Supplier diversity is rapidly becoming a social imperative — a government mandate. When the federal, state, and local governments champion inclusivity, all businesses in such an environment must quickly adopt supplier diversity. Therefore, understanding these mandates is important when a business is interested in obtaining government contracts and gaining recognition in society.
In this article, you will find details about supplier diversity regulations, compliance requirements, and reason out how government mandates provide opportunities to businesses seeking to elevate their supplier diversity programs.
What is Supplier Diversity?
Supplier diversity therefore is a business strategy that seeks to source its supplies from underrepresented groups—such as women, minorities, veterans, and LGBTQ+ individuals within a supply chain. This not only contributes to economic building, but it also enables innovation, reduces procurement costs, and enhances a company’s reputation.
Government Mandates to Promote Supplier Diversity from the Government
There are numerous federal, state, and /or local mandates that require businesses to incorporate diverse suppliers within their procurement strategies when dealing with public sector contracts.
1.Federal Mandates
Small Business Act (SBA): The Small Business Act is one of the federal mandates that promote supplier diversity. The U.S. government offers a segment of federal contracts to businesses from underrepresented groups through programs like the Business Development Program, HUBZone Program, and Women-Owned Small Business (WOSB) Federal Contracting Program.
Executive Orders: Some executive orders mandate Federal agencies to develop supplier diversity targets. For instance, Executive Order 13985 stipulates promoting equity for minorities as well as; laying down goals for minority and women-owned businesses within federal contracting.
2.State-Level Mandates
Currently, most US states are pursuing their own supplier diversity policy either mandating or encouraging federal, state and local organizations to procure from small, minority-owned, women’s and service-disabled veteran-owned firms.
For example, California’s Public Utilities Commission has established requirements for utilities to set goals for procuring from diverse suppliers, while New York’s Empire State Development Corporation requires that a minimum percentage of state contract spending must be allocated to minority- and women-owned businesses.
3. Municipal and Local Mandates
Chicago and Los Angeles have enacted supplier diversity goals at the municipal level, directing public agencies and city contractors to consider certified diverse businesses within their procurement processes.
Compliance Requirements
Publicly contracted businesses must comply with a variety of compliance requirements in order to remain competitive and meet supplier diversity mandates.
- Certification: Any business qualified as a diverse supplier must possess certification through a recognized certifying agency. The National Minority Supplier Development Councils (NMSDC), Women’s Business Enterprise National Councils (WBENCs), and Veteran-Owned Businesses Verification (VOBs) provide certifications confirming a business is at least 51% owned, operated, and controlled by the relevant minority group. These certifications are helpful in verifying supplier diversity eligibility.
- Reporting and Documentation: Currently, most US states are mandating or encouraging federal, state and local organizations to procure detailed reports on their use of diverse suppliers. Compliance involves submitting regular reports to ensure that diversity spend meets agreed-upon goals. supplier diversity certifications from small, minority-owned, women’s and service-disabled veteran-owned firms.
Federal Acquisition Regulation (FAR) Subpart 19.7 promotes specifications where a certain percentage of state contracts must go to companies owned by any applicants, who belong to minorities, women, veterans, or other vulnerable and less-favored persons. - Penalties for Non-Compliance: Non-adherence to the set supplier diversity goals or reporting errors can lead to penalties, which include the loss of potential business. Therefore, tracking and reporting systems are a necessity for businesses.
Benefits of Meeting Supplier Diversity Mandate
Businesses that successfully meet compliance requirements unlock a range of benefits:
- Access to Government Contracts: Government contracts are usually substantial, secure, predictable and recurrent sources of revenue for businesses. Forcing supplier diversity, companies will be able to meet the mandates set and qualify for contracts that include specific provisions on contractors in the following categories or those businesses who use such contractors.
- Competitive Advantage: Supplier diversity programmes should be integrated into businesses to effectively show commitment to equity and inclusion. Many big organizations and governments prefer to select vendors that work towards supplier diversity.
- Innovation and Cost Savings: Diverse suppliers, thus, enable organizations to bring new perspectives which helps move forward with their goals. Also, having multiple suppliers means competitive pricing leading to cost-savings.
How Gainfront Can Help with Supplier Diversity Compliance
While governments remain committed to the implementation of supplier diversity programs through mandates, companies require effective ways to meet compliance and diversity objectives. Gainfront is thus best suited to assist such companies to connect and coordinate both Tier 1 and Tier 2 supplier diversity in a centralized and efficient manner.
Key Benefits of Gainfront’s Supplier Diversity Solutions
- Automated Compliance Reporting: Gainfront enhances easy tracking and reporting of diverse supplier spend that keeps your business compliant with federal, state, & local regulations.
- Certification Management: This also includes the integration with the major certifying authorities with the aim was to assist in keeping the supplier certifications current and to assure all the possible suppliers are included in our list.
- Benchmarking and Analytics: Gainfront also provides superior reporting capabilities that enable businesses to compare its diversity spend with other organizations as well as predict future opportunities.
With the help of Gainfront solutions, businesses can remain compliant and navigate through the ever-changing regulations and demonstrate leadership in supplier diversity.
Conclusion
Supplier diversity requirements specifically influence public sector contracting. Awareness of the laws and adherence to them is crucial for the companies seeking to succeed. By strategically attaining these goals, organizations can secure government contracts and contribute to social and economic equity. Gainfront provides a one-stop solution for businesses who need supplier diversity management tools and solutions to be compliant and achieve diversity goals.
Rahul Asthana has a PhD in Operations Management from the Anderson School at UCLA. He has 25 years of experience in supply chain management, starting his career in IBM working in supply chain operations. He then moved into product management and product marketing of supply chain software while at SAP and Oracle. He manages product strategy and product management at Gainfront. In terms of hobbies outside of work, he really enjoys tennis. Follow Rahul Asthana on Linkedin!