Not just government contracts: The advantages of being a certified minority and women business - by Joshua Spitalnik

Too many business owners are missing out on great opportunities.  Nearly every week, I find myself engaged in the same conversation with business owners where I am encouraging them to become a certified minority or women owned businesses. Although these programs have been around for 35 years, too many business owners fail to understand that: 1. They may qualify for certification; 2. Certification can help them obtain private work – not just government work; and 3. Certification opens doors to large networks, mentorship and educational opportunities, advantageous financing programs and more.

Who can qualify?

The first statutory provisions governing “Disadvantaged Business Enterprises” (DBE) were enacted by the U.S. congress in 1983.  The objectives of the DBE statutes were to ensure non-discrimination in the award and administration of infrastructure contracts, help to remove barriers in order to create a level playing field on which DBEs can compete fairly so that these firms can compete successfully in the marketplace without the need for the DBE program.

While the federal guidelines set forth DBE standards, similar statutes were also enacted by state and city governments, which utilize the terms “Minority Business Enterprises” (MBE) and “Women Business Enterprises” (WBE).Over the past 35 years, federal and state governments have become more expansive and created similar statutes to help promote “Veteran Owned Small Businesses” (VOSB), “Service Disabled Veteran Owned Small Businesses” (SDVOSB), and “Lesbian, Gay, Bisexual, and Transgender Business Enterprises” (LGBTBE). In general, the requirements to be certified as a DBE, MBE, WBE, are that the company be at least 51% owned by one or more individuals who are both socially and economically disadvantaged (i.e., minorities, women, veteran, LGBT) and that the minority or woman exercise authority to independently control the company’s day-to-day operations.

Supplier Diversity Programs in Private Companies

Although DBE, MBE and WBE programs are commonly associated with government contracts, more and more private companies are creating Supplier Diversity Programs.  A quick internet search will easily display a veritable “who’s who” of large companies with Supplier Diversity Programs, including companies like CBRE, Forest City, Cushman & Wakefield, Jones Lang LaSalle, Amazon, Starbucks, Macys, BNY Mellon, and many more.

Many of my construction clients have benefited from their certifications to secure substantial commercial real estate work. Often, when building new or renovated retail or office space, these large corporations seek out DBE contractors, subcontractors and suppliers.  

Just like the government contracts, the private corporations set diversity goals and standards they hope to meet.  Some companies have created mentorship programs or outreach events to help target certified companies to bid upon work. Moreover, these corporations not only seek out direct contracts with certified DBEs, but also push their contractors to seek out subcontractors or suppliers who are certified to meet their goals. 

The Benefits of Certification

Over the past 35 years, governmental agencies and private companies have continually increased their DBE goals, creating tremendous opportunities for certified businesses. In addition to opening doors to opportunities to bid upon new work, certified DBEs are eligible for low-interest loans or financing programs. There are also several well connected networks designed to help educate and assist the certified MWBE companies, including the Small Business Administration (SBA), the Procurement Technical Assistance Centers (PTACs), National Minority Supplier Development Council (NMSDC), Women’s Business Enterprise National Council (WBENC), National Gay & Lesbian Chamber of Commerce, Association for Service Disabled Veterans (ASDV), and others.

I have also helped many of my construction clients leverage their DBE certifications to obtain better terms and conditions on their subcontracts. Since my DBE clients are often in high demand, I have used this to eliminate retainage from contracts, modify insurance requirements for my clients, and eliminate many of the one-sided contract provisions that other subcontractors would be forced to take. This has resulted in significant cost savings and stronger protections for my clients.

Penalties for Fraud

Since there are tremendous opportunities to be gained from being a certified DBE, unfortunately, there are those who will try to defraud the system to benefit from these opportunities. Too often, people try to create phony “pass-throughs” or “front companies” by “partnering” with another company that can qualify as DBE, then having the non-certified company perform all the work.  These fraudsters can face potential imprisonment and civil penalties from such fraudulent conduct. Before attempting to become a certified DBE or partnering with another business to obtain the advantages of DBE certification, you should consult with a lawyer knowledgeable in the rules and regulations.  

Joshua Spitalnik is the owner of The Law Office of Joshua D. Spitalnik, P.C., Port Washington, N.Y.