EthnicMajority

(BUSINESS WIRE)–Minority- and women-owned business enterprises (M/WBEs) in New York State continue to experience statistically significant disparities in their access to private and public sector contracting and procurement opportunities, according to a study released by NERA Economic Consulting.

The New York State Department of Economic Development commissioned NERA to conduct a statewide disparity study under Executive Law § 312-a regarding the participation of minority and women-owned business enterprises in state contracts. NERA’s report examined the past and current status of minority-owned and women-owned business enterprises (M/WBEs) in the geographic and product markets for contracting and procurement in the state of New York.

In the NERA report, “The State of Minority- and Woman-Owned Business Enterprise: Evidence from New York,” co-authors NERA Vice President Dr. Jon Wainwright and longtime NERA collaborator Colette Holt, JD, of Colette Holt & Associates, found that M/WBEs have substantially lower business formation rates and business owner earnings; are more likely to be denied credit even with comparable balance sheets; and during the period of the study, found that M/WBE firms were generally utilized at far lower rates than their availability. Furthermore, the authors of the study determined that the statistical evidence supports the conclusion that these outcomes are consistent with discrimination in New York’s contracting and procurement markets.

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(Inc Magazine) Having a minority-owned business certification can help you tap into a bevy of public and private sector programs. Here’s how to apply.

Corporations, the federal government, and state agencies all want to do business with minority-owned companies. The Department of Transportation, for example, requires that recipients of its funding award a percentage of contracts to minority-owned businesses and many large companies have goals for buying from minority-owned suppliers.

The reason for such mandates is twofold. First, contracting with minority-owned businesses is important to customers: “Corporate America understands that you cannot expect minorities to buy things when you haven’t done business with minorities,” says Steven Sims, the vice president of the National Minority Supplier Development Council. Second, it’s responsible: “It’s important because we have an obligation in government to ensure that all firms in our state have an opportunity to participate in contracts that are paid for with tax dollars,” says Luwanda Jenkins, the special secretary of minority affairs for Maryland.

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The California Supreme Court debated the constitutionality of Proposition 209 on Tuesday, questioning whether the reach of the 1996 ban on affirmative action in government should be limited.

During a hearing Tuesday, some members of the state high court appeared inclined to permit some type of affirmative action when needed to address deliberate and ongoing discrimination.

The court is reviewing a San Francisco ordinance that gives firms owned by women and minorities an advantage in city contracting. Although the U.S. 9th Circuit Court of Appeal upheld the constitutionality of Proposition 209 in 1997, the state high court is not bound by the circuit ruling.

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While world-class procurement organizations continue to outperform their peers in driving supplier diversity spending according to a new study by The Hackett Group. The study identified several critical ways that most companies fail in their supplier diversity programs.

Hackett’s latest research found that companies with world-class procurement organizations commit 33% more of their spend to diverse suppliers (13.3% of total spend for world-class versus 10.0% for typical companies). But according to Hackett’s research, most companies still make major errors in how they operate and measure the performance of their supplier diversity efforts. Most rely on overly simplistic measures to evaluate the progress of supplier diversity programs, and never truly assess whether programs are meeting corporate objectives.

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Overstock.com, the online discount retailer based in Salt Lake City, is launching an initiative to help small and minority-owned businesses sell their products.

Patrick Byrne, Overstock’s chief executive, said the company’s “Main Street Initiative” is designed to increase the visibility of those businesses that lack exposure to national markets.

“By joining our network these small businesses can reduce their supply chain costs, and open their products to a mass audience,” Byrne said in a statement announcing the new effort.

Initially the products that those businesses will offer for sale will be listed in their appropriate shopping categories on Overstock.com. But Byrne said once a critical mass of partners and products is reached, the products will be consolidated into a “Main Street” store on the company’s website.

– Steve Oberbeck

There are always a few bad apples in any organization or program, and minority business programs are no exception. Take for example Wallace Construction in Rhode Island.

According to a story in the Providence Journal, Wallace was certified as a minority owned business and eligible to participate in federally-funded transportation projects that targeted contracting/subcontracting a portion of the business with minority owned businesses. Christina Rosciti, the daughter of a principal in a much larger construction firm, purchased a 49% interest in Wallace apparently for the sole purpose of using it as a front to keep more of the business in the family.

All was going swimmingly until the founder Wallace (an African American male) died, and the authorities began to question the firm’s minority status. In order to qualify for the federal minority owned business program (and most state and local programs), firms must be majority owned AND controlled by minorities. After the founder’s widow assumed the title of President, the firm had its minority status reinstated.

The reinstatement occurred in spite of several disturbing facts. Neither the founder’s widow nor Rosciti had any previous executive management experience. Rosciti had not paid taxes in years and clearly lacked the financial resources to buy her equity stake in Wallace, which was not a successful business until becoming the beneficiary of millions of dollars of business from Rosciti’s family businesses. There was also evidence that 15 employees were employed by both Wallace and Rosciti’s companies.

Minority business programs are intended to give legitimate companies opportunities to compete and grow. If a majority company acquires a significant interest in a minority owned company, brings in its own people, and funnels business to it, the minority owner becomes nothing more than a front for the majority owners. These fronts give both the program and the legitimate minority owned companies a bad name, and should be aggressively investigated and banned from the program.

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Small Business Administration (SBA) loans should be easier to get (theoretically) in the future. According to the Associated Press, the SBA has eliminated fees for its 7a and 504 small business loans. In addition, $15 billion in TARP money will be used to buy current SBA loans from the banks, thereby freeing up capital that can be used for new SBA loans.

The TARP program, which stands for Troubled Asset Relief Program, has gotten a nasty reputation as a bank bailout program funded by the taxpayers. Although there was the expectation that TARP funds would be used to loosen credit to make new loans, the reality is that most recipients have used the funding to shore up liquidity and protect against loan losses.

Perhaps new program changes increasing the amount of each loan the government will guarantee from 75-80% to 90% will help. If the lenders have less risk, they should be willing to make more loans.

For more details, see the Congressional Research Report.

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