How to bolster minority-owned businesses through improved contracting opportunities, based on my experiences as a Black American starting my own federal contracting business
by Neil Hoosier
Founder and CEO, Neil Hoosier & Associates
I grew up in a New York City housing project amidst a considerable amount of poverty and despair.
Today, I run a business that generates millions in revenue and employs more than 100 people of diverse backgrounds in more than a dozen states, including my two sons.
I was fortunate to have a family structure and caring schoolteachers to support my ambitions and provide mentorship along the way. And I have seen firsthand the power that minority business ownership can have in affecting community-wide generational change.
One of the key lessons I have learned is that it truly does “take a village to raise a child”, and that each and every one of us should embrace that responsibility, for the next generation, once we have the means to do so. My business has allowed me to give my sons and other employees opportunities, skills and experiences that they in turn will use to create further opportunities, skills and experiences for their kids and others. And so the cycle will continue, opportunity begetting more opportunity.
The challenges facing Black and Brown communities today are vast, as the pandemic compounds and exacerbates longstanding systemic issues. A new Goldman Sachs report highlights disparities in education, housing, healthcare and finance that have contributed to Black households holding 85% less wealth than White households. But there is perhaps no development that could have a more widespread and lasting impact in addressing these issues – and boosting the country as a whole — than a turbocharged emergence of Black- and Brown-owned businesses.
With that in mind, I applaud President Biden for his strong commitment to bolstering minority-owned businesses, including his early Executive Order on Racial Equity. Among other things, the Executive Order directs federal agencies to identify and remove barriers to federal contracting opportunities for minority-owned businesses. This is a tremendous first step.
As my experience has shown me, federal contracting can provide a great pathway to success for minority-owned businesses, particularly through the SBA 8(a) program, in which eligible minority-owned businesses are able to bid on certain contracts with limited competition for a nine-year period. But even with the 8(a) program, the barriers to success for minority-owned contractors are real and plentiful.
These are some bold but practical policy recommendations – born of my own experiences — to address some of these barriers and improve contracting opportunities for minority-owned businesses moving forward.
Provide an early infusion of knowledge and capital
I started NHA in 1999 with 2 employees after working for many years for Empire BCBS’s Medicare Division and the Centers for Medicare and Medicaid Services (CMS) and becoming a nationally recognized expert on certain Medicare policies and requirements. I signed contracts with CMS to help develop and improve a range of Medicare programs, systems and processes.
I quickly learned that while I was a leading expert in Medicare Secondary Payer and Coordination of Benefits, I was a novice at finance and accounting and other things that turned out to be just as crucial to starting and operating my business. I also learned how difficult it can be to secure access to capital, as I tried unsuccessfully to secure a line of credit from large financial institutions before ultimately opening an account with a small community bank.
Without the necessary knowledge and capital, minority-owned small businesses can struggle to build the extensive infrastructure required to comply with the many regulatory requirements associated with government contracting.
I made it through the early years of anxiety, bootstrapping and often-costly trial and error. But many, if not most, minority-owned contractors do not. Here’s how to fix that:
- Establish a PPP-style forgivable loan for all 8(a) participants, available one time upon first entering the program and contingent on the completion of a training course on financial literacy.
- Provide student loan relief to individuals who choose to work for 8(a) participants.
The PPP loan program has proven successful in helping small businesses survive the tumultuous and uncertain times of COVID-19, but for many new businesses, the early years are just as tumultuous and uncertain no matter the conditions. This forgivable infusion of capital, combined with the influx of top young talent lured away from large businesses by the promise of student loan forgiveness, would allow these businesses to get off the ground and build a sustainable infrastructure. Meanwhile, tying the loan to the completion of a training course on financial literacy will help ensure that businesses can meet the short-term requirements of the loan while also leaving them better prepared for the future.
As with the current PPP loan program, these would be significant expenditures. But like the current loan program, the huge ripple effect these would have on the economy would make these similarly wise investments.
Facilitate private partnerships and public information
Once I had the necessary infrastructure in place, I was able to rapidly scale my business, as we went from advising CMS on how to develop and manage certain Medicare programs and applications to handling much of that development and management work ourselves. We added dozens of new staff including leading experts and professionals and greatly expanded our capabilities to include project management and integration, software development and support, audit and oversight, and training and outreach.
The logical next step was to take our experience and expertise in the Medicare sphere and translate it to other agency programs, particularly other healthcare-related programs like TRICARE and VA healthcare. However, our attempts to enter the DHA, VHA and other agencies have revealed a hard truth: agencies tend to only contract with companies they know and have an existing relationship with, making breaking into an agency for a new company exceedingly difficult.
New agencies also mean new regulatory requirements to learn and new bureaucracy to navigate.
All of this can be daunting — even prohibitively so – for minority-owned small businesses with their likely limited resources and relationships. Here are two things the government can do to help address this issue:
- Increase funding to the SBA to allow for an expanded and improved Mentor-Protégé Joint Venture program.
- Require all agencies to provide a detailed opportunity forecast and fund a website that provides agency-specific news and insights on opportunities and awards.
Partnering with a large contractor with an established agency footprint is the surest way for small, minority-owned contractors to make inroads into a new agency. Large established contractors are also in the best position to provide the kind of personalized mentorship that would help small, minority-owned contractors comply with regulatory requirements, navigate bureaucracy and otherwise survive in the world of government contracting. The SBA Mentor-Protégé Joint Venture program recognizes this by allowing limited partnerships between large and small contractors, but expanded partnership opportunities and improved oversight would bolster small contractors even further.
Meanwhile, providing more robust publicly available information and agency insights would help alleviate one of the principal disadvantages that small, minority-owned contractors face when trying to compete with larger more established contractors for the attention of new agencies.
Level the long-term playing field
My company has four more years left in the 8(a) program, which means we are staring down a familiar crossroads. For many, the end of the 8(a) program and the loss of set-aside contracts means sale, stagnated growth or even the end of the line.
Making it this far is great, but to truly begin reversing the vast structural inequities and wealth disparities and creating the kind of lasting change that President Biden is calling for, we need minority-owned contractors to make it past this plateau. Which brings me to my final recommendation:
- Establish a new Minority-Owned Small Business set-aside program for minority-owned small businesses that have graduated the 8(a) program.
The new set-aside program could operate much the same as the current Women-Owned Small Business set-aside program, which has no term limits but rather a single pool of all eligible women-owned small businesses and then a separate tier of economically disadvantaged women-owned small businesses.
The Women-Owned Small Business program recognizes the government’s strong interest in facilitating the continued growth of underrepresented businesses. That same interest would be served with this new Minority-Owned Small Business program.
President Biden has taken the first step, expressing his goal to bolster minority-owned businesses through improved federal contracting opportunities, a goal with immense challenges but one that could have a widespread generational impact in minority communities and beyond. By spearheading these policy initiatives, the president and his administration could go a long way toward making that goal a reality.
At NHA, we are working to be a part of the solution.
First, we are using our perspective to help drive bold and effective policy changes that can target and address the unique barriers and inequities that minority communities and minority-owned businesses face.
Second, we are using our capabilities to provide tailored, solutions-based training, outreach and mentorship on issues like financial literacy, vaccine awareness, healthcare access and equity, and diversity and inclusion.
To learn more about the work we are doing and how we might be able to work with you, contact us at email@example.com
Capability Maturity Model Integration
Small Business Administration 8(a): Business Development Program
Minority Business Enterprise (MBE) of GA, KS, MA, MD, NY, NYC, PA and WI
Department of Transportation (DOT) Disadvantaged Business Enterprise