Bill would allocate 23% of state contracts to woman- and minority-owned businesses

With the release of a study that shows only 13.4% of all state contracts were awarded to woman- and minority-owned businesses in Virginia, Gov. Ralph Northam on Friday threw support behind a reframed state bill that would raise that percentage to at least 23.1% of state contracts.

The bill would set a similar goal for all state-certified small, woman- and minority-owned (SWaM) businesses to receive at least 42% of all state contracts, which range from construction work to professional services and goods. That number would include all certified small businesses, including those owned by white men.

In July 2019, Northam ordered a  disparity study focusing on state contracts and subcontracts’ distribution among businesses owned by women of all races and businesses owned by minorities. The report, conducted last year by BBC Research & Consulting, studied all contracts awarded by the state between July 1, 2014 through June 30, 2019.

Here are some highlights:

• Woman- and minority-owned businesses make up 32.8% of all SWaM-certified businesses in Virginia, but they received only 13.4% of all contracts over the five years studied.
• The last disparity study, published in 2011, found that only 2.82% of all state contracts went to woman- and minority-owned businesses.
• White women own 10.9% of all SWaM-certified businesses and received 5.5% of all contracts.
• Non-white business owners, both men and women, make up 21.9% of all SWaM-certified business owners but received only 8% of all contracts.
• Broken down among race and ethnicity: Asian American-owned businesses received 1.1% of contracts but make up 6.6% of certified businesses; Black-owned businesses, 3.4% of contracts, 7.1% of certified businesses; Hispanic-owned businesses, 3.3% of contracts, 5.3% of certified businesses; Native American-owned businesses, 0.1% of contracts and 2.9% of certified businesses.

The Virginia Department of Small Business and Supplier Diversity oversees the SWaM program, which includes about 15,000 small businesses, defined by the state as having 250 or fewer employees, or average annual gross receipts of $10 million or less over the past three years. Virginia currently does not use any race- or gender-conscious guidelines as part of its contracting and procurement process, but a newly reworded House Bill 1784 would introduce demographic considerations.

The bill, sponsored by Democratic delegates Jeion Ward and Rodney Willett and senators Jennifer McClellan and Mamie Locke, would substitute wording approved by the Northam administration to include the 23.1% guideline. The first version of the bill called only for 42% of contracts to go to SWaM businesses. It has been referred to the House Committee on General Laws.

“I am proud to carry legislation that will enable woman- and minority-owned businesses across the commonwealth to participate in Virginia’s procurement process,” Ward, D-Hampton, said in a statement. “I look forward to working with Gov. Northam and my colleagues in the General Assembly to ensure a more equitable Virginia.”

Aside from the percentage goals, the bill would start a new division at the DSBSD that would work closely with the Department of General Services, the state’s main procurement agency, to make sure the percentages are met annually and that prime contractors comply with the state in hiring of subcontractors. The department also would collect extensive demographic data on all subcontractors.

“State contracting, which represents more than $6 billion annually, can be a powerful tool to create economic opportunity,” Northam said in a statement Friday. “This study makes clear that the commonwealth has significant work to do to maximize the participation of woman- and minority-owned businesses in state contract work. Our administration remains committed to ensuring Virginia supports and benefits from our diverse business community, and this legislation will help advance our ongoing efforts to make the public procurement process more equitable, inclusive and transparent.”

The results of the disparity study will help inform the One Virginia Plan to address systemic racism and inequity throughout state government and create more inclusive practices. Chief Diversity, Equity and Inclusion Officer Janice Underwood, who was hired to oversee the effort in 2019, expects to release the plan later this year.

Read more in our February 2021 interview with Underwood. 

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