Government contracts present unique opportunity for minority-owned businesses

Measurable progress has been made in minority business development in the past several decades. Although there are still strides to be made, it’s safe to say that minority-owned businesses have moved from emerging to noteworthy in terms of numbers, employees and industry sectors in recent years.

Since the 1980s, expanded government programs and enhanced contractor diversity programs have opened up many opportunities. The difference is a 10 percent increase in revenue annually, a 23 percent increase in the number of jobs created and a growth rate that is three times higher than that of most traditional businesses. Still, with the prediction that minorities will comprise 40 percent of the U.S. population in the near future, there is some distance to cover before the percentage of minority-owned businesses is comparable.

The difference can be accounted for by considering that minority-owned businesses are disproportionately represented in low- and no-growth business sectors. They tend to rely more on personal debt and family financing rather than commercial loans, equity and other tools to finance their companies. And they often lack the size, scale and capabilities of some of their majority colleagues.

There is one area, however, in which minority-owned businesses often find some advantage: government contracting.
Last year, the Missouri Procurement Technical Assistance Center (MO PTAC) program helped Missouri companies win $188.5 million in new contracts from local, state and federal governmental agencies. That’s $188.5 million in new sales flowing into the state of Missouri.

Of that, nearly $56 million went to minority-owned and disadvantaged companies.
At the University Center for Innovation and Entrepreneurship, where the central Missouri office of MO PTAC is housed, we often get questions regarding loan or grant opportunities for minority-owned companies. The fact is that nothing exists in terms of preferential funding for any business.

However, when it comes to government contracting, it’s a different story. Federal, state and local governments spend more than $500 billion annually on various products and services, and most governmental agencies are required to “set aside” contracts or portions of contracts for exclusive bidding by small and/or minority- or women-owned businesses. Often, major prime contractors are also required to subcontract a portion of their government contracts to small companies.

For instance, the U.S. Small Business Administration operates the 8(a) program, a business development program designed to help small disadvantaged businesses access the federal contracting environment.

Typically, a disadvantaged business is one in which the majority of ownership falls to a black, Hispanic, American Indian or Asian owner.
In addition, the Small Disadvantaged Business Program (SDB) offers a certification that helps minority-owned companies in the federal contracting arena only. Those with SDB certification have access to bidding benefits, and prime contractors who use SDBs for subcontracts can gain additional evaluation credits with the contracting agencies.

The Historically Underutilized Business Zone (HUBZone) program allows businesses located in many urban or rural areas to qualify for sole-source and other types of federal contracting benefits. 8(a) or SDB companies located in HUBZones realize the benefits of both programs.

To ensure equity, the federal government has stipulated that 5 percent of prime contracts and subcontracts should go to SDBs, 5 percent should go to women-owned small businesses, 3 percent of prime contracts should go to firms located in HUBZones, and 3 percent of prime contracts and subcontracts should go to service-disabled, veteran-owned small businesses.
Helping companies get certified to bid through these programs and matching them to the appropriate bidding opportunities are two of the services the MO PTAC program provides. The program also offers a computerized bid matching service at no charge to qualified clients for one year.

Through this program, the client is notified daily of bidding opportunities advertised in FedBizOpps, formerly the Commerce Business Daily (CBD), and some bidding opportunities under $25,000 from major defense buying centers, which are not required to be advertised. Many state and local opportunities are also provided.

Minority-owned companies should examine these possibilities to see if they can take advantage of the vast opportunities government contracting provides. v

Bill Stuby is a procurement counselor with the MO PTAC program in central Missouri.