Articles by Claire Guthrie Gastañaga
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Not Getting Our Share:  The State Disparity Study and Next Steps
Richmond WOMAN, Vol. 1, Issue 3, June 2004, pp. 12-13

In “Getting Our Share” (richmondWOMAN, 1, no. 4, Dec 2003, 12-13) I wrote that the most recent data then available from the state indicated that out of $10 billion in government-issued contracts for goods and services awarded through the state’s electronic procurement program, called eVA, only 1% was distributed to woman-owned businesses. I posed a number of questions about why such a gross disparity between women business owners’ share of contract dollars awarded and their representation among state businesses (then estimated at 33% of all private firms) might exist. I counseled, however, that we must wait to begin to answer these questions until after we had a “clearer picture of what a ‘fair share’ of public business would look like for woman-owned firms.” We now have some data that allows us to see the picture more clearly, and the picture is not good.

The recently issued study of the disparity in state contracting revealed facts that are not surprising to small, women- and/or minority-owned businesses seeking to sell goods and services to the Commonwealth of Virginia. This study, conducted by MGT of America (the MGT Study or the disparity study), covered state contracting for the five years between July 1, 1997 and June 30, 2002.  The entire MGT Study is available on the Department of Minority Business Enterprise website at www.dmbe.state.va.us.

The first thing that the MGT Study makes clear is that the Commonwealth spent a lot of money buying goods and services during the five years of the study: over $7.8 billion for goods and supplies and about $3.2 billion for professional services paid out in tens of thousands of payments.

The second trend that the MGT Study documents is that very few of the payments and fewer of the dollars went to women or minority owned firms.  The only category in which contracting dollars awarded to women- and minority-owned firms (except among Native American-owned firms) was roughly equivalent to the availability of such firms to do the work was in the "other services" category (nonprofessional, labor intensive services such as janitorial services, lawn and landscaping, maintenance, employment and printing). 

Women- (WBE) and minority-owned (MBE) firms were found to be significantly underutilized in every other category for which the state contracts for goods or services: construction prime and subcontracting, architecture and engineering services, professional services and goods and supplies.

The MGT Study applied a measure called the "disparity index" to quantify the difference between the availability of M/WBE's and their utilization as vendors/contractors by the Commonwealth. The disparity index showed that non-minority, male-owned firms consistently were over-utilized, receiving 97% to 99% of all contract dollars spent.  The largest disparity documented occurred in construction subcontracting, where non-minority, male-owned firms represented only 82% of available vendors but got 97% of the contract dollars.

Among professional services vendors, the disparity between availability and utilization over five years was found to be most significant for non-minority, women-owned firms –  69% lower than expected, based on availability.

The MGT Study recommended the following methods to address this identified discrimination in state government as part of a comprehensive package of strategies: 1) issuing contracts in smaller dollar amounts, thus reversing the emphasis on larger dollar contracts found in the state's current "spend management" program; 2) increased participation by M/WBE firms in informal purchasing (below $50,000) by making the use of M/WBE vendors a factor in evaluating purchasing officers; 3) setting M/WBE goals for state contracting; 4) establishing a small business program including a small business fund set aside; 5) establishing a small business surety assistance program to help address difficulties in meeting bonding requirements; 6) improved access to capital; and 7) accountability and evaluation in measuring the effectiveness of the Virginia Department of Minority Business Enterprise and of the strategies implemented for improved utilization of women and minority owned businesses.

In January, the Governor appointed a task force made up of state officials to study the MGT study recommendations. On Tuesday, May 3rd, in a speech to the Virginia Minority Supplier Development Council, he announced that his administration will take four important steps to address the discrimination identified in the MGT Study: 1) consolidate certification of WBE’s and MBE’s in the Department of Minority Business Enterprise; 2) establish by May 20 specific goals for minority-owned, women-owned, and small business procurement; 3) require prime contractors on state construction projects to include a subcontractor plan in their bid proposals and demonstrate compliance with the plan to receive final contract payments; and 4) initiate performance evaluations for top agency personnel and procurement officials that consider their agency’s procurement record.

While the four initiatives announced by the Governor are all positive actions, these proposed actions do not address structural problems identified in the MGT Study that impede participation of small, women- and minority-owned businesses in state procurement.  These structural issues include the adverse effects on small business of the Commonwealth’s effort to control costs by consolidating purchases in large, statewide contracts. This initiative, called “spend management,” is equivalent to the federal contract bundling program opposed by the National Association of Women Business Owners and every other group representing small businesses. The structural problems also include concerns about bonding requirements and access to capital – capacity issues not addressed by the Governor’s announced actions. In addition, the Governor’s announcement included no reference to the MGT Study’s recommendation in favor of a small business set aside program. 

The failure to address these structural concerns about the fairness of the state marketplace for small businesses may render unattainable any goals set for including small, women- and minority-owned businesses among state contractors. Compare the experience of the federal government in achieving a procurement goal of 5% for women owned businesses – a goal set more than a decade ago. Although the federal government has had a competitive, small business set aside program in place since the 1940’s, it has not come close to meeting the 5% contracting goal.  This is true despite the fact that, in addition to set asides, the federal government has in place “best practices” educational, counseling, mentoring, matchmaking, lending and outreach programs not included among the four initiatives just announced by the Governor.

In light of this experience, it is not unreasonable for small, women, and minority business owners to question whether the four initiatives announced by the Governor (standing alone) will, in fact, put Virginia in a position to catch up quickly to other states like Maryland (17%), North Carolina (7.4%), Florida (11.8%) and Texas (13%) in spending with M/WBE's.

The MGT Study showed a pattern of overt discrimination against women- and minority- owned businesses in state contracting.  Other data show that although nearly 98% of Virginia businesses are small businesses, those businesses receive less than half of the state contracts.  What is now required is a complete overhaul of the contracting system and implementation of every best practice used by the private industry or the federal government to level the playing field.  Nothing less can guarantee that small, women-, and minority-owned businesses get our fair share of the state’s business.(end)

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