Supplier Diversity – How to Market your business to public entity
For small businesses, one or two contracts with a public entity — such as the federal, state or city government or a quasi-government organization — can provide enough revenue to keep things running for years. More importantly, for minority and women-owned businesses, the door to these lucrative contracts is wide open. Big companies with contracts to offer are clamoring for more small businesses to line up.
The law requires that 23 percent of all federal prime contract dollars be awarded to small businesses, but there are not enough qualified small firms. Big entities have to scramble to find enough small businesses to ink deals so they can hit the required number.
You would think that the small business response would be overwhelming to get access to the cash cow of such deals, but it often isn’t.
One challenge is certification. A lot of the work targeted to small businesses also has requirements for specific certification and is only available to those businesses certified as MBE (minority), DBE (disadvantaged), WBE (women) or VBE (veteran). Small businesses are often scared away from the certification process, but they shouldn’t be. The U.S. Small Business Administration runs a number of programs to help small businesses get certification and then help them get contracts. Most states have some sort of office — such as the Massachusetts Supplier Diversity Office — that help with this as well.
While state and federal agencies have faced plenty of criticism for the length and complexity of the certification process, most are working hard to shorten and simplify it.
David Polatin, head of the SBA 8(a) Business Development Program, which helps small, disadvantaged businesses, says once small businesses put in the effort to get into the 8(a) program it can be worth millions.
Small businesses can take part in the 8(a) program for nine years. During this time they can get contracts up to $4 million for goods and services and $6.5 million for manufacturing, as well as form joint ventures to bid on big contracts. If these numbers don’t sound that impressive, just know that the SBA has a limit of $100 million on the size of contracts a small business can receive during the program. That is a number no small business would shake a stick at, and the fact that there is an imposed limit suggests that this number can definitely be hit.
Still, as of now, there are only 36 businesses in Massachusetts taking part in the 8(a) program. Polatin is confident this number should be a lot higher.
And the 8(a) program is just one of many the SBA has that target small businesses.
“These programs are set up for minority-owned firms and a lot of them don’t take advantage of it and it is really a shame,” Polatin said.
Continual scrutiny of small businesses during contracts may be one of the fears. The long lead time for obtaining federal contracts may also be a deterrent to some small businesses that need money now and are not able to look too far ahead.
“It is a cycle and understanding how that works and how the money comes in is necessary,” said Polatin. “There is a lot to it and it is not quick and easy. Some people can’t be bothered with it, but others are on the ball and see there is opportunity there.”
Streamlining the process
Kenn Turner, director of diversity and inclusion/compliance at Massport, said his organization recently worked to streamline the certification process small businesses need to complete to get access to its contracts by reducing the timeframe from six-to-seven months down to 60 days. This was done by making the process all-digital and online.
Massport’s dilemma illustrates another hurdle small businesses face in accessing contracts with public entities — even once they get minority or disadvantaged certification through the government, they still often have to be certified by the various organizations and agencies from which they are trying to get work.
Massport, the state’s transportation authority, handles airports and ports, and generates $8 billion in revenue. The agency tries to make it as easy as possible to do business with the organization by running regional forums and education events to show small businesses how it can be done.
Turner leads a proactive charge at Massport to connect with MBEs, WBEs, DBEs and the like by setting goals — beyond what is federally required — to ink deals with small business for 11 percent of all its construction work, 11 percent of all its concession contracts and 2 percent of all airport rental car business over the next three years.
On tap is about $65 million in spending.
Finding small businesses is often about searching through the database provided by the state’s Supplier Diversity Office, which contains hundreds of companies.
“Diversity for us is a moral imperative. You promote it because it is right. But diversity in the 21st century is also the right business thing to do,” Turner said. “It is important to us to stay ahead of the curve.”
At Keolis Commuter Services, which operates and maintains the MBTA’s commuter rail system, Rita Hardiman oversees diversity efforts and outreach to small, disadvantage businesses.
Her job is crucial because, even though it is a private company, Keolis falls under federal requirements for contracting with small businesses since it works as a subcontractor for the MBTA, which receives federal transportation dollars.
In the future, Keolis plans to offer seminars and training programs to prep small businesses to do business with the company. It also partners with other organizations — including Center for Women & Enterprise, Greater New England Minority Supplier Development Council and the Urban League — to build a network connection to small businesses.
Work load management
The fact is, Hardiman says, just finding certified small businesses is not enough because some of them are not prepared to do businesses with a company as big at Keolis.
“One of the mistakes is that sometimes small businesses don’t do their homework or really do research on the company and know what we are about and what we are looking for,” Hardiman said. “They don’t even know that what they are selling is not something that we are buying.”
Another common problem is that some small businesses just aren’t prepared to handle the amount of work a large contract can bring. It is the old adage “Be careful what you wish for.”
“Sometimes for small businesses it is a feast or a famine,” Hardiman said. “That is a very delicate balancing act.”
While Hardiman’s warnings are real, it is clear that for small businesses that make an effort to get access to contracts with public entities it should be more feast than famine.
Numbers from the Massachusetts Supplier Diversity Office show that it connects small business with over $1 billion in revenue annually.
The beauty of working with government contracts through small business certification programs, as the SBA’s Polatin points out, is that once you are in the door — and if you do a good job — more deals will flow directly to your business.
This is not the typical modus operandi of the government and is something only small businesses get the advantage of, and a big advantage it is.
“It is really a valuable thing,” Polatin said. “You can really grow a business.”
This article appeared in the March issue of Banner Biz Magazine. To read full issue click here.