A Competitive Edge
Women Business Owners Reap Benefits from State Program
Cheryl Rumley says SDO certification has enhanced her ability to obtain and maintain strong state contracts.
Cheryl Rumley says the number of state contracts available to business owners is surprising. “There are reams of them in different industries,” the president/owner of Apex Healthcare Services Inc. in Springfield told BusinessWest.
But bidding against the competition can be difficult unless you have an advantage, which is exactly why Rumley became certified by the Massachusetts Supplier Diversity Office (SDO) in Boston (formerly known as SOMWBA, or the State Office of Minority and Business Assistance) when she opened her firm in 1999.
Rumley says the free certification has enhanced her ability to obtain and maintain strong state contracts, which account for about 45% of her annual revenue. “It’s very steady income, and you always get paid,” she said. “I feel my company is stronger than similar companies as a result of this certification. Women who own businesses don’t realize the number of contracts they are eligible for until they become certified.”
She sits on the board of directors for the Mass. Small Business Development Center Network, and says she knows many women whose success is due in part to their SDO certification.
Reginald Nunnally agrees. “Women-owned businesses are continuing to grow, and they do really do well with the Commonwealth,” said the executive director of the SDO. “The certification gives business owners a real edge in doing business with the state.”
But he stressed that screening is thorough and many applicants are denied, which often occurs in family-run businesses where the husband and wife have equal access to bank accounts. “We only issue these certifications to women who own and have at least 51% of the control,” he told BusinessWest.
However, those who do make the grade find the certification beneficial because it’s recognized by all state agencies, Massachusetts quasi-public authorities, general and prime contractors who hold major state contracts with affirmative-purchasing benchmarks, and many cities and towns. In addition, private companies often have affirmative-purchasing programs, and those companies may also recognize SDO certifications.
SDO is an agency within the Mass. Department of Economic Development that promotes the development of certified minority businesses, women-owned businesses, and minority and women-owned nonprofits.
To help these groups gain work in the state, Gov. Deval Patrick signed the Small Business Purchasing Program into law in June 2010. The goal was to increase state spending with eligible small businesses by having executive departments grant them special consideration when they conduct non-construction procurements between $5,000 and $150,000. The law mandates that 12% of all discretionary funds spent by the state’s 72 executive offices must go to SDO-certified businesses.
In FY 2011, this totaled about $550 billon, and although the numbers are still being finalized, Nunnally said that figure rose by about $13 million in FY 2012.
Certification requires women-owned businesses to have been operational in the state for at least one year, have annual revenues of less than $15 million, and employ fewer than 50 full-time workers.
The paperwork is not cumbersome, but the process does take time, since SDO conducts a comprehensive investigation of each applicant to insure the business is truly owned and operated by a woman or minority.
“We reject applications every week,” said Nunnally. “We have some firms that could be considered women-owned, but the husband may dominate the finances and hold the licenses. But they see a distinct advantage in becoming certified, because it allows them to play in the open field as well as qualifying as a minority.
“We also have women who are CEOs of companies but hold other jobs and do not qualify because they are not in control of making decisions, signing contracts, and taking risks,” he continued. “Our certification specialists really dive into a business to determine who holds the licenses and who signs the checks, and tax returns also can come into play.”
Certified businesses range from temporary staffing services to janitorial, office supplies, architectural design, medical services, and information- and communication-technology firms.
Nunnally said there are 144 state contracts and about 1,200 prime contractors, since the state procurement process allows contracts to be awarded to up to 10 companies for a particular service. For example, there may be as many as 10 different janitorial firms taking care of state buildings in different geographic areas that were hired by the Statehouse Division of Capital Assets and Management, because that agency oversees janitorial services.
Although there is a substantial amount of money to be made from state contracts, in recent years, competing for the 12% of funding awarded to women and minority business owners has become increasingly competitive. “Still, every year there is an increase in the money spent with these businesses because their work is so good,” Nunnally said. “And although we don’t award contracts, we can provide valuable guidance to people who seek out our help.”
Anyone interested in learning more about doing business with the state can attend a program offered by the Commonwealth Procurement and Solicitation System (Comm-PASS) in Boston. Certification is not required for participation, and Nunnally says the agency is willing to bring this half-day training session to Western Mass. for groups of six to eight businesses. However, a computer lab is required because participants are taught to navigate the state’s contract-procurement site during the session.
“It exposes people to the range of contracts available and lets them know how to register for a subscription,” Nunnally explained. “Once they have a profile, the state will automatically notify them if contracts become available.”
Years ago, a subscription cost $275, but in 2010 the governor did away with the fee because he felt it was a major impediment to small businesses.
However, one of the main obstacles subscribers face is the complexity of the Comm-PASS system. It covers such a wide variety of industries that it can be a full-time job to monitor it. And that’s where certification gives women business owners a decided edge, as they are automatically alerted to contracts they qualify for. “But there is no guarantee that they will get a contract, and they still have to do everything necessary to achieve success,” Nunnally cautioned.
Still, since many contractors are looking to meet their 12% quota, chances of being noticed and awarded a contract are significantly higher for certified businesses.
In addition to notifications, SDO offers other benefits by providing assistance in the form of business plans, marketing strategies, accounting services, financial literacy, legal services, loan-preparation services, and networking.
“We can connect the dots when women business owners are looking for advice on a particular issue,” Nunnally said, adding that it can be difficult for people to get in touch with the most helpful person pertinent to their situation.
These individuals include Andre Porter, executive director of the Commonwealth’s Small Business and Entrepreneurial Agency. After listening to an issue, he often connects the business owner with someone from a local university or agency with expertise in their field. “He has a large network in terms of industries and geography,” Nunnally said. “And if we refer someone, they are given preference over others.”
Access to capital is another area SDO can help with. It will conduct a workshop Sept. 12 at UMass Boston with a number of banks, nonprofit lenders, and quasi-public lenders who specialize in loans under $50,000. “If your credit is not quite where it needs to be, there are government entities who will partner with traditional lenders to help mitigate the risk,” Nunnally explained.
There are also monthly workshops and other activities for certified members. “We partner with other companies and agencies, such as banks and legal firms, to insure that the service provided is a good one,” Nunnally said. “We can also be helpful when it comes to business-plan development.”
SDO has a partnership with Next Street Financial, which helps businesses develop growth strategies. The service can cost up to $50,000, but certified members typically pay $500 to $2,000, since the state subsidies the program. “And it’s a very good program for a business making $3 million that wants to get to the $5 million mark,” Nunnally said, adding that the agency will conduct a program in the Springfield area in January.
“Next Street works with the business for a period of time,” he explained. “The first week, they are at the business for eight hours a day and go through all of their personal policies and contracts to determine where they can do better to increase profit and improve efficiency.”
SDO is affiliated with three major construction firms that hold programs for businesses hoping to become subcontractors. “These firms have large contracts and are always in need of women and minority businesses to meet their quotas,” said Nunnally. “So they teach business owners how to work exclusively with them, as they each have their own expectations and ways of doing things. We have 70 firms right now going through these programs, and there is always a waiting list.”
Although state contracts are not enough to sustain a business, Nunnally said, “the Commonwealth will continue to purchase goods and services, and in this economy, a government contract can help a business become a success.”
And, since SDO certification is free, women-owned businesses have nothing to lose by applying. “If they are accepted, it certainly gives them a marketing edge,” he went on. “We will provide them with information to discover opportunities available to them as well as technical assistance they can access.”
Which is a win-win situation filled with possibility on the pathway to business success.