Small Businesses Need More Than Diversity Goals To Succeed – And Meet America’s Infrastructure Needs

Op-ed: With major federal investments in infrastructure projects underway, supporting MWBEs in development and construction projects is more important than ever.

A Black man doing construction work

(Photo by JSB Co. / Unsplash+)

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Coming off of Black History Month and as we celebrate Women’s History Month, we’ll continue to see inspiring social media posts from organizations celebrating the contributions of Black and women leaders who helped build our country. As professionals working to advance economic opportunity for minority and women entrepreneurs and close the racial and gender wealth gap, we hope those same organizations — local governments, corporations and other anchor institutions — are inspired to help shape history today.

Our country is in the midst of a historic infrastructure boom. Fueled by $1.2 trillion in federal funds, governments at every level are advancing a wide range of infrastructure projects to reshore industries to the U.S. and build economic opportunities in cities and rural areas across the country —from expanding clean and renewable energy sources and modernizing public transportation to upgrading ports to investing in factories for semiconductor manufacturing.

This major investment is an opportunity to establish and execute an equity-focused plan for economic development — arguably the biggest opportunity that we have seen this generation — that can move the needle on closing the racial and gender wealth gap.

How? By thoughtfully awarding these tens of thousands of contracts and subcontracts to the widest range of entrepreneurs and small business owners, including MWBEs (Minority and Women Owned Business Enterprises) and DBEs (disadvantaged business enterprises) — and following through on the contractual requirements and goals set by the government to include MWBEs and DBEs on projects.

Small businesses are the backbone of our economy, employing 61.7 million Americans – nearly half of private sector employment. They are a large and growing segment of the business ecosystem that will become more integral as the U.S. becomes more demographically diverse. And since small businesses are such a big part of the economy, ensuring access via contracts helps ensure business is happening equitably.

To be sure, there are already regulations in place to ensure a fair distribution of contracts and the revenue generated. According to the U.S. Small Business Administration, the federal government’s goal is to award at least 5 percent of all federal contracting dollars to women-owned small businesses annually — meaning MWBEs and DBEs will have the opportunity to capitalize on roughly $60 billion of federal contracting dollars through this historic infrastructure investment. The Biden administration and many city and state governments have set percentage mandates for MWBE procurement to ensure a more inclusive process through supplier diversity programs.

However, these goals often fall short, even in progressive cities like New York and Boston. In fact, MWBEs win only a miniscule fraction of the available contracts given their representation in the industry. A recent report from New Jersey indicates that 9.19% of construction businesses in the state are Black-owned, but those businesses received only 0.14% of available large construction contracts. At just over a hundredth of what you might expect, that is a glaring discrepancy.

White women-owned businesses do a bit better than that, but still received less than half of the contracts expected given their proportion of the industry. They represent 19.7% of the available construction businesses, but received 8.14% of contracts.

What’s holding these enterprises back? First: access. That’s where governments, corporations, and regulators can take the lead, making sure their procurement processes are casting a wide net and meeting their diversification targets. Second: resources for capacity building. MWBEs often lack the connections, business expertise and financial backing to present themselves as legitimate contenders for contracts, despite successful track records.

Numerous national and regional nonprofits have built programs to help small businesses bridge these gaps, build their knowledge and create connections. But we need to significantly scale up these capacity-building opportunities in order to truly benefit from the opportunities this unprecedented funding will provide:

  • The National Minority Supplier Development Council (NMSDC) offers increased access to capital and business resources to MWBE leaders through 23 regional affiliates. NMSDC has fostered $482.1 billion in economic output annually, 1.8 million jobs, and $136.4 billion in total wages earned.

  • Start Small Think Big (NY and CA) provides legal, financial, and marketing support to over 3,400 small businesses.

  • Operate HOPE (GA) coaches small business owners in underserved communities.

  • SCORE (VA) has paired mentors to over 30,000 entrepreneurs across the country.

  • Our own organization, Interise, offers the Streetwise MBA, a seven-month turnkey business education curriculum for established small business owners through regional and national partners.

We’re in a history-making moment, with unprecedented levels of investment coming from the federal government that is being delivered on by the private sector. What we do next, as business leaders, politicians, nonprofit and public agency leaders, and advocates, will shape this nation in one of two ways.

Either that trillion-dollar influx of money is going to further widen the chasm of inequality in this country — or that investment can be spread widely and fairly, spent more efficiently, utilizing the thousands of small businesses ready to work, and helping diversify the middle and upper classes. It’s up to us to make that choice.

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Darrell Byers is the CEO of Interise and a national leader on issues of entrepreneurship and small business development. Rebecca Karp is CEO of Karp Strategies, a community economic development and urban planning strategy consulting firm, and a board member of Interise. She is a proud Streetwise MBA alumna.

Tags: diversityinfrastructure investmentmwbe

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