Examining Minority Business Enterprises as Government Contractors

By Gibson, Shanan; McDowell, William et al. | Journal of Business and Entrepreneurship, Fall 2012 | Go to article overview

Examining Minority Business Enterprises as Government Contractors


Gibson, Shanan, McDowell, William, Harris, Michael, Voelker, Troy, Journal of Business and Entrepreneurship


ABSTRACT

The current study examines contracts awarded by Johnson Space Center to Minority Business Enterprises from 2005 - 2007 with the goal of better understanding the degree to which MBE status was associated with specific industrial categories when compared with non-minority enterprises. Using NAICS code categories, findings indicated that MBEs are more-likely to serve as contractors within Construction (NA23), Administrative, Support, and Waste Management (NA56), and Educational Services (NA61). Within these NAICS codes, Socially Disadvantaged Businesses (SDB) were significantly more likely to be Construction (NA23) and Administrative, Support, and Waste Management (NA56) firms than were the other minority groups. Women Owned Businesses (WOB) were the most likely providers of Educational Services (NA61). Metal Manufacturing (NA33) is characterized by significantly more non-minority-owned small businesses contractors.

INTRODUCTION

As is frequently noted, entrepreneurship plays a significant role in the economy of the United States. It is known to be a powerful source of economic growth and innovation (Reynolds & White, 1997) and as a result, we all have a vested interest in promoting the success of small business enterprise. By providing job growth, technological innovation, increasing economic diversity, providing for increased local spending and loyalty, small businesses play a seminal role in local, regional, and the national economy (Luke, Ventriss, Reed, & Reed, 1988). According to the Small Business Administration (SBA) Office of Advocacy, more than 99% of all current employers are classified as small businesses, and that much of the new job growth necessary for economic recovery will come from the small business sector (SBA Office of Advocacy, 2010). The current study aims to examine the categories of small business contractors to a large government agency.

BACKGROUND

Despite the many virtues of small businesses, significant obstacles to their long term success exist. One way that small businesses seek to survive and prosper is by seeking out government agencies as customers - acting as federal contractors. Given the significant role that small business plays in our economy, the responsibility to ensure their success extends to the government as well. In fact, Section 2(a) of the Small Business Act states that:

". . .security (of our Nation) and wellbeing cannot be realized unless the actual and potential capacity of small business is encouraged and developed. . ." (Jenkins, 2009).

This acknowledgement underscores the myriad special programs that assist small business; from start-up resources to ongoing customer relationships, the government and other institutions are intertwined with small business enterprise. Specifically, included in SB A' s mission is the mandate to increase Federal prime and subcontracting opportunities for small businesses in general, as well as specifically women-owned, services-disabled veteran-owned, small businesses owned by socially and economically disadvantaged individuals, and small businesses located in Historical Underutilized Business Zones (HUBZone).

Mandate to Government Agencies

In order to meet its mission with regard to small businesses, the federal government utilizes several procurement preference programs for small businesses, including: Small Business Set-asides, which restrict procurements to small businesses, and the Small Disadvantaged Business Program, which favors certified SDBs in prime and subcontracting activities (United States Department of Labor, 201 1). The goals of these preferential procurement policies are to stimulate and equalize opportunities for minority owned businesses. The federal government focuses procurement efforts on small businesses out of recognition of the significant economic impact and job creation typical of small ventures. Current guidelines from the federal government set targets for federal direct procurement contracts awards for small business. …

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