Jun 3, 2024 - News

Contract spending on Massachusetts minority-owned businesses dips

Two side-by-side slope charts showing minority-owned business spending in Massachusetts, by race and ethnicity for FY22 and FY23. The first chart shows contracts and the second shows subcontract spending. prime contracts for African American/Black businesses decreased significantly from $76.4 million to $22.3 million, while subcontracts for the same group increased from $37.9 million to $62.3 million. Conversely, prime contracts for Asian American (Pacific) businesses rose from $45.8 million to $70.9 million, and subcontracts for this group slightly decreased from $26.2 million to $24.7 million.
Note: Subcontractors are those hired by businesses with prime contracts. Excludes contract and subcontract spending on nonprofits with minority-led boards; The chart also does not factor adjustments for businesses that fit in several categories. Data: Supplier Diversity Office; Chart: Jared Whalen/Axios

State contracts to minority-owned businesses dropped by nearly $45 million in the last fiscal year, according to a new report.

Why it matters: The Healey administration has made diversifying state spending a top priority.

The big picture: Though Massachusetts appears to have met its diversity contracting goals overall, the dip in direct spending to these businesses shows more work is needed.

By the numbers: Massachusetts awarded $172 million in state contracts to minority-owned businesses in fiscal 2023, a 20% drop.

  • But subcontracting for minority-owned businesses grew to $157 million, an $18-million uptick.

The fine print: The state hits its goal for diversity contracting by counting more than $260 million it paid to nonprofits with minority-led boards.

  • Critics have said factoring contracts with nonprofits can lead to "misleading" data, per GBH News.

The other side: Matt Murphy, a Healey spokesperson speaking on behalf of the supplier diversity office, said these nonprofits with minority-led boards are major employers and providing services that for-profit companies typically do not in health and human services.

  • "Promoting diversity on their board of directors ensures greater community participation in the decision-making, greater diversity hiring and better meeting the needs of the communities they serve," Murphy said.

Between the lines: Healey administration officials have said there's more work to do to diversify state contracting.

  • That's at least partly why the state started reopening major contracts and appointed an advisory board, led by Nicole Obi, president and CEO of the Black Economic Council of Massachusetts

What they're saying: In a statement, supplier diversity office executive director Bill McAvoy told Axios he was proud of his staff's work in FY23 but knows there is still "much more" to be done in ensuring equity in procurement and contracting.

Zoom in: Businesses owned by Cape Verdeans, Latinos and Pacific Islanders saw increases in government contracts and subcontracts in fiscal 2023.

  • Businesses owned by African Americans, Native Americans and other Asian Americans saw government spending decline.

The supplier diversity office attributed the shift in spending with African American-owned businesses to pandemic-related purchases declining in fiscal 2023.

  • Non-COVID-related spending with African American-owned businesses went up by 35.8% during that same period, but it wasn't enough to prevent an overall decrease.
  • Native American-owned business spending dropped because of the completion of construction contracts in fiscal 2023, per the report.

Yes, but: The state has increased the number of minority-owned businesses that are certified and thus eligible for certain state contracting. A lack of access to certification can be another barrier to diversifying contracting.

  • Massachusetts certified roughly another 164 minority-owned businesses in fiscal 2023, totaling 1,843.
  • That's more than the number of certified white-owned businesses in fiscal 2023 (1,791).
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