It’s time for providers of government purchasing software to help fix the low participation of WMBEs as local governments increasingly rely on third-party software for their procurement needs.
While the nation has become more socially aware of women and minority issues, including their importance as businesspeople, one of the largest sectors of the U.S. economy has been slow to adapt: local government purchasing. Across the United States, women- and minority-run businesses (also known as Women-owned and Minority-owned Business Enterprises or WMBEs) face a variety of significant challenges when it comes to securing contracts with local government agencies.
Recently, The Institute for Public Procurement (NIGP) released a research paper that highlights the continued under-representation of WMBEs in the purchasing process. The study found that few local governments have minority-owned business policies (37 percent) and fewer have women-owned business policies (30 percent). Furthermore, of those local governments that do have policies, two-thirds have either not implemented the policies or have only implemented them moderately.
This problem is not only in small, rural, and less diverse parts of the country, but, as a recent New York Daily News article highlights, the issue is pervasive in big, metropolitan, and culturally diverse cities like New York City. Despite a seemingly more favorable environment in New York, the city’s WMBEs are only receiving 5 percent of the city’s nearly $20 billion in annual contracts.
Vendor Registry’s analysis of over 50,000 vendors shows that over 15 percent of businesses registered to do business with local governments (cities, counties and school districts) are owned by a woman or minority. The analysis also shows that approximately 50 percent of registered vendors have 10 or fewer employees. These small WMBEs face further challenges, such as fewer resources to manage compliance paperwork and RFP responses, fewer referenceable customers, and fewer hours to generate new business.
Local governments are relying more and more upon third-party software to manage purchasing. It makes sense, therefore, that purchasing software providers have a role and responsibility in enabling greater vendor diversity. First and foremost, vendor and bid management software should mitigate the barriers that discourage WMBE businesses from participating in local government contracting. These barriers include: PDF registration forms, the inability to disclose diversity status, the inability to communicate with local government using mobile technology, and paper RFP responses (or “bids”).
For example, small vendor leaders (including WMBEs) are often in the field during the day. They need mobile-friendly communications for timely notifications, form requests and other needs.
Furthermore, local governments should not underestimate the barrier they create for small and WMBE businesses by still requiring paper RFx responses, which commonly require five copies or more. Purchasing software should enable electronic submissions as well as online bid evaluation, scoring and tabulations.
With WMBEs encouraged to participate, purchasing software should then help purchasers easily identify, recruit, and engage WMBEs, especially small WMBEs that do not have the resources to keep up with required documentation or solicitation notifications.
For example, starting with the registration process, purchasing software should make it easy for WMBEs to accurately declare their diversity status as well as upload certification documentation. After hearing from states’ Offices of Supplier Diversity, another opportunity for purchasing software companies to make a positive impact is to help diverse businesses get certified as part of the vendor registration process so these businesses can maximize their benefits with their respective states.
By making the diversity declaration process easy and accurate, local governments can then query the system to report on vendor diversity as well as identify qualified WMBEs in order to invite them to participate in a particular bid process.
Purchasing software companies should also work to eliminate real — and dispel perceived — barriers to local governments engaging more WMBEs to participate in their procurement processes. Cost for implementing a new online purchasing system can be a real barrier, especially for smaller governments. However, software providers can get creative with their pricing models to make solutions more attainable. As already demonstrated in the commercial markets, software providers can leverage freemium, no-cost, a la carte, pay-per-use and transaction-based pricing models to lower or even eliminate costs for local governments (while still making money).
A perceived barrier is, “we don’t have many WMBEs in my area that are qualified to bid.” First, an easier vendor registration process with mobile bid notifications may surface diverse vendors they never knew they had in their backyard. Second, purchasing systems that leverage a shared common vendor database can identify WMBEs in neighboring cities, counties and regions that local governments can invite to compete.
No doubt, software in and of itself makes engaging WMBEs easier and more efficient. However, software is only as good as the people behind it. Thus, purchasing software providers should go beyond just delivering code and actively assist local governments in engaging WMBEs (as well as other small and local vendors, for that matter).
One best practice is for local governments to hold annual vendor days, which are free, open events where vendors are invited to learn about upcoming projects, meet decision-makers and learn how to participate in the procurement process — all in one day and in one location. The city of Knoxville, Tenn., now has a robust vendor day, where hundreds of attending vendors get to hear strategic plans and purchasing processes from over a dozen departments and related entities. Smaller cities and organizations can also team up to leverage resources. Myrtle Beach, S.C., and Horry-Georgetown Technical College run a joint vendor day that not only decreases the burden on resources but also increases interest with vendors.
Purchasing software providers can support and even enable these types of events in many ways by getting the word out to vendors, hosting a vendor registration table at the event, providing market data to event organizers and offering vendors training and best practices in sourcing and responding to bid opportunities.
The NIGP study on supplier diversity mentions that common activities for encouraging diversity include enhancing access, empowering small, disadvantaged business owners to participate in government contracting, outreach, distributing bid opportunities more widely, and tracking utilization, all of which can be achieved with technology.
It’s time for purchasing software companies to accept some responsibility in enabling women-owned and minority-owned businesses. And, yes, some local governments need encouragement or examples to follow. On a positive note, however, while local governments may be behind in contracting with WMBEs, many have shown the will to do so. Technology, especially purchasing platforms, can give their will a way.