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Procurement

Why Disparity Studies Aren’t Enough to Improve Supplier Diversity

If you’re part of any government procurement team, you’ve likely been asked, “What are you doing to increase supplier diversity?” It’s also likely you’ve heard of and possibly conducted disparity studies to improve your procurement process and identify the needs of different types of suppliers.

But are disparity studies the be-all-end-all of fixing the problem of diversity in public sector spending? The short answer is no – all procurement teams should know that disparity studies, while useful, have their limits.

In the rest of this post, we’ll take a look at why disparity studies can be helpful, where they fall short, and what you can do to implement change and increase diversity in your procurement efforts.

What Are Disparity Studies?

Disparity studies are meant to help governments take a deep look at how they are buying and purchasing, and whether or not their procurement process is handled in a fair and equitable way. The data often helps show businesses how they’re excluding minorities, women, and other types of disadvantaged groups like veterans from being able to win government contracts.

Why Are They Needed?

Municipalities need a way to better understand if they lack supplier diversity in their procurement processes so they can address these disparities. It wasn’t until a 1980s Supreme Court case that many local governments began looking for a way to prove there was possible discrimination so they could enact legislation around improving the bias. This is where disparity studies came in.

Historically, many local governments haven’t had a great track record of awarding contracts in a fair manner – most went to white, male-owned businesses. Unfortunately, this trend continues today.

For example, over the last two decades, the value of contracts given to minority-owned businesses in Massachusetts has fallen 24%, equal to $135M per year. In 2020, the City of Boston reported that about 7% of its contracts went to minority- and women-owned businesses; while this was up almost 2% from the previous year, Boston still lagged far behind the supplier diversity of other large cities like New York (19% contractor diversity), Chicago (29%), and Philadelphia (31%).

Why Don’t These Studies Always Help with Supplier Diversity?

Many U.S. cities and municipalities want more inclusion and equality and are taking steps to conduct disparity studies. So why are we not seeing the impact on supplier diversity after decades of studies?

Often, when local government procurement teams are asked to improve supplier diversity and better procurement results for the community, their ideas are often met with red tape and excessive bureaucracy. Simple improvements require legal approval and are met with the following response, “We’ve never done that before and I don’t know if we can, so let’s hold off for another year.” Before you know it, a year turns into a decade.

Similarly, even if disparity studies come with a list of suggestions for improvement, governments are often unable to implement these ideas effectively because they treat them as a simple checklist. But when a suggestion such as “lengthen your solicitation time from 3 to 5 weeks” is tried, procurement teams often see no change because the problem was never with the length of time – it was that the exact same companies who always see your RFP ads are again the only ones who see it, and no new audiences of diverse business owners are reached.

What Can I Do About It?

Procurement departments are often the first to be blamed for supplier diversity gaps in government spending, but this doesn’t have to be the case. In fact, these teams can accomplish better results in their procurement process with buy-in from higher levels of authority.

With support from upper-level management and other departments, procurement teams can get the attention and resources to achieve more.

Upper-level management and departments should support the ideas and requested changes coming from procurement teams. After all, they need tools and resources just like the finance department needs payroll and budgeting tools. Cities and towns that have successfully implemented programs that produced real results often have their mayor and state governors supporting the procurement department’s goals and initiatives. For example, Broward County Schools hosts an annual diversity event to encourage different types of suppliers to bid on projects.

Later this summer, we’ll be having a deeper conversation with a key organizer of Broward County Schools’ diversity events to discuss how to get the attention of new suppliers, enable new businesses to bid, and embrace changes in the procurement process. Join us at NIGP 2022 in Boston this summer to be part of the conversation!

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