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CONTESTED TERRAIN

The Role of Preferential Policies in Opening Government and Corporate Procurement Markets to Black-Owned Businesses

Published online by Cambridge University Press:  26 January 2015

Timothy Bates
Timothy Bates*
Affiliation:
Department of Economics, Wayne State University
*
*Corresponding author: Timothy Bates, 204 Cherokee Road, Asheville, NC 28804. E-mail: [email protected]
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Abstract

Since 1969, the procurement powers of government have been used proactively to assist minority-owned businesses. Originating in the U.S. Small Business Administration, the practice of targeting procurement contracts to minority-owned business enterprises (MBEs) has expanded throughout government and corporate America. Compared to other minorities, Black-owned firms have been the most active participants. Preferential procurement has been controversial for decades, and its effectiveness for assisting bona fide MBEs has been repeatedly questioned. “Front-company” abuses have received abundant media attention; allegations of reverse discrimination have inspired legal challenges; the judiciary has often thrown out procurement preferences targeted to minorities. Less attention has focused on understanding whether racially targeted procurement preferences have assisted minority-owned businesses.

As the multi-billion dollar government and corporate procurement market opened up, employment in Black-owned firms operating in the impacted industries soared. Growing access to procurement opportunities encouraged firm creation and expansion. Government entities operating successful programs actively screened out front firms, eased bonding requirements, downsized and unbundled contracts, and paid MBE vendor invoices promptly. In the process, they effectively lowered key barriers limiting MBE participation in mainstream procurement markets. Well-designed and administered programs succeeded because they created a less discriminatory environment, thus allowing talented entrepreneurs to build large firms. Problems notwithstanding, preferential procurement programs have been highly successful, and this success is a reflection of declining barriers unleashing the creativity of new generations of Black entrepreneurs.

Keywords

Black EntrepreneurshipPreferential ProcurementAffirmative Action
Type
State of the Art
Information
Du Bois Review: Social Science Research on Race , Volume 12 , Issue 1 , Spring 2015 , pp. 137 - 159
Copyright
Copyright © Hutchins Center for African and African American Research 2015 

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