The landscape of government contracting for small disadvantaged businesses has long been rife with inefficiencies, inconsistencies, and inequities. Although women and veterans are less likely to get their expected share of government contracts, minority business owners bear the brunt of the inequity. They are consistently less likely than other groups to win bids. Despite the breadth of research demonstrating that this pattern is pervasive across the country and at all levels of government, a recent court ruling prohibits government agencies from using race as a proxy for social disadvantage. In response, the Small Business Administration temporarily suspended the review of new applications as they scrambled to determine how to serve vulnerable businesses without using minority status as a presumptive measure of disadvantage.

The SBA is back to accepting and processing applications but with a new requirement known as a ‘social disadvantage narrative,’ where the burden of proof falls squarely on the disadvantaged business. In this narrative, minority business owners must ‘prove’ that they have experienced discrimination or bias in ways that have undermined their success. This solution merely adds more hurdles to an already arduous process and opens the door to subjective rejections if the applicant fails to provide ‘enough’ proof. The SBA has pivoted in a way that allows them to put a band-aid on a crumbling structure, but this is only the beginning of the legal and practical challenges that DBE programs like 8(a) will face. And that’s why it is time to reimagine the role of government in supporting vulnerable businesses and move toward the privatization of DBE programs.

Privatization as the Effective Pivot

Initiatives like 8(a) are specifically designed to help historically underutilized businesses better navigate public procurement and secure more government contracting dollars, an effort that could translate into individual business success and more equitable wealth distribution. Historically, critics have questioned their effectiveness and efficiency as government-run programs are notorious for being slow to implement, slow to take effect, and slow to change to market forces.

But the more pressing threat to public DBE programs–and the organizations that run them–is the legal challenge to race-based presumptions of disadvantage. Government agencies prioritize avoiding lawsuits over supplying practical solutions. Best case, this means that agencies continue to provide critical services to DBEs but with far greater concern for documenting ‘proof’ of discrimination. Worst case, these programs will be rendered useless as their ability to help disadvantaged businesses is completely hamstrung by legal risk aversion.

Transition to Privatization

The transition of DBE resources from the public sector to a privatized model of self-sufficiency will require a phased approach that simultaneously helps women, minorities, and veterans more successfully compete for government contracts while also shielding organizations from legal scrutiny over definitions and measures of disadvantage.

Over the next several years, government agencies should create strategic partnerships with mission-aligned private entities to gradually shift responsibility for allocating resources and services for vulnerable businesses in public procurement. Ultimately, DBE services–including professional and technical assistance–should be provided exclusively by private organizations.

That’s not to say, however, that government agencies will be completely absolved of responsibility for promoting DBE success; instead, the scope for these agencies will be reserved largely for the collection and analysis of different types of data. Specifically, these agencies should be prepared to track the distribution of government funds to identify disparities across demographic groups, reform policies that perpetuate inequities in outcomes, monitor contracting agreements to better protect subcontractors from predatory primes, and set up (and execute) accountability mechanisms for businesses that violate efforts to level the playing field.

The Role of The Amalgamation

The Amalgamation is an independently-operated collective of disadvantaged businesses, vulnerable microbusinesses, and nonprofits committed to overcoming the common hurdles faced by small businesses in government contracting. Our model is structured around four basic principles:

Since our inception in 2022, we have established strong relationships with government agencies responsible for awarding contracts to DBEs as well as among small business owners who are looking for a collaborative approach to contracting and are generally left out of more conventional contracting networks. We have provided key resources to our members that are not available or affordable elsewhere. We have secured a contract for a 100% DBE team. And we have demonstrated the importance of collective action in challenging the status quo and moving the needle toward equity.

We are ready for the revolution that privatizes DBE support. You in?