Minority-owned small contractors invest more, take longer to win


All groups spent more time and money chasing government work from 2009 to 2010, but the increase was most pronounced among minority-owned firms.
March 2, 2012

Minority government contractors are on par with their peers when it comes to the revenue they earn, according to a new survey. But they spend more time and resources securing those contracts.

In 2010, minority-owned firms invested 35 percent more time and money than the average small business in seeking contracts, according to an American Express survey released this week. The poll of 740 women and minority small-business contractors has a margin of error of plus or minus 3.6 percent.

“This analysis puts me in mind of Ginger Rogers, who did everything Fred Astaire did but backward and in high heels,” said Julie Weeks, an AmEx research adviser and author of the report. “Minority firms are having to invest more and wait longer for their contracts, but they’re still doing the dance just as well as other firms.”

Nevertheless, Weeks added, the increased time minorities spend finding work, “might cut down on other business that they’d be able to pursue, because there are only so many hours in the day.”

The report also found that it took minority business owners longer on average to secure their first win — 20 months and 6.1 unsuccessful bids, compared with 16 months and 4.4 unsuccessful bids for small contractors as a whole.

Weeks speculated this might be because minority-owned firms may not have strong networks with other contractors when they are first starting out.

“Finding other business owners who have procurement experience was key for many of these businesses,” Weeks said.

Hester Clark, owner of the Hester Group and a black- and woman-owned contractor, said she can identify with the long road to victory. Clark’s public relations firm had been a commercial business for 12 years before she began to steer the firm toward government clients in 2008 during a lull in private-sector work.

Clark made a number of major investments in order to move into government contracting, including opening an office in Washington, changing the marketing strategy and even investing in a new accounting infrastructure that would suit government clients.

Overall, it was two and a half years from the time her transition began before the Hester Group was awarded its first contract: Helping the FDA communicate new food-safety regulations.

“At times we were focusing the majority of our efforts on the move to contracting,” she said. “It was a whole new way of doing business for us.” 

Mixed results

Minority and women contractors are on par with their peers in part because of government set-aside programs, the survey found. From 2007-09, women had a subcontract success rate higher than any other group.

But because of cutbacks in federal spending, they now are facing the same challenges as their non-minority counterparts. Some contractors are bidding less — both because there is less work available and because some small companies are becoming more selective in an attempt to conserve their resources.

The average number of prime bids minority contractors submitted dropped by 54 percent between the 2007-2009 and 2008-2010 periods. The average number of bids in which they participated as a subcontractor dropped even more — by 62 percent. Women saw a similar above-average drop in prime contracting bids — 55 percent.

As they’ve been bidding less, women contractors have also been winning less. Women contractors saw a greater-than-average decline in their contracting success rates between the 2007-2009 and 2008-2010 periods — 17 percent for prime and 34 percent for subcontracts.

Weeks suggests one possible cause for the overall downturn may be contract bundling, the practice in which government agencies consolidate two or more procurement requirements into one large contract for which small businesses are not as able to compete.

Despite those hurdles, though, minority contractors saw a 10 percent improvement in their prime success rate.

For Clark, success comes in part through tireless networking. “I go to the chamber of commerce and to vendor trade fairs,” she said. “Sometimes you’ll meet an individual or a company you’ll want to have a subcontracting relationship with.” 

Useful certifications

The survey shows that minority and women small contractors are on average just as successful as their peers — and they tend to be much better off than small businesses as a whole. The report found that 42 percent of women contractors and 41 percent of the minority ones have business revenues in excess of $1 million, compared with 47 percent of the general population of contractors. Only 5 percent of all small businesses have reached that level nationally.

While minority firms invested more time and money to get contracts, women-led businesses spent 17 percent less than average.

Weeks said that might be because women are more likely to take advantage of the General Services Administration schedule — a pre-approved list of contractors the government can buy from. Forty-one percent of women contractor said being on the GSA schedule has been very or extremely helpful to them, compared with 28 percent of active minority contractors. Minority contractors, on the other hand, reported that the 8(a) status and the disabled veteran status have been the most helpful. 

Lisa Firestone, president of health care contractor Managed Care Advisors in Bethesda, said getting on the GSA schedule and learning to use it was key for her company. At one point, she said she realized she was in the wrong GSA category and switched. Now, 80 percent of her contracts come through the schedule.

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