Just 13% of Virginia’s spending on state contracts and procurement went to women- and minority-owned businesses from 2014 to 2019, according to a report released on Friday.
Gov. Ralph Northam, who commissioned the study via executive order in 2019, said its findings were proof Virginia needed to do more to reach those businesses.
“State contracting, which represents more than $6 billion annually, can be a powerful tool to create economic opportunity,” Northam said in a statement.
Northam is backing changes to legislation currently before the General Assembly that would set a goal of 23% of state procurement and contract spending on those businesses in addition to a 42% goal for all small businesses. State agencies would have to come up with a plan to meet the target, but it would not be binding.
The administration’s proposal calls for more thorough reporting on subcontractors. It also requires contractors to spell out plans for hiring diverse subcontractors.
“We are proposing very carefully drawn, narrowly drawn, race and gender conscious measures to encourage greater participation by women and minorities,” Sec. of Commerce Brian Ball said in an interview.
The study from BBC Research and Consulting found that women- and minority-owned businesses were capable of capturing 33% of state contracting dollars -- a figure the company recommended as a goal for spending. The administration reached the 23% target by averaging the study’s findings with the current level of spending, according to Ball.
The study noted that small businesses were often outbid by larger companies who could provide cheaper services. It recommended setting aside a portion of contracts for those small businesses -- a proposal that has made its way into the Northam-backed legislation from Del. Jeion Ward (D-Hampton).
BBC also found that subcontractors reported problems collecting payment from so-called “prime” contractors, in violation of state regulations. It noted that stricter enforcement would help those businesses collect what they are owed.
“It may also help ensure that minority- and woman-owned businesses have enough operating capital to remain competitive and successful,” the report said.
The last report on diversity in state procurement was completed in 2009. It found that less than three percent of state contracts were awarded to women- and minority-owned businesses, according to Northam’s office.
