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Can Minorities Win More Gov Tech Deals as Pandemic Eases?

Despite calls to increase diversity in gov tech contracting, women and minority business owners still struggle to break through. A young incubator called Hutch offers lessons in how to get more voices into procurement.

Young black woman on her smartphone.
Emmanuel Iroanya, a 32-year-old Nigerian-American software engineer and entrepreneur, wants to bring more diversity to government technology — and help ease the climate crisis while doing so.

Just a few weeks from graduating from a fledgling incubator program in Baltimore designed to increase minority participation in the vast gov tech space, Iroanya said he has learned vital lessons about how to scale his digital services and consulting company, Theta LLC, as it works to add to its eight-member workforce and win more work from public agencies.

“I want to build tech that works for everybody,” said Iroanya, who had worked in financial technology before deciding that influencing how governments use software and related tools could bring more important rewards. “How government uses technology impacts everyone.”

In December he will be among the handful of companies graduating from a two-year-old program offered by Hutch, which started operations in 2019 and has since taken on new cohorts every year.

Those cohorts are tiny in size — five or six companies each, according to Hutch officials — but the ultimate goal is big: Increase diversity in the government contracting space, and at a time when that market is quickly growing and changing as public officials embrace cloud computing, data science, mobile applications, citizen engagement platforms and many other technologies.

“What if those (tools) are being built by the folks who are actually utilizing the services,” said Stephanie Chin, program manager for Hutch, describing one of the incubator’s guiding principles.

But that’s not all — government spends massive amounts of money on IT each year.

“Imagine if we could spread that around among many companies instead of a few powerful ones," she said. "The economic impacts have been huge.”

Programs to get more minority- and women-owned firms into the general government contracting space are nothing new, of course, but those efforts seem to have gained more steam during the pandemic as local, state and federal agencies gained a new understanding of the power of technology, thanks to remote work, spikes in unemployment, the need for public health data and other factors.

One typical example comes from the state of Washington.

Officials there recently set up the Washington State Office of Equity and gave it a budget of at least $365 million. In February, the new office gained its first director and started work on various goals related to diversity in state government, including increasing the number of minority contractors.

Local governments are also trying to do more to encourage minority contractors as well as attract more bids from small, local businesses.

The East Baton Rouge Parish Metro Council in Louisiana, for example, recently directed $228,000 toward a Division of Supplier Diversity, according to a local newspaper report.

"This will help small, locally-owned disadvantaged businesses create jobs, expand opportunities and build wealth in their communities," said the mayor-president in a statement.

Meanwhile, a program launched in last year in DeSoto, Texas, mandates that 20 percent of city contracts have minority participation, the details of which are determined by the size of the contract.

“The city’s Black residents are not alone in the ongoing local battle to compete with white-owned companies; market and capital access are a struggle nationwide for minority-owned businesses,” wrote DeSoto City Councilmember Candice Quarles in a summary of the program. “COVID-19 further exacerbated the rate of Black unemployment and the need to support business ownership to contribute to local economic stability.”

Big Gaps

But such efforts also run up against data that often show a noticeable lack of such contractors at various levels of government — data that helps to drive programs like Hutch and entrepreneurs like Iroanya.

Streamlined data about state and local government contracting can be hard to come by, but statistics from specific public agencies help illustrate what Hutch and its students are trying to fix.

The Colorado Department of Personnel and Administration recently released data showing that minority- and women-owned businesses received about 8 percent of funds via the state’s contracts, based on an analysis of nearly 22,000 contracts and subcontracts between 2014 and 2018. According to that report, that level of funding stands about 20 percent below what should be the case when judging by the number of firms that might have been able to take on those deals.

On a national level, the U.S. Small Business Administration reportedly has only twice met its annual goal of granting at least 5 percent of federal government contracts to businesses owned by women — in 2015 and 2019.

Counting all businesses in the U.S., about 18.3 percent are owned by minorities and 19.9 percent by women, according to U.S. Census Bureau data from 2018.

Fresh Work

Bringing more diversity to government contracting — including tech deployments — requires multiple efforts by various players, some of whom encourage the federal government to follow the lead of local and state agencies as they innovate in this area of procurement.

The role of an organization such as Hutch is to attract entrepreneurs who have the desire to change the face of gov tech and the determination to commit to monthly classroom and mentoring sessions over 24 months. If the passion and willpower are there, Hutch can then teach lessons that help small, ambitious companies grow into their next phase, according to Chin, the program manager.

“Some folks leave looking for institutional investment,” she said. “But most of them are doing contracting or subcontracting before they even leave the program.”

She said half the slots in each cohort that Hutch accepts are reserved for students from Baltimore, and half also for women. She said Hutch also tries to work with local policymakers to make them aware of not only the existence of minority-, women- and locally-owned tech vendors, but the advantages of awarding more contracts to Hutch graduates.

“We de-risk them,” Hutch said. “We pour resources into them via the two-year incubation process. Small businesses are just as capable with tech skills, and finding partners, and finding the right talent.”

Personal Motivations

Another principle that guides Hutch and its students: Chin believes that without enough people at the contracting table, so to speak — without a variety of voices and experiences helping to guide tech decisions — agencies might face consequences sooner or later.

“If there are not enough people at that table, bias can be introduced consciously or unconsciously,” she said, echoing a theme often found in recent resolutions and other media related to the push to improve minority access to government contracts.

That point is driven home by the personal experiences of Iroanya. A fan of video games, he recalled how his first Xbox came with a facial recognition feature.

“It didn’t do it for me, and not for my brothers,” he said. “It didn’t properly get my beard and skin tone. I thought about all the other kids working part time at Target to save up to buy an Xbox but wouldn’t be able to use it in the way they intended (it) to be used because they weren’t part of the process.”

Now Iroanya is making himself part of the process.

His company already has a few technology contracts at the federal level — he focuses on that level in part because, he said, technology innovation there tends to influence state and local governments — and is hard at work on tools designed to help in the fight against climate change.

The idea is to use edge data collection to help agencies measure their total energy use via one convenient plug-and-play platform. His employees are developing that tool in the company’s own innovation center, but Iroanya credits his education at Hutch with making that possible.

“It has helped me mature as a business owner,” he said. “I know how to do the government thing, but I never knew how to scale. It’s extremely difficult.”

Editor's note: Emmanuel Iroanya's heritage has been clarified.
Thad Rueter writes about the business of government technology. He covered local and state governments for newspapers in the Chicago area and Florida, as well as e-commerce, digital payments and related topics for various publications. He lives in Wisconsin.