News Column

Big Goals, Small Steps

January/February 2003, HISPANIC BUSINESS Magazine

Frank McCoy

It irks former Dallas entrepreneur Felipe Mendoza that minority businesses haven't won more federal contracts. And as deputy associate administrator at the General Services Administration (GSA) charged with boosting small, minority, and women-owned business prospects with the agency, Mr. Mendoza says he knows how to increase minority contracting.

Minority companies account for tiny bites of the public pie. In fiscal 2001, ending September 31, 2001, the government awarded contracts worth a total of $235 billion, according to the Federal Procurement Data System.

The Minority Business Development Agency (MBDA) at the Department of Commerce no longer documents contracts awarded to minority-owned companies, according to director Ronald N. Langston.

"Historically, the MBDA was charged with collection of this data, but the previous administration chose to suspend this reporting requirement, and it has not been resumed. The MBDA is in the process of assessing potential collection measures, " he says.

The MBDA does, however, have a network of business development centers that assist minority businesses with the federal contracting application process, says Mr. Langston.

"The business development specialists at these centers assist MBEs [minority business enterprises] in contacting the correct federal purchasing offices to ensure that their applications are submitted and reviewed," he says.

Small Business Administration–certified 8(a) firms, which are mostly small and minority-owned, accounted for roughly 64,000 contracts worth nearly $7 billion. Half of those valued less than $25,000 per contract, for a total of $130 million. Another 30,000 valued more than $25,000 per contract, for a total of $6 billion, and the remaining 2,000 contracts targeting poor areas were worth a collective $370 million.

The top three agencies doing business with 8(a) firms on a total cash basis were the Department of Defense ($3.2 billion), the GSA ($370 million), and the National Aeronautics and Space Administration ($445 million).

Of course, not all minority firms are 8(a)-certified. In fiscal year 2001, so-called small disadvantaged business units won 196,000 contracts worth $9.4 billion.

By the end of fiscal year 2002, the GSA had paid $746 million for goods and services from small and disadvantaged businesses, including 8(a) firms. The agency does not compile statistics on Hispanic-owned companies.

To Mr. Mendoza, a Bush appointee, the key to doing business with the federal government is marketing. The former telecommunications and data processing entrepreneur is pushing the GSA's 11 regional Small Business Utilization centers to teach firms how to showcase their strengths. Then they can exploit what he calls "a license to kill": the GSA schedule of available contracts. But first, he says, companies have to learn how to sell their goods and services to the agency.

A good source for contractors seeking federal contract information is The site serves as a one-stop shop for government procurement contracts of more than $25,000.

But good marketing and revealing data don't guarantee a signed contract. Agency administrators admit that the recent focus on homeland security–oriented measures has slowed contracting. While Hispanic company owners need to prepare for and actively solicit federal business, they should also realize that they might not get any until new federal money begins flowing in 2003.

The hurry-up-and-wait approach doesn't surprise Rep. Nydia Velázquez (D-NY), the ranking member of the House Committee on Small Business. Since 1998, her committee has given poor-to-failing grades to initiatives that seek to provide federal contracting opportunities for minorities.

In its first year, the Bush administration got a "D" for its efforts to promote small-business contracting. The Clinton administration earned a "C–" in each of its last two years.

Ms. Velázquez does commend the Bush Administration for elevating Hispanics to key leadership posts, including SBA Administrator Hector Barreto. But she says those selections don't boost minority contracting numbers. "Not only are sweeping policy changes necessary, but there must be clear direction from the top ranks of government on how to support and implement diversity practices and initiatives," she says.

Last fall, committee members brainstormed with 40 minority business leaders about providing business openings in the federal marketplace. A common criticism was that federal agencies don't face penalties if they fail to achieve their diversity goals. In a statement, the group said that "action should be taken if small-business goals are not met, such as losing their ability to consolidate contracts."

Critics say that the practice of "bundling," or contract consolidation, has slashed opportunities for minority businesses. From 1997 to 2001, the Department of Defense, which makes 65 percent of all federal purchases, awarded more than 10 percent fewer contracts to small businesses and slashed contracts to small disadvantaged businesses by more than 45 percent.

The Office of Management and Budget has reviewed the issue of bundling, but Ms. Velázquez says nothing has changed. "At a time when the small-business community is looking for leadership and vision from the administration, what they received again was more empty rhetoric instead of real action," she says.

Mr. Barreto disagrees. "The Bush administration and the SBA are committed and dedicated to reaching out to emerging markets," he says. "A key component of that are women- and Hispanic-owned businesses, which represent the fastest-growing segment of small business. This administration applauds that success and is working to build on it."


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