February 1, 2021 - Small Business

Roadblocks Inherent to the Public Procurement Process for Minority-Owned Businesses (Guide 1 of 4)

Small BusinessIn the next four posts, we will share guides specific to federal contracting as a minority-owned small business.

Minority-owned businesses often face unique challenges in the public procurement process due to systemic barriers embedded in the process. These barriers affect minority-owned business at all stages of the process—from solicitation and bidding to completion—and put these businesses at a disadvantage compared to their counterparts.  Even after accounting for fewer minority-owned businesses, the share of government contracts won by other firms has remained disproportionate to their share of the industry.

All businesses should have the opportunity to compete freely and fairly in the public procurement process. Here are some key hurdles to look out for and solutions if these roadblocks enter your path:

During the solicitation and bidding process:

The liberal granting of waivers for minority subcontracting requirements

State and federal agencies may require prime contractors to include minority- or women-owned businesses as subcontractors in their bids. If they are not included, a waiver is often required for the bid to go forward.

Oftentimes only a “good faith effort” is needed to bypass minority set-aside requirements or other language requiring diversity among subcontractors. The threshold for a “good faith effort,” can be quite low and bidders may not even face repercussions if they do not make “good faith effort” to achieve these goals.

Hidden or untimely bid information

There are a number of places to find solicitation information for federal, state, and local contracts, including USASpending.gov, SAM.gov, bidsearch.com, however, prime contractors can often seek subcontractors through their own personal channels.

Due to some primes’ use of insulated network and association channels, minority-owned firms may receive incomplete bid information, find that bid solicitations are not published in “minority media” outlets, or may receive bid information well after their competition.

Subjective standards in award selections enabling discrimination

While some subjectivity is inherent in this process, if you see a lack of reasons given for how you were evaluated, this might suggest something is amiss. For example, an audit conducted by the City of Atlanta in 2006 found that the city’s solicitation process at that time did not require evaluators to provide reasons for scores given to vendors. This is in stark contrast to federal procurement regulations, which require evaluators to adequately document their evaluation and selection decisions.

 

After the contract has been awarded:

Low utilization on projects

While federal law requires primes to submit periodic reports on how they are meeting their subcontracting goals, this is not always the case at the state level, as agencies. Thus, primes may solicit information from minority-owned firms and include them on a prime bid with no intention of using them on an awarded contract. Several disparity studies have identified this “bait and switch” as a pervasive and damaging issue for minority-owned firms.

Late payments from the prime.

While there are provisions preventing late payments on contract work at the federal level, minority-owned firms may often encounter delayed payments at the state and local level. In Minnesota, a 2017 study of 78 Black-owned construction firms listed “slow payment by general contractors” as a perceived instance of discrimination. These late payments put the small businesses at financial risk. To mitigate this, an expedited payment plan could be requested at the outset, but this also suggests to primes that the sub cannot handle the job or is financially insecure, jeopardizing minority-owned businesses success in the bidding process.

Recourse and Resources

Make yourself known.  Affirmative outreach to prime contractors and potential Government customers as part of market research or formal Request for Information processes may avoid blind spots on behalf of each of those groups and drive set aside opportunities.

File a protest. If you believe there were improprieties in the solicitation process, you can file a bid protest before or after a contract has been awarded depending on the nature of the impropriety. At the federal level, there are three tribunals for bid protest: the Government Accountability Office (GAO), the Court of Federal Claims, and the procuring agency itself. For more information, check out An Introduction to Bid Protests.

  • If you are competing for contracts under one of the SBA’s socioeconomic programs and believe the awardee does not qualify for that program, you may file a size protest with the relevant contracting officer, followed (if necessary) by an appeal with the SBA Office of Hearings & Appeals.
  • States have different processes and requirements for aggrieved parties. For example, New York and California have separate procedures. It is important to carefully review the relevant state’s processes and corresponding filing deadlines to ensure a protest is not dismissed on procedural grounds. Note: some states may require the unsuccessful party to bear the costs of its unsuccessful bid protest.

Be your own boss. As a prime, you have a direct relationship with the government, rather than through another firm. This can help cut down on issues such as late payment and lack of work. You can find assistance with becoming a prime at all levels of government. For example, the City of Philadelphia PIDC offers resources such as project, equipment and commercial mortgage loans, contract-related working capital, and business development.  Philadelphia’s Minority Business Pipeline Project creates a pipeline of “ready, willing, and able” minority firms to compete as primes.

Contact your Small Business Administration District Office. The SBA offers counseling and business development help.

If an employer doing business with the federal government, such as a prime, has discriminated against you, you can file a complaint with the Office of Federal Contract Compliance Programs.

If an agency of the federal government has discriminated against you, you can file a complaint by contacting that agency’s Equal Employment Opportunity (EEO) Officer.

“Dangers” New Minority-Owned Small Business Contractors Should Be Aware Of

“Dangers” Solutions
Overwhelming amount of regulations. Familiarize yourself with baseline policies and procedures required for government work at the state and federal level.

Consider using NASPO (National Association of State Procurement Officials) to get acquainted with your state’s officials and guidelines.

Pro Tip: Maintain Part 12 contractor status. Under Federal Acquisition Regulations, Part 12 is a contractor status for commercial item contracting. Part 12 “prescribes policies and procedures unique to the acquisition of commercial items” and this contractor status limits liability under a number of laws related to contracts and subcontracts.

Lack of social networks. Get a mentor. If you are in federal procurement, you can obtain a large business mentor and form a joint venture together. By expanding your network and building meaningful relationships, you can set yourself up to avoid the pitfalls in government procurement.

Consider joining local small business organizations, unions, and social groups, such as the National Institute for Government Procurement or the Northern Virginia Technology Council.

Lack of resources. The SBA offers SBA guaranteed business loans and free business counseling. In addition, federal agencies set aside contracts for entities within the following programs, making it so small businesses within each subcategory do not have to compete against large companies or all other small businesses. The programs include:

SDVOSB (service-disabled veterans-owned small businesses), HUBzone (historically underutilized businesses), WOSB (women-owned small businesses), and 8(a) (small disadvantaged businesses).

The 8(a) program also partners the business with a Business Development officer.

Lastly, the SBA’s All Small program matches small businesses with an experienced government contractor through a mentorship program.