Under an executive order signed yesterday by Gov. Josh Shapiro, the state plans to marshal government and private-sector resources to help small, diverse businesses win a bigger share of state spending.
- The order builds on efforts by Shapiro’s predecessor, former Gov. Tom Wolf, to diversify the ranks of state contractors.
- The efforts have made progress but it has not always been linear.
- In 2022, 11.3% of state contract spending went to small, diverse businesses, up from 4.9% in 2015, when Wolf signed an executive order on the issue.
- However, spending under a state program awarding prime contracts to small businesses fell between fiscal years 2020-21 and 2021-22, slipping from nearly $43.6 million to about $41.8 million, according to data from the Department of General Services, or DGS
What’s new: Under Shapiro’s order, DGS and PennDOT plan to step up efforts to ensure small, diverse businesses have a better shot at landing contracts.
- For instance, the two agencies will identify and reach out to small and small, diverse businesses that could provide goods or services to the state.
- Other efforts focus on delivering technical assistance to the businesses in areas such as project management, insurance and bonding.
- The agencies also expect to work with community development financial institutions — a category that includes Lancaster-based Community First Fund — to address access to capital and other financial issues.
- In addition, state officials are creating a new panel called the Pennsylvania Advisory Council for Inclusive Procurement, to be chaired by Lt. Gov. Austin Davis.
What’s small: Under state law, a business with less than 100 employees, though Shapiro is reportedly pushing to have the limit raised to 500 in order for more businesses to qualify as small.
- Since 2018, the state also has defined small as a firm with revenue below $38.5 million.
- However, the executive order raises the threshold to $47 million and calls for developing new methods for setting the threshold — with the goal of qualifying more businesses.
- Pennsylvania generally defines small, diverse businesses, or SDBs, as companies owned by women, minorities, veterans and LGBTQ people.
- The U.S. Small Business Administration generally defines a small business as one with less than 500 employees, but the actual figure depends on the industry. In some cases, the federal agency relies on revenue figures instead.
Who’s measuring progress: That is another feature of the executive order.
- DGS is expected to bolster its collection of information on small-business and SDB contracting among state agencies, including in the program for using small businesses as prime contractors, known as the Small Business Reserve Program.
- In a separate effort, the agency is gathering data on potential disparities in state contracting, updating a 2018 report that showed the state was significantly under-utilizing woman- and minority-owned firms.