For Black-owned Firms, Government Contracting Matters

Historically, Black-owned businesses have been more dependent upon local, state and federal procurement than have businesses of other groups. However, government contractors have experienced a bumpy ride over the last ten years, that is during the Great Recession and economic recovery. Fiscal austerity measures in public spending caused large contractions in public procurement. However, if black-owned businesses did not have access to preferential procurement programs, they would have ben hit severely by the steep downturn and slow recovery.

Black-owned firms comprise 2.1% of all small businesses in the country that have one or more employees. However, such firms make up 11.7% of registered federal contractors. This fact is not surprising. Black-owned business are more heavily dependent upon government contracting than are white firms, or those owned by other minority groups. One primary reason is the continuing presence of discriminatory barriers in the private sector.

To document the importance of preferential procurement programs, we followed the annual progress of 15,000 federal government contractors between 2007 and 2013. They included minority and non-minority contractors. The results revealed that about one-half of all minority-owned firms participated in a federal preferential procurement program such as the 8(a) Business Development Program, Small Disadvantaged Business Program (SDB), or, Disadvantage Business Enterprise Program (DBE).

Two facts were most revealing. First, the revenue growth of black-owned businesses was the slowest of all race and ethnic groups. In fact, African-American firms experienced a 7% decline in real business revenue between 2007 and 2013, while the average revenue increase across all groups was over 70%. The second most revealing fact is black-owned firms that participated in federal procurement programs experienced a 23% increase in revenue over the same period while those who did not saw their revenue decline by -25%. The bottom line is that preferential procurement programs make a big difference to black business success.