the minority-owned business complete the project if any issues were to arise.

Many programs supporting increased spending are well-intentioned, but they fall short of helping minority business owners grow their businesses, hire employees, reach their potential and create generational wealth for the business owners simply due to not having the opportunity in the first place.

No one bats an eye or protests when a prime contractor is awarded another multimillion-dollar professional services contract with no true expenses other than staff time. Meanwhile, minority businesses must comply with onerous paperwork requirements just to prove who they are (when registering as a MBE or DBE) when they should be focused on earning more business.

For organizations working to increase their minority spend, this contracting program does not have to be difficult to implement. Having the right strategy sessions – and hiring competent outside communications consultants – can make it even easier. For example, think about whether your organization is spending millions a year on advertising – and whether that same work could be performed by a minority-owned business. As the contracting organization, you would have a copy of this year’s media plan. 

Now that this expertise has been paid for, you could hire a minority-owned business to implement a similar plan or make changes as needed to improve the plan.

The 100% Minority Contract Program could be touted as a DEI initiative – and as a smart way of doing business. It does not look good when mainstay institutions, corporations and government agencies consistently hire firms with minimal minority staff and zero minority ownership. Additionally, a lack of diversity among staff, management and ownership can lead to a lack of diversity of thought.

There are many studies that show the importance of diverse viewpoints in solving real challenges that large organizations often face. As written about in a recent Harvard Business Review article, when “companies successfully implement DEI policies and practices … they also improve their ability to change,” which was found to be “enormously valuable” and comes with “better financial performance, stronger culture and leadership, and more engaged and inspired employees.”

The next time your organization is thinking about increasing minority spending by $5 million or $10 million a year, spend the time to think through what a meaningful contract looks like. The only way to create new prime contractors is to give the people who have been sitting on the sidelines an opportunity to get in the game.

Lastly, if you paid the last prime contractor $1 million for their services, then pay the minority-owned business the same amount if they will be doing the same scope of work. Even prime contracts don’t mean much if the minority-owned business does the same work for half the money, or double the work for the same money.

There are several things the next generation of prime contractors needs to do, and they can only be done with sufficient revenue profits: Investing in the business, building sufficient cash reserves, hiring employees, paying off business and personal debt, leasing commercial office space and growing to reach their full potential.

Teresa M. Lundy is the principal and founder of TML Communications and is a member of the City & State PA advisory board.