Survey of State Inclusive Business Programs

1. Survey of State Inclusive Business Programs Tim Lohrentz, Insight Center for Community Economic Development July 21, 2008

2. Insight Center for Community Economic Development • The Insight Center for Community Economic Development is a national research, consulting and legal organization that develops and promotes innovative solutions that help people and communities become, and remain, economically secure. The Insight Center is based in Oakland, California, and was founded in 1969 as National Economic Development and Law Center (NEDLC). • The Insight Center's multidisciplinary approach utilizes a wide array of community economic development strategies including industry-focused workforce development, individual and community asset building, establishing the link between early care and education and economic development, and advocating for the adoption of the Self-Sufficiency Standard as a measurement of wage adequacy and an alternative to the Federal Poverty Line.

3. Content • Why Look at State Inclusive Business Programs? • The Last Five Years: What’s Happening in the States? • Supplier Diversity in the States • State Implementation of the USDOT DBE Program

4. Purpose of the Study • This study examines the procurement and business development programs for small businesses owned by people of color (MBEs) and women (WBEs), looking at all 50 states and the District of Columbia. • The purpose of the Insight Center’s state policy scan of inclusive business programs is to promote policies and programs that enhance minority and women business development. • M/WBE development builds intergenerational family assets, aids community reinvestment, creates jobs, adds to the tax base, and links communities of color to the regional economy.

5. What is this trend? • State Inclusive Business Programs – M/WBE Targeted Procurement and Business Development Services

6. Enhancements in 2003 • Indiana Created an M/WBE Advisory Commission and Administrative Division to lead its supplier diversity. Required each state agency to have a supplier diversity plan. • Ohio Created the Encouraging Diversity, Growth and Equity (EDGE) program. State agencies have a 5% goal for contracting with EDGE-certified firms. • Maryland The Governor’s Commission on MBE Reform was convened to identify and solve problems with the state’s M/WBE program. • Delaware Expanded its race- and gender-neutral supplier diversity program with the adoption of a systematic electronic vendor notification system targeting M/WBE firms and M/WBE business development associations.

7. Enhancements in 2004 • Massachusetts New legislation required that any local government body that receives state-funding for construction-related projects must have goals for MBE and WBE participation. • Tennessee Passed legislation that required all state agencies to implement supplier diversity practices. • Arizona Created an electronic vendor directory which includes M/WBE status, and required M/WBE bidders on state contracts under $50,000. • North Carolina The state helped fund and establish the Minority Business Enterprise Center which provides technical and financial assistance to MBEs.

8. Enhancements in 2004 and 2005 • 2004 • Pennsylvania Overhauled its M/WBE certification process and required each state agency to have a supplier diversity plan and coordinator. • Minnesota Doubled state M/WBE procurement from 2003, the biggest upswing since the late 1990s. • 2005 • Florida Doubled procurement from certified M/WBEs from 2004. • Missouri Established the Office of Supplier and Workforce Diversity (OSWD) to ensure that each state agency continues to pursue supplier diversity in a race- and gender-neutral fashion.

9. Enhancements in 2006 • Maryland A comprehensive disparity study leads to a 24.3% DBE goal on federally-funded highway projects, the highest of any state, and a 25% goal on all state spending, also the highest in the country • Illinois IDOT disparity study demonstrated continued need for a race- and gender-conscious DBE program and established a 22.77% DBE goal for FHWA funds, the 2nd highest in the country. • Colorado Established the Minority Business Advisory Council to review the operations and effectiveness of the state Minority Business Office and to support MBE development. In addition, the state established that all state spending in Denver would be subject to M/WBE goals.

10. Enhancements in 2006 • Virginia Changed procedures for its small-, women-, and minority-owned business (SWaM) program, requiring each agency to have a SWaM plan, including specific WBE and MBE sub-goals. • South Carolina Overhauled its M/WBE program with new procedures and tracking mechanisms to ensure implementation. • Washington Following a disparity study, the state DOT reestablished race- and gender-conscious contracting, with an 18.77% DBE goal for FY06-07 FHWA funds, one of the highest rates in the country.

11. Enhancements in 2006 & 2007 • 2006 • New Jersey Governor Corzine signed Executive Order 34, establishing a Division of Minority and Women Business Development, to ensure equal opportunity access to the state’s marketplace. • 2007 • Massachusetts Required each state agency to have an affirmative marketing program and coordinator. • New York Governor Spitzer established an M/WBE Executive Leadership Council and M/WBE Corporate Roundtable to identify problems and recommend fixes to the state’s M/WBE program.

12. Where are They? State Supplier Diversity

13. Bipartisan Support for Inclusive Business • “We all benefit from an educated citizenry and economic development, such as business development.” • “That is why we have bipartisan support for affirmative action in Indiana. The state’s economic growth is dependent on growth in all parts of the state, including the inner city, suburbs, and rural areas.” • - Indiana State Representative William Crawford • William Crawford has served in the Indiana State House since 1972 and serves as Chair of the Indiana House Ways & Means Committee and is a long-time advocate for minority- and women-business development. • Indiana’s M/WBE program has been supported by Democratic Governors Bayh, O’Bannon, and Kernan, and current Republican Governor Mitch Daniels.

14. State Supplier Diversity Efforts • Agency Coordination & Accountability • Focused Vendor Outreach • Technology for Supplier Diversity • Linking Procurement to M/WBE Financing & Business Development Services

15. Agency Coordination & Accountability • Aspirational goals of M/WBE procurement achievement for each state agency and university • Each agency must create and submit a supplier diversity plan • Each agency designates a supplier diversity coordinator • The performance reviews of agency directors includes supplier diversity efforts • Workshops and one-on-one assistance with agency procurement officers

16. Focused Vendor Outreach • Business fairs, ‘power’ networking, social events, and ‘match-maker’ activities • Bringing together diverse businesses, private purchasing agents, and public agency procurement officers, or • Bringing together prime contractors and sub-contractors • Telephone call conferences, video conferences, and webinars • Partnering with local chambers and supplier development councils • Best Practice: Florida, Massachusetts and the Illinois DOT all host annual M/WBE award events

17. Technology for Supplier Diversity • Electronic vendor registration • E-bid notification to registered M/WBEs on all relevant public lettings • E-procurement, purchase orders, monitoring, and tracking • Universal Certification Protocol (UCP) and Streamlined or Reciprocal Certification Process • Best Practice: Colorado, Delaware, North Carolina, Vermont

18. Linking Procurement to M/WBE Financing & Business Development Services • Ten States Have M/WBE Equity Investing and Loan Programs • Best Practice: Mississippi has one of the larger MBE loan pools, with a total capitalization of over $26 million. There are two loan programs – one for loans of up to $250,000 and a micro-loan program for up to $35,000. • Low-Interest Loans, Brokering Loans, Loan Guarantee and Bonding Programs • Best Practice: Washington has a Linked Deposit Program: interest from state deposits in CDs are linked to commercial loans made to M/WBEs, lowering the interest charged on the loans by two percent. • Fourteen states provided targeted Business Development Services to M/WBEs • Best Practice: Ohio has perhaps the most extensive targeted business development services to M/WBEs through the Division of Minority Business Affairs (DMBA) within the Department of Development. The DMBA has set up the Minority Contractors and Business Assistance Program (MCBAP).

19. For more information on State M/WBE Programs • http://www.insightcced.org/index.php?page=programgoals

20. USDOT DBE Programs: Key Component • Even if states do not have a state M/WBE program, they all implement Disadvantaged Business Enterprise (DBE) programs for USDOT funds. • USDOT DBE programs comprise some of the largest dollar amounts of procurement to M/WBEs • The biggest of the federal DBE programs administered by states is through the Federal Highway Administration (FHWA). • 31 of 39 states, for which we have data, utilize race-/gender-conscious goals.

21. For the USDOT DBE Program: Maryland, Illinois, Colorado, and Georgia stand out

22. So do Washington, Massachusetts, and Missouri

23. Financing Innovations in State DOT DBE Programs • Georgia, Hawaii, and Wisconsin are among the few states that have a DBE loan program operated by the department of transportation. Georgia DOT funds Citizens Trust Bank, a minority-owned bank, to make loans to DBE sub-contractors below market rate. Montana hopes to soon open a similar program. • Best Practice: Wisconsin DOT is noteworthy, as it helps DBEs to access financing and bonding specifically for the purpose of helping them move from being sub-contractors to prime contractors. At the same time it provides the same DBEs with long-term financial counseling. • State DOTs with a bond guarantee component to their DBE program include: Florida, Maryland, and Tennessee.

24. Additional DBE Program Innovations • Vendor Outreach – Delaware, New Jersey, South Dakota, Utah, Vermont, and Wyoming DOTs • Highway Construction Technical Assistance Programs in Illinois, Kansas, and Texas DOTs • Small Business Development Services by New Hampshire, Pennsylvania, and Minnesota DOTs • DBE mentor-protégé programs in California, Delaware, Illinois, Minnesota, North Carolina, and Texas.

25. For more information on State DOT DBE Programs • http://www.insightcced.org/index.php?page=dotdbegoals

26. Conclusions – Advocate for State Best Practices • Inclusive Business Programs are politically feasible – more and more states are doing them • Inclusive Business Programs make business sense – they help corporations be more competitive and do the same for states and local governments • M/WBE development leads to reinvestment and jobs in our communities, a stronger tax base, intergenerational transfers of wealth • Supplier diversity coordinators and plans • Electronic vendor registration and notification

27. The Inclusive Business Initiative • http://www.insightcced.org/index.php/insight-communities/inbiz • inbiz@insightcced.org, 510-251-2600