Small and minority-owned businesses see more opportunity than ever

Gigantic federal spending programs, outside of regular appropriations, look like a big opportunity to small and minority-owned businesses. That is according to a group called Reimagining Main Street, which surveyed its constituents. For more, the Federal Drive with Tom Temin spoke with Tammy Halevy, the executive director of Reimagining Main Street.

Interview Transcript:  

Tom Temin And let’s begin with Reimagining Main Street. Sounds like redoing hub zones or something but tell us about your organization briefly.

Tammy Halevy So reimagine main Street is a cross-sector, multi-stakeholder network of folks who meet regularly. We started meeting in the wake of the shelter in place orders during the pandemic to share intelligence and understand what was going on. Over time, that has evolved to focus on ensuring growth for small businesses and the people they employ. On MLK Boulevard, Cesar Chavez Way’s Chinatowns and main streets across the country. And what we do is we’ve got the network that meets regularly to exchange insights. What are you hearing? What are you seeing? How does it look from your perspective if you are a corporation, if you’re a an organization that finances small businesses, if you’re an organization that is an advocate, and then we do regular surveys of small businesses to understand where they stand on various issues and how that might differ by race, ethnicity, gender and other dimensions.

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Tom Temin All right. And what were some of the top line findings in the most recent survey? It sounds like they really like the Inflation Reduction Act and the Chips and Science Act, and some of those other big landmark pieces of legislation.

Tammy Halevy Yep. So what we wanted to understand was how business owners experience contracting in both the public and the private sectors. And what we found that I think is both super important and maybe a little surprising, is that diverse owned and small businesses have the capacity for contracting. And they say that government contracting is critical for their business strategies. But the problem is, as you may expect, generally don’t think the playing field is level for small and diverse businesses to compete.

Tom Temin What is it that tilts the playing field? Do they feel?

Tammy Halevy I think there are three things in particular. One is folks told us that they don’t typically have relationships with contracting officers. They don’t necessarily know when opportunities are available and frequently, which is a real issue for smaller businesses. The size of the contract is too big for them to credibly compete.

Tom Temin Yeah, so those are pretty daunting challenges. And as you probably know, the government spends a significant portion, probably 24% of contracting dollars, but it seems to be within a closed universe of small businesses.

Tammy Halevy Indeed. So federal contracting in fiscal year 2022 exceeded $690 billion. So, we’re talking about real money. We’re talking about real opportunities. And that’s just at the federal level. Folks in our surveys also, of course, compete for state and municipal contracts as well. But the opportunity is huge. And frankly, it’s not just an opportunity for the business owners. It’s opportunity for a more flexible supply chain from the contracting side. And it’s an opportunity for innovation and competition as well.

Tom Temin Do you think that perhaps your constituent members are looking too much at doing direct prime contracting, where you have to know a lot, and it can take two years from the time you begin to try to get the first contract versus having a position on one of the large, government wide acquisition contracts or subbing, you know, for a big prime.

Tammy Halevy So it’s interesting we asked folks how they compete. And as you would expect, there’s a broad distribution of respondents in the survey who are primes versus subs. And many of them compete as both, sometimes as primes, sometimes as sub. I think there’s a different set of challenges when you’re competing as a sub. But I think your point is very well taken that there are lots of different ways for a small, diverse business to compete for federal contracting.

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Tom Temin We’re speaking with Tammy Halevy. She’s executive director of Reimagining Mainstreet. And what does the population that you deal with look like in terms of what it is they offer? Because lots of small businesses enter the market as, say, IT services contractors. But that’s pretty competitive. Maybe someone needs a new manufacturer of gyroscopes for the DoD. That’s not so easy.

Tammy Halevy Yep. So, the sample in the survey was broadly distributed. Virtually every industry you can think of and a whole range of offers, products and services, high tech and very low tech. We did pull out a segment of the survey to understand businesses that could compete in the Investing in America program. So, as you mentioned, IRA Chips and the rest of it, and nearly a third at 29% of the respondents compete in. What we would characterize as investing in America businesses, manufacturing, high tech, green tech, construction. And many of those businesses are winning contracts today. So, competing effectively, what we did see was that there was a large portion of businesses in the sample who don’t know what the investing in America opportunities are and how they might compete. So, there’s a bit of a mixed story there. Those who are, you know, making the high-tech gyroscope are frequently unique and well-positioned, and others who either could be making the high-tech gyroscope because they have an adjacent capability that could be applied, don’t necessarily know where and how to compete.

Tom Temin In other words, the government is a gigantic opportunity living right next door to them. They just can’t find the front door to get in.

Tammy Halevy That’s exactly right. It’s a challenge to know which door to open and maybe what’s the behind door number three?

Tom Temin Sure. And from your experience, what do you think the government could do? The agencies could do the contracting officers even to maybe make it easier for people to understand how to get in that front door?

Tammy Halevy I think there’s a few things. The first, and the Biden administration has done quite a good job, is intentional engagement, both setting targets, establishing incentives, and making it clear that competition should include small and diverse owned businesses. I think the second piece is related to this size dimension, and that is unbundling contracts so that they can be competed in more, let’s call it digestible chunks that can be more closely managed and arguably more competition for this sort of right sized contracts.

Tom Temin And what about some of the reporting and compliance requirements that, frankly, make people find the front door and say, forget it, I’m not going there and run for the back door?

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Tammy Halevy Look, the survey respondents told us universally that government contracting is far more burdensome than corporate contracting, and that was obviously among the sample who compete for both. I think there are ways, probably to reduce that burden. But let us be clear, there’s an obligation for much of that reporting and much of that transparency. And so, striking the balance is not an easy thing. If you use large corporates as a proxy for some government agencies, there are ways to reduce the administrative burden and still achieve all of the necessary components of on-time delivery and quality delivery. But it’s government.

Tom Temin Sure. And just a detailed question did security clearance requirements come up at all in the survey?

Tammy Halevy Interesting. We asked a few questions about barriers. We asked questions about financial barriers. We asked about IT barriers. And we did have security clearances ever prevented you from getting a contract? The share of respondents for whom the security clearance was a significant barrier was far lower than others. Not going to say it wasn’t an issue but did not emerge as kind of top of the list.

Tom Temin So the barriers then are?

Tammy Halevy Relationships with contracting officers, awareness of opportunities, size of the contracts. For the majority of businesses, financing is not a challenge, but for the businesses for whom financing is a challenge, it’s a persistent challenge. And for the most part, if we can solve the awareness to compete and the size of the contracts, I think a larger share of government contracting could move to small and diverse businesses.

Tom Temin Yeah, maybe we need community college classes on how to operate, SAM, you know, and so people could find out what’s going on.

Tammy Halevy I’m sure the enrollment would be high.

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