Building a Supplier Diversity Program? Learn from the U.S. Government.

Since George Floyd’s murder in 2020 and the nationwide protests in the United States to address racial injustice that it sparked, large companies in the United States have been increasingly looking to supplier diversity programs as a means to advance racial equity. For example, as part of its Racial Equity Action and Change strategy, Target committed to sourcing more than $2 billion worth of products from Black-owned businesses by the end of 2025. Intel has a vision to develop a “diverse and inclusive supply chain” by increasing its “spending with diverse-owned suppliers, as well as working with others to expand and enable inclusive sourcing practices across the industry.” Other large companies, such as Eli Lilly, Google, Procter & Gamble, and Wayfair, have made commitments to increase their spending on supplies from small, diverse-owned businesses (SDBs) — those that are 51% or more owned and operated by an individual or group that is part of a historically underrepresented or underserved group (e.g., women, racial minorities, veterans, LGBTQIA+, and people with disabilities). But many large companies are struggling to turn those pledges into reality. The U.S. federal government, which has decades of experience in sourcing from SDBs products and services that are cumulatively worth billions of dollars, can help. To shed more light on its practices (and as part of an ongoing effort), we interviewed executive directors for small business procurement and procurement analysts at four different federal agencies: the Department of Health and Human Services (HHS), the Department of Veteran Affairs (VA), the National Aeronautics and Space Administration (NASA), and the Department of Housing and Urban Development (HUD). Our interviews uncovered several ways that can aid large companies in finding capable SDBs and making them more aware of their procurement needs. Finding Capable SDBs Considering that women-owned and minority-owned businesses comprise only one-fifth of all businesses in the U.S. economy, procurement executives and managers often grapple with the challenge of finding capable SDBs as suppliers. Steps that can make a difference include the following: Build a database. HHS, which awards billions of dollars as contracts to SDBs in the highly regulated health care sector, maintains a database of SDBs that are capable of working with each of its 13 different sub-agencies. All SDBs that apply for contracts are in the database, irrespective of whether they win a contract or not. This database, which is publicly searchable (based on a variety of parameters including NAICS code, SDB type, SDB name, and so on), enables SDBs to search for other SDBs and identify potential collaborators to jointly apply for large-value HHS contracts. Form partnerships. To cast a wider net and obtain assistance in identifying capable SDBs, all four agencies have established partnerships with organizations such as the Minority Business Development Agency (MBDA), National Gay & Lesbian Chamber of Commerce (NGLCC), and National Minority Supplier Development Council (NMSDC). Conduct technology-enabled market research. To expedite the process of identifying capable SDBs, the VA has recently piloted the use of market research robotics such as website scraping to identify capable SDBs through an examination of their websites. Provide subcontracting opportunities for SDBs to earn their spurs. Almost all our interviewees highlighted the importance of giving SDBs subcontracting opportunities that help them establish a track record that sets them the path to becoming prime contractors. How to Generate Awareness of Needs and Capabilities SDBs often lack awareness about a company’s specific procurement needs and the different steps that encompass its procurement processes, and companies often struggle to get a handle on SDBs’ capabilities. Here are ways to address these problems. Conduct outreach programs. Federal agencies organize outreach events to facilitate in-depth, two-way conversations about federal procurement needs and the specific capabilities of SDBs to address them. Two examples of outreach programs are the FDA’s Virtual Small Business Fair and one-to-one matchmaking sessions. While small business fairs are designed to provide a generic overview of an agency’s procurement needs, one-to-one matchmaking sessions are more intimate in nature and help small businesses and agency representatives delve deeper into the specific contracting opportunities that are available with an agency or a sub-agency. Provide details about past and future contracting opportunities. SDBs also gain more awareness of federal agencies’ procurement needs by examining the nature of prior contracts that are awarded by the agencies. A careful examination of prior contracts provides SDBs with valuable information on the types of goods and services that are procured by an agency, enabling them to align their offerings to better suit agency needs. HUD also publishes an advance forecast of contracting opportunities, which helps SDBs understand what HUD is planning to purchase in the next one or two years. Communicate the priority. The four federal agencies utilize several means to drive home the message to their procurement managers that the respective agency’s leadership is committed to awarding more contracts to SDBs and to instruct them about how contracting opportunities for SDBs can be maximized within the purview of federal contracting regulations. The VA sends “affirmation emails” to procurement managers to inform them about how the agency is doing in terms of achieving its annual small business contracting goals. In addition, the VA’s executive director for acquisition and logistics spearheaded an awareness campaign, which included holding regular meetings with procurement managers at different levels, to remind them of their responsibilities to award contracts to SDBs. Share success stories. Yet another way to raise awareness among procurement managers is sharing stories with them about how SDB programs have made a difference to those suppliers and how they have helped the agency in question achieve its goals. For example, the National Institutes of Health, which is part of the HHS, and NASA have dedicated public websites that highlight the success stories of SDBs in developing innovative technologies and advancing the research and development needs of those agencies. Although the federal government and large companies exist for very different reasons, both procure enormous amounts of goods and services from external businesses and share the goal of increasing those purchases. The time-tested practices of the federal government can help companies make their SDB programs more effective and develop more inclusive supply chains.

Building a Supplier Diversity Program? Learn from the U.S. Government.

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