Improving Government Vendor Diversity

Introduction

Many cities and states seek to contract with local Minority- and Women-owned Business Enterprises (MWBEs) both to spur economic development and improve racial and gender equity. Across the U.S., people of color constitute a small but growing share of business owners. A challenge for them is that their families typically have only a fraction of the net worth of white families, and businesses often depend on family and friends for start-up and growth capital. They can also suffer discrimination in the private marketplace. And while more American women have owned businesses in recent years, these businesses still comprise a disproportionately small share of the country’s total revenues and jobs. For example, according to the City of Boston’s 2016 Economic and Equity Agenda, 74 percent of privately-owned businesses in the City with paid employees are owned by men and 80 percent are owned by non-Hispanic whites.

As part of Bloomberg Philanthropies’ What Works Cities (WWC) initiative, the Harvard Kennedy School Government Performance Lab (GPL) helped Boston’s Office of Small Business Development, Department of Neighborhood Development, and Department of Innovation and Technology improve vendor diversity. In particular, the GPL supported the City’s ongoing efforts to streamline procurement processes, expand technical assistance provided to diverse vendors, and monitor progress on vendor diversity goals. Initial signs suggest that these strategies have been effective. For example, Department of Neighborhood Development estimates that 70 percent of its maintenance expenditures on City-owned vacant plots in the first half of 2015 were spent on contracts with MWBEs.

Drawing from our experience with Boston and other WWC engagements, this brief describes three strategies for improving government vendor diversity: (1) publicly establish concrete goals, and hold departments accountable for meeting them by tracking their performance; (2) dedicate staff resources for outreach and technical assistance to small businesses; and (3) streamline procurement processes for all businesses, as complexity may prevent the smallest vendors, which are disproportionately MWBEs, from winning government work opportunities. This brief concludes by summarizing lessons that can be drawn for other cities from Boston’s progress on vendor diversity.

Read More