Last year’s Executive Order 13985 “On Advancing Racial Equity and Support for Underserved Communities Through the Federal Government” and the more recent announcement that the Biden administration will target 12% of federal contracting dollars to be awarded to small, disadvantaged businesses, are major steps toward meaningful change needed to expand opportunities for women and people of color within the federal government.
A 2016 report from the Commerce Department shows that women own more than one-third of all businesses in the United States, but they are 21% less likely to be awarded federal contracts than their male counterparts. In addition, the federal government has only achieved its strategic goal of awarding 5% of its prime contracts to women-owned businesses once since 2007.
According to the Minority Business Development Agency, there are more than 11 million minority-owned businesses in the United States, but very few have more than a handful of employees.
These disparities aren’t due to a lack of ability on the part of disadvantaged groups, which is why President Biden’s executive order will be instrumental in facilitating lasting change. The federal government has expanded its ability to meaningfully reduce the racial wealth gap and generational poverty through various programs and initiatives across government at the local, state and federal level, such as the Small Business Administration’s 8a program.
This spring, the SBA announced that its 2023 budget request would ramp up “outreach efforts for small disadvantaged businesses and other firms in need of support to address a 40% decline in small businesses working with the federal government.”
Federal agencies also are partnering with historically black colleges and universities (HBCUs) to improve equity across contracting and the tech workforce. Set-asides and other mandates help small, young businesses get started, but we need capacity-building programs and resources that focus on scaling and growing minority-owned businesses.
It’s estimated that about 90% of all small businesses fail and that just 1% of venture-funded startup founders are African American.
While the founders of these small businesses have the technical experience needed to meet the demand of government projects, they may not have the business acumen and the knowledge needed to navigate the federal procurement process. These are not skills that are easily learned independently, increasing the demand for incubator-style programs that provide entrepreneurs with the guidance, mentorship and pathway for success.
It’s important that every minority business, large or small, develop a sound strategy based on short- and long-term goals. These objectives will provide guidance and direction for new founders who must manage competing priorities such as partnerships with other contractors or vendors, administrative tasks and federal compliance requirements. Furthermore, hiring, retaining, and upskilling the right people is just as crucial as procuring the contract. Founders must apply talent appropriately to meet the need of the contract while conscientiously monitoring revenue.
Incubator programs designed for the unique needs of companies looking to do business with the government are necessary to empower minority entrepreneurs with the tools, mentorship and peer support needed to navigate the complex world of federal procurements. Programs like these are critical to helping entrepreneurs address these challenges and reframe them into opportunities for continued growth and sustainable success.
New mandates and initiatives to expand opportunity are important, but the only way we can make a true impact on the number of minority contractors participating and benefitting–growing and scaling and building wealth–is to help them develop a roadmap early on that will guide them to success.
Stephanie Chin is the program manager for Hutch, a digital services incubator founded by Fearless, a full-stack digital services firm. Chin is a member of the Digital Services Coalition Board of Directors.
Celestine Pressley is the chief information officer for the Office of the U.S. Trade Representative. Pressley is a former member of the Hutch Advisory Board.
They can be reached at [email protected].