By Philip Walzer
Terry McAuliffe has set the most ambitious goal in the state’s history for doing business with small firms and those owned by women and minorities.
He recently signed an order setting a target of 42 percent for the share of state contract money awarded to such businesses.
Since fiscal 2007, according to state records, the highest proportion awarded to small, women-owned and minority-owned, or SWAM, businesses was 41.9 percent in fiscal 2009.
“We wanted to outdo any previous performance,” said Maurice Jones, the state secretary of commerce and trade. “This is something quite important for the governor, having been a business owner and entrepreneur himself.”
At least two-thirds of the total SWAM percentage has gone to small businesses. And the percentages for minorities and women have dropped in recent years, hitting their lowest level since fiscal year 2008.
In fiscal 2014, which ended June 30, 4.8 percent of state contract money went to female-owned businesses and 4.7 percent to firms run by minorities.
That’s far less than their proportion in Virginia. According to U.S. Census Bureau statistics, 30 percent of the commonwealth’s businesses are owned by women and 22 percent by minorities. Some businesses fall into both of those categories.
“Virginia depends too much on the public sector for our economic health,” Jones said. “We have to grow the private pieces of our economy…. We need a diversity of business partners if we’re going to stay resilient and stay healthy and grow.”
Gwen Davis, a Portsmouth businesswoman who in recent years has lobbied the state to work harder to award contracts to minority businesses, said: “Inclusiveness is always good for society. You cannot operate effectively without including everybody’s dollars.”
Davis, who is chairwoman of Equipping Businesses for Success Institute, said McAuliffe’s order is “a step in the right direction. I’m optimistic that the state will try to reach the target.”
Jones, former publisher of The Virginian-Pilot, cited a range of reasons for the underrepresentation of businesses owned by women and minorities.
“They include such things as us not doing as good a job as we need to do in making sure that we know who the women and minority businesses are out there and that we know their capabilities and we’re aggressively outreaching to them about the opportunities we have,” he said.
Jones added: “Those businesses also have to make sure that they do an aggressive job of alerting us to who they are, to what they can do, to getting registered.”
Bryan Stephens, president and CEO of the Hampton Roads Chamber of Commerce, said he believes the action also will help small businesses. But he added: “It’s all about execution and accountability. I would like to see the commonwealth come out with more specifics.”
Jones said a key step is a new state position — adviser for small business equity and development. McAuliffe appointed Susan “Syd” Dorsey, a former IBM Corp. executive, to the job in May. “We’ve got somebody in the governor’s office now, 24/7, to figure out how to get there,” Jones said.
Other ways the state will reach the goal, Jones said, include McAuliffe’s designation of a new category, “microbusiness,” limited to companies with fewer than 26 employees and annual revenue no higher than $3 million.
The order requires at least one bid from microbusinesses for most small contracts. Most minority businesses should fall into that category, Davis said.
Jones said the order also adds penalties for noncompliance: “If you’re a prime vendor and you put together a SWAM business plan and you don’t fulfill the plan, there could be serious financial consequences.
People’s track record in this will matter now, and it will matter both in whether they get paid and whether they get additional contracts.”
During this year’s General Assembly session, Sen. Louise Lucas, D-Portsmouth, unsuccessfully introduced a bill to require that 15 percent of state purchases go to minority- and women-owned businesses.
Jones said McAuliffe’s order steered clear of mandates partly because that might raise legal challenges.
For the same reason, he said, the governor did not set separate targets for small, minority- and women-owned firms.
On the other side, Jones rejected the argument that the government shouldn’t attempt to influence the contract process.
“The notion that you let the market do its job is a notion that is already inconsistent with what is going on now,” he said. “We have tax incentives, we have grants, we have economic opportunities that are all directed toward recruiting businesses and helping them grow.”