Updated at 4:57 p.m. Feb. 16
Latino-owned businesses face vast disadvantages in government contracting, a new national survey shows, with an average contract value that is a tiny fraction of those won by white-owned firms.
The new study by the Stanford Business School Latino Entrepreurship Initiative found that the average federal contract won by white-owned businesses nationwide had a value of $14.8 million and the average state contract was $20.5 million. For Latino-owned businesses, the average state or federal contract was around half a million dollars.
In addition, it takes Latino businesses much longer to secure government contracts, the report found. Thirty-seven percent of Latino-owned businesses said it took them more than a year to secure a contract, while only 27% of white-owned businesses said it took that long.
Barbara Gomez-Aguinaga, associate director of the Latino Entrepreneurship Initiative, said that the group’s annual survey of 10,000 companies with at least one employee on payroll found that Latino-owned businesses are actually slightly more likely to win a government or corporate contract than white-owned businesses. “But when we dive deeper and analyze the size and the substance of the contracts, well, we see very dramatic gaps, particularly from sources that have larger contracts, including federal and state governments as well as corporations,” she said.
“And when we think about the process to negotiate and secure government contracts … it takes longer for Latino-owned businesses.”
The Color of Public Money, an ongoing project of the GBH News Center for Investigative Reporting, has shown that minority-owned businesses in Massachusetts have for years received a tiny fraction of the state’s contracting dollars. In last year’s annual report, the state acknowledged that out of a $5.7 billion annual budget, Black-owned companies received $49 million worth of contracts and Latino businesses got $20 million worth of work.
Nevertheless, the Stanford study found that Latino-owned businesses are growing faster, with annual payrolls rising at twice the rate of white-owned businesses from 2007-2019.
“Latino entrepreneurs continue to grow,” Gomez-Aguinaga said, noting that was the case even through the economic turbulence of the COVID-19 pandemic. “But they keep facing systemic disparities that impact their growth of their businesses. And this year, we revealed that access to government and corporate contracts is one of the challenges."
Gomez-Aguinaga said the survey does not make an attempt to explain why these disparities exist.
But Daliza Nova has some ideas. She is the project director for the Massachusetts branch of the federal Minority Business Development Agency, where she works with minority-owned companies across New England to expand their business.
She said small minority-owned businesses often don’t have in-house contracting teams that can quickly respond to large contracts that are offered with very short deadlines for bids — sometimes just a couple of weeks. “So then the big companies … the ones that have the leverage and the ability to have a team that just focuses on creating bids or completing bids, they'll do that very quickly," she said. Smaller companies may have the ability to do the work, but she added that “they don't have an entire team to just write bids.”
Nova also said that Latino and other minority businesses that compete for contracts and don’t win are not getting feedback that would help them improve.
“They go to the table and they compete and they don't win the bid, but they never hear of why they didn't win it,” she said. “So maybe it'll take an extra 15-20 minutes for the buyer to come back and be like, ‘Look, we need to see X, Y and Z.’ But that's not even happening.”
Nova also argues that big companies and government agencies have invested a lot of energy in the past few years focusing on diversity inside their organizations, but not nearly as much energy focusing on their impact on the communities outside. She says that beyond just setting minority contracting goals, these large organizations should provide cash bonuses to contract officers that meet or exceed goals for minority inclusion, thereby creating a financial incentive for success.
Correction: This story was updated to correct the number of businesses included in the Latino Entrepreneurship Initiative's annual survey.
