Research Report Removing Barriers to Participation in Local and State Government Procurement and Contracting for Entrepreneurs of Color
Brett Theodos, Sophie McManus, Tomi Rajninger
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With state and local government procurement expending more than $1 trillion each year, removing barriers to contracting participation—especially for minority-owned business enterprises (MBEs)—could advance a more equitable and accessible contracting environment. For decades, many states and localities have implemented procurement policies and practices aiming to increase the participation of businesses owned by people of color. However, recent court cases may threaten equity-focused approaches as well as considerably alter the broader procurement landscape.

To explore state and local procurement practices, especially within the current legal landscape, our research team conducted more than three dozen interviews with leaders and staff in government procurement, including training and technical assistance providers, disparity study consultants, legal experts, government officials across a wide range of departments, advocates, researchers, small-business owners, and others.

We find the following:

  • There is considerable potential for procurement to be a transformative tool to work toward increasing opportunities for growth for MBEs. Open and fair contracting processes can boost financial stability and wealth for diverse business owners and their communities.
  • There is no “one-size-fits-all" approach, and implementing multiple practices in tandem may be the most impactful. This report discusses numerous key strategies to remove barriers to participation in public contracting, including bolstering outreach and offering technical assistance to small businesses navigating the contracting process, developing data systems to track vendors by type of firm and owner attribute, and paying vendors in a timely manner.

In addition to the best practices examined in the report, we recommend that state and local governments engage the following strategies:

  • Establish and maintain streamlined systems for the collection, tracking, and management of procurement spending data to monitor MBE utilization.
  • Strategically assess contracts to determine opportunities for “unbundling” (breaking large contracts into smaller contracts), especially in sectors with high concentrations of MBEs.
  • Identify and strengthen race-neutral strategies—such as proactive outreach, pre-bid informational sessions, and one-on-one technical assistance for bid submission—that can support MBE participation in contexts where race-conscious strategies either are not allowed or do not exist.

This research highlights the untapped power of government procurement to promote and foster equity for MBEs and all small businesses. While our report offers concrete recommendations for state and local governments about how to ensure race-focused procurement strategies are institutionalized, sustainable, and responsive to the ever-changing legal landscape, further research is needed to more deeply understand the legal context of government procurement and identify which practices may have the greatest impact on increasing the participation of MBEs.

Research Areas Race and equity State and local finance Wealth and financial well-being
Tags Racial inequities in economic mobility Small businesses
Policy Centers Metropolitan Housing and Communities Policy Center
Research Methods Qualitative data analysis
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