Women, minorities pay a high price for procurement gains

In the wake of reduced federal contract spending, a new study found that the price tag of doing business is higher for minority and women contractors as compared to other small firms.

An American Express survey, “Women and Minority Small Business Contractors: Divergent Paths to Equal Success,” measured 740 active small-business contractors and looked at how the women and minority contractor experiences compares with other small firms in terms of overall contracting activity and success.

It found, particularly for minorities, that the annual investment made to seek federal contracts was 35 percent higher than for the average small firm with the same credentials. While small firms invested an average of $103,827 to secure a federal contract in 2010, the investment made by minority business owners averaged $139,709. Women business owners invested a less-than-average $86,643, but still up 23 percent from their 2009 investment of $70,512.

“It took minority business owners longer to achieve their very first victory in procurement,” the study said.

As bidding activity and success rates dipped for small business contractors from 2008-2010 as compared to three years before, the survey found women contractors were part of the same trend, but minorities weren’t. While minority contractors had a steeper decline in bidding activity than other small businesses, minority firms’ success rates jumped 10 percent in garnering prime contracts between the periods of 2007-2009 and 2008-2010. Meanwhile, overall prime-contracting rates plunged 8 percent during the same period.

Another positive finding showed women and minority contractors were more likely than their non-contracting colleagues to exceed $1 million in revenue and more likely to own larger firms versus their non-contracting peers.

Furthermore, the survey examined “turning points” toward procurement success in these two groups.  It found that 55 percent of most small businesses couldn’t point to a single action that defined their success. However, fellow business owners were found to be “more helpful than average” to minorities in sharing tips and experiences. Outside consultants (procurement advisors, accountants, or attorneys) and agency purchasing officials ranked “higher than average” at helping women.

These groups were more likely to have a specific certification or procurement designation. For women, getting on the GSA schedule was shown to buoy their business and 41 percent said that the designation has been “very or extremely helpful.” On the other hand, certification as a women-owned business was “very or extremely useful” to only 17 percent of the group. For minorities, 8(a) and disabled-veteran status has proved to be the most helpful certification.

The findings are part of the second annual government contracting survey from the American Express OPEN’s Victory in Procurement small business program.

All the businesses in the study are contained in the Federal Procurement Data System and are registered on the Central Contractor database.