More About Acronyms

In November, we talked about ABC’s of supplier diversity nomenclature.  It is a subject full of abbreviations and acronyms that can be completely confusing to a new SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) owner.  The earlier post spells out many of the common terms used when talking about diversity certification.  But who certifies SDMWVLGBTBEs?

Certifiers
Note: This list does not include all state certifying agencies, but references the country-wide Department of Transportation (DOT) based Unified Certification Program (UCP). Information about individual state certifiers can generally be found on their web sites..

  • EPHCC: El Paso Hispanic Chamber of Commerce, a SBA-approved certifier for the WOSB program for both WOSB and EDWOSB status.
  • HUD: Housing and Urban Development, a Federal agency that offers its own certification – Section 3.
  • NGLCC: National Gay & Lesbian Chamber of Commerce, the 3rd party certifier for LGBT owned businesses.
  • NMSDC: National Minority Supplier Development Council, the 3rd party certifier for minority owned businesses.
  • NWBOC: National Women Business Owners Corporation, a 3rd party certifier of women owned businesses and a SBA-approved certifier for the WOSB program for both WOSB and EDWOSB status. They also offer a MBE and VBE certification.
  • SBA: United States Small Business Administration, certifier for 8(a) and HUBZone and repository holder for the Federal WOSB/EDWOSB program.
  • UCP: Unified Certification Program, this program is available in every state and offers DBE certification.
  • USBLN: US Business Leadership Network, the 3rd party certifier for Person with Disability or Disabled owned businesses.
  • USWCC: US Women’s Chamber of Commerce, 3rd party certifier of women owned businesses offering WBE and International WBE certification and is a SBA-approved certifier for the WOSB program for both WOSB and EDWOSB status.
  • VA: Veterans Administration, the Federal certifier for Veteran or Service-Disabled Veteran certification. (Some states offer their own veteran owned business certification.)
  • WBENC: Women’s Business Enterprise National Council, the largest 3rd party certifier of women owned businesses and a SBA-approved certifier for the WOSB program for WOSB status only. Also affiliated with WEConnect International, who certifies women-owned businesses internationally including: Canada, China, Europe, and India.

Other Related Acronyms

  • BDR: Billion Dollar Roundtable, a group of corporate entities working to increase commitment and spending levels with diverse suppliers.
  • CAGE Code: Commercial and Government Entity Code, a unique ID assigned to Federal suppliers.
  • DUNS: Data Universal Numbering System also known as the Dun and Bradstreet ID Number, a credit reporting number for your business.
  • FAR: Federal Acquisition Regulations, the rules governing how the Federal government procures goods and services.
  • FedBizOpps: The website where Federal procurement opportunities are posted by government buyers.
  • FEIN: Federal Employer Identification Number
  • FSC: Federal Supply Codes, a set of codes the Federal government uses to “group products into logical families for management purposes.”
  • GSA: United States General Services Administration, they establish long-term government-wide contracts known as GSA Schedules (also known as Multiple Award Schedules or Federal Supply Schedules). These schedules are organized by the goods, services or products purchased. NOTE: The Department of Veterans Affairs (VA) has their own schedule, the VA Federal Supply Schedules Program, to procure medical supplies.
  • Home-State: State in which your business is headquartered or domiciled.
  • NAICS: North American Industry Classification System, a way to classify your business (products and services sold).
  • NIGP Codes: National Institute of Governmental Purchasing Codes, a way to classify your business (products and services sold).
  • OSDBU: Office of Small Disadvantaged Business Utilization, virtually every federal agency has an office to ensure use of diverse businesses similar to supplier diversity in corporate America.
  • PNW: Personal Net Worth Statement, a financial reporting document listing short and long-term assets and liabilities of an individual. Required for DBE certification.
  • PSC: Product Service Codes, a way to classify your business (products and services sold) – these codes are broken down into three types: products, services, and research and development projects; and are used in the SAM (see below) system.
  • PTAC: Procurement Technical Assistance Centers, they provide government contracting (federal, state, and/or local) assistance, at little or no charge, through training and one-on-one counseling. PTACs are part of the Procurement Technical Assistance Program.
  • PTAP: Procurement Technical Assistance Program, a program established to expand the number of businesses capable of participating in government contracts.
  • SAM: System Award Management, the Federal government’s contracting registration system. You MUST BE registered to be certified by or do business with the Federal government. SAM has replaced the following disparate systems: CCR (Central Contractor Registration), FedReg (Federal Agency Registration), ORCA (Online Representations and Certifications Application), and EPLS (Excluded Parties List System).
  • SIC: Standard Industrial Classification, a way to classify your business (products and services sold).
  • UNSPSC: United Nations Standard Products and Services Code, a way to classify your business (products and services sold).

Like any other field, knowing the common terminology will help you understand how to take advantage of the opportunities certification presents.

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ABC’s of Supplier Diversity

If you’re a newbie to the SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) certification world, your head is likely swimming with the terms and acronyms the rest of the community uses as shorthand.  We thought we’d take a moment to introduce you to the definitions of some important ones.

What is Supplier Diversity? It is proactive business programs to encourage the use of disable owned, LGBT owned, minority owned, women owned, veteran or service disabled veteran owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns as suppliers. These programs exist at most large businesses and all of your local, county, state and federal government agencies in the US. There are strong supplier diversity programs being developed in many countries around the world – the UK, the EU, Canada, South America, India, etc. so the issues of diversity and inclusion are actually international.

Relevant Supplier Diversity Terms

  • Diverse/Diversity: An easy way to refer to all minorities and women with a single word. Often the term “minority” is used to describe a group that represents a smaller percentage of the total population than another group or groups. In the United States a minority is a person who is an African American; Asian Pacific; Hispanic; Native Americans (of all tribes including Native Hawaiians/Pacific Islander); and Subcontinent Asian. Women are considered among the minority group because historically, they have had limited access to educational and professional opportunities. Veterans and Service Disabled Veterans of the U.S. Armed Forces (Air Force, Army, Coast Guard, Marines and Navy), Persons with Disability and LGBTs can also be included in the disadvantaged category for diversity spend and certification.
  • Spend: The amount that a corporation or government entity purchases from diverse suppliers; this amount is typically tracked both by individual vendor and in aggregate.
  • Strategic Sourcing: A systematic approach to minimize costs, streamline processes, and improve quality; results in the clustering of like purchases from fewer vendors.
  • Tier 1: Direct supplier to a customer; prime contractor.
  • Tier 2: Second-level contractor; subcontractor; also referred to as Tier 2 supplier.
  • NAICS (North American Industry Classification System) code: US-based coding system that groups establishments into industry sectors based on what the business does. NAICS is a comprehensive system covering the entire field of economic activities, producing and non-producing. It is used by Corporate America, as well as local, state, and federal government entities.
  • SIC Codes: Standard Industrial Classification, a way to classify your business (products and services sold). Not often used anymore, as the NAICS codes have become the code of choice.
  • UNSPSC Codes: United Nations Standard Products and Services Code, an international way to classify your business (products and services sold), this systems is much more detailed than NAICS codes. We include our SIC and NAICS codes on our web page, and offer file of UN Codes because there are so many related to computer system design and programming.

Certification Types

  • 8(a): Federal Small Business development program
  • DBE: Disadvantaged Business Enterprise (must be socially and economically disadvantaged to qualify). ACDBE, are airport concessionaire businesses with DBE certification status.
  • HUBZone: Federal designation for historically underutilized business in designated urban or rural areas or designated census tracts, the business must be located in a designated area and 35% of its employees must live in designated HUB areas to qualify.
  • LGBT: Lesbian, Gay, Bisexual or Transgendered
  • MBE: Minority Business Enterprise (minorities recognized for certification in in the United States are: African American; Asian Pacific; Hispanic; Native Americans (of all tribes including Native Hawaiians/Pacific Islander); and Subcontinent Asian. Some states will breakdown these categories further.
  • PWD: Person with Disability or Disabled
  • SBE: Small Business Enterprise
  • Section 3: Housing and Urban Development agency specific certification, criteria is different county-by-county across the country.
  • VBE or SDVBE: Veteran or Service-Disabled Veteran Business Enterprise
  • WBE: Woman Business Enterprise
  • WOSB/EDWOSB: Federal designation for Woman Owned Small or Economically Disadvantaged Woman Owned Small Business

Related Terms: Next time we’ll look at acronyms often thrown around in the diverse supplier community.

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Community Support

Sometimes, in today’s political climate, it is hard to remember that this is a country with a commitment to diversity; a country that recognizes this commitment as a fuel driving the engines of both our civil liberty and national economy. Building a free and vibrant community depends on inclusion and opportunity for all.

The Kennedy and Johnson administrations’ Civil Rights Act of 1964 brought us the Equal Employment Opportunity (EEO) programs beginning affirmative action with prohibition of discrimination in all aspects of human resource practices. The supplier diversity movement began about forty-five years ago when President Nixon’s executive order directed federal agencies to develop comprehensive plans and specific program goals for a national Minority Business Enterprise (MBE) contracting program. Eleven years later, President Reagan issued another executive order requiring each federal agency with substantial procurement or grant making authority to develop a Minority Business Enterprise (MBE) development plan. Where the federal government goes, large corporations – especially those who sell or report to the fed – follow.

It took many civil activists and all political parties to help us build today’s broad community that encompasses SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) owners and supplier diversity professionals. And, while there remains room for improvement, it is today’s community that will influence tomorrow’s direction.  Personally, we see this community as a far-flung family that should be supportive of each other. Some people call this paying it forward. We think that if other SDMWVLGBTBEs see good role models in their associates and competitors practicing diversity with each other, it will help lift us all. For us, this means acting with intention — looking for diversity when partnering for proposals and procuring the goods and services out organization needs. In fact, we even created our own supplier diversity plan that guides everyone in our organization on how to locate potential SDMWVLGBTBE partners and suppliers.

In 2016, we talked about disparity studies and the new perspective we gained from our MWBE partner who wanted to know if diversity and inclusion practices of certified SDMWVLGBTBEs had resulted in employee populations that mirrored their state’s population statistics. We saw that as such a good question, because so many of us forget to practice diversity inside our own walls. Shame on us if we don’t. Not only will we benefit from a diverse employee and supplier base, but those of us who practice what we preach will shine a light on the legacy of lifting our entire community, together … one hiring, purchasing or partnering opportunity at a time.

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Dog Days

It is the hot, humid and last lazy dog days of summer, as our mother used to refer to them.  Then we were excited about new home room teachers, cool clothes and maybe even a new school building.  These days, its the return to a more normal business landscape.  Our customers will be back from final vacations in a week or two and we’re planning how to make the most of this year’s final quarter.  For many SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) business owners, this has become a good time to think about the benefits of diversity certification — most of our company’s certifications renew in September and October — and we’ve been getting calls from many people who are just starting their certification research.  So it seems like a good time to talk about certifers and what’s out there.

Who are the certifying organizations? 

It is a lengthy list that can be simplified by type.  There are diversity certifications offered by virtually every level of government: federal, state, county and municipality. These certifications often rely on the US Department of Transportation’s rules to define which businesses may be certified. Each certifier may have slightly different expectations and processes, but underlying programs expect:

  • Company is an independent, for-profit business.
  • The business is at least 51% owned and controlled by a socially and economically disadvantaged individual(s).
  • The company’s disadvantaged owners are US citizens or lawfully admitted permanent residents.
  • The business meets the Small Business Administration’s size standards for its primary NAICS code.

There are several third party certifiers: Women’s Business Enterprise National Council (www.wbenc.org); National Minority Supplier Diversity Council (www.nmsdc.org); LGBT business owners – National Gay and Lesbian Chamber of Commerce (www.nglcc.org); or people with disabilities business owners – US Business Leadership Network (www.usbln.org).  Third party supplier rules can be different.  For example, social or economic disadvantage is not part of the criteria — and personal net worth statements are generally not required.  In general, the businesses are not restricted to being considered small — large DMWVLGBTBEs can apply and be certified.  But, NMSDC only certifies US citizens.

Don’t know what to choose because there are so many choices? Taking time to poll your customers may be the best way to choose.  We often recommend reviewing these certification strategies.

What will certification do for me?

Hate to say, but it depends.  Diversity certification isn’t a golden ticket, it’s a marketing tool. You still have to be good at what you do, and continue to offer valuable goods or services to your customers.  What it does offer is instant recognition.  Many SDMWVLGBTBEs aren’t aware of the value certification adds in supporting their clients’ diversity  and inclusion goals — and it is NOT just the government clients. Corporate cultures are becoming more interested in commitments to supporting their own diverse customer base.  Take, for example, the Billion Dollar Roundtable (BDR) comprised of 24 corporations with a minimum $1 billion annual 1st Tier MWBE Supplier Diversity  spend, that in 2011 spent another $6.5 Billion with “Other Diverse Suppliers” including veterans, service disabled veterans and LGBT suppliers. BDR members encourage  prime suppliers to engage with SDMWVLGBTBEs by setting participation goals.

In our world, we use our certifications in three ways.  We often serve as prime on moderate-sized government contracts. In many cases those contracts also require us to meet supplier diversity goals — we can self-fulfill the WBE portion of the contract but not the MBE portion, so we have MBE certified suppliers.  We’re approached frequently to subcontract to other government primes, some who may be certified themselves but most often with large companies that aren’t certified — remember, government agencies have size limits. And finally, in every piece of marketing material, web site, business card, etc. we declare our certification status so potential clients know we’re certified.

The key to successful SDMWVLGBTBE certification is choosing the program that best suits your business and using it to enhance your marketing efforts.

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Perspectives

We often talk about the history of supplier diversity, how its roots are buried in the affirmative action/equal employment opportunities that came out of the Kennedy, Johnson and Nixon administrations.  Some of our staff actually marched (and sat) in solidarity with Martin Luther King, Jr’s mission at various locations and campuses in the Midwest and New England.  The many federal, state, local and third party diversity certification  processes began as an idea in Nixon’s 1971 Executive Order 11625, that directed federal agencies to develop comprehensive plans and specific program goals for a national Minority Business Enterprise (MBE) contracting program.  Today, there are many robust  programs offering SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) certifications.  Theses certifications open doors for us and are a value add when pursuing commercial and government contract opportunities with customers who are committed to diversity and inclusion in their own organizations.

What we haven’t talked about much, is how and why the certification processes have changed.  Granted, at GetDiversityCertified.com we only have direct experience since the late 1980s, but that’s still almost three decades.  Our business owners first heard about MWBE (minority and women business enterprise) issues around 1988.  There was a local news story about an MBE firm that was charged with fronting  for a non-minority owned company in a computer related contract.  Today, that would be called a pass-through. This type of arrangement has always been illegal.  The SDMWVLGBTBE must provide a legitimate and commercially useful function (CUF). A few months later, after winning a state contract, we were asked to complete a one page survey about our business, its ownership and our sales volume. A return letter certified us as a large – size standards were different then – WBE in the state of Illinois, which made our client agency very happy and, combined with good performance, led to more work. That’s when we began to understand the true impact certification had on our business.

Based on that experience, we applied for certification in our home state of Pennsylvania.  At the time, there were several agencies that certified MWBEs — Department of General Services (DGS), Department of Transportation (DOT) and the major counties like Allegheny.  And all three had different certification criteria, application forms and required documentation. Today, Allegheny County is apart of Pennsylvania’s Unified Certification Process (UCP) which ties into the DOT’s Disadvantaged Business Enterprise (DBE) program – the County still sends an additional letter to confirm WBE, MBE, or MWBE status – and DGS no longer certifies business’s but rather verifies them. DGS grants SBE verification with submission of business taxes for size standard proof and for MWBE status a business must submit proof of their DBE or 3rd party SDMWVLGBTBE certification.

But we digress, because what’s changed most is the progressively detailed information  and amount of supporting documentation necessary to prove that your business is actually 51% owned, controlled and operated by diverse citizens (or permanent residents) of the United States. In 2002 when we first applied for DBE status as a corporation our certifier required that we provide: a financial statement from our CPA, preferably audited; three years corporate tax returns; three years personal tax returns; resumes of the owners and officers; proof of our ability to perform work in Pennsylvania (basically a good standing certificate); copies of any 3rd party rental agreements (leases) and management services agreements; articles of incorporation; by-laws; record of our first corporate organization meeting; issued stock certificates (front and back); and a stock ledger. If there were any stipulations on stock/ownership options, restrictions on disposal of stock loans or voting, or stockholder or buy-rights agreements that information also had to be provided. This list of paperwork seems pretty short by today’s standards, but it was significantly more than our initial one page survey in 1989.

In 2014 the United State’s Department of Transportation made changes to the DBE program which filtered down to all 53 states or territory programs. Some of the changes were minor, formatting corrections made to the application.  For example, before the older DBE application asked about “Immediate Family Member” relationships between owners on page one before asking who actually owned the business on page three. Additional questions about the owner and business were also added, such as “Does this owner work for any other firm, non-profit organization, or is engaged in any other activity more than 10 hours per week?” and “At present, or at any time in the past, has your firm: Served as a subcontractor with another firm constituting more than 25% of your firm’s receipts?” Supporting documentation also changed.  Before late 2014:

  • Resumes only needed submitted for owners and officers of the business, but now all owners, officers, and key personnel resumes must be included;
  • Business tax returns for the previous three years now include any requests for extensions filed as well as three years worth of affiliated business’s tax returns with related schedules;
  • If a business owns or leases a vehicle they now also have to include VIN numbers, copy of titles, proof of ownership/lease, and insurance cards for each vehicle; and
  • Corporations used to only need to provide minutes for the first and most recent stockholders and board of directors meetings, but now must provide ALL meeting minutes.

The amount of supporting documentation can feel intimidating, but there is a valid purpose behind it.  The certifier must be sure that the business has  provided proof that both the business and the owner(s) meet the eligibility requirements set forth by the rules or legislation of its governing body (federal and/or state laws and procurement regulations); and ensure that the business is capable of performing the services or producing the products it says it does. It is incumbent upon you and your business to prove that you’re  certifiable.

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Into the Breach

Every year, we write at least one post about networking for the SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) business owner. And, it would seem to be that time of year, as we gear up for the 20th annual national conference for WBENC, the Women’s Business Enterprise National Council. We’ve been involved with this, the largest third party certifier of WBEs (Women Business Enterprises), for just over 18 years and are looking forward to attending our 7th time. Each year the number of sponsors and attendees grows, so for us it is a perfect use of our networking and conference budget funds.

We have had several recent conversations about why a small organization should have a budget for and/or bother to attend networking events. We were honestly surprised by the push back from some of the participants. It has been our experience that people like to do business with people and organizations that they know. Sure, you can hope that potential clients will first, find you through an internet search, and then be so blown away by your business’s web presence that they will buy from you right this minute. And, that could very well be the scenario if you sell a particular product (do people still make widgets?) that has little or no competition. If, on the other hand, your business is like that of the majority of us, this could be wishful thinking.

Each business has to target the networking events that will achieve its own goals and objectives, but for us, this is one of largest gatherings of supplier diversity and procurement managers that we know are absolutely committed to buying goods and services from certified WBEs. (And, many of these corporations are also sponsors or members of National Minority Supplier Diversity Council, the National Gay & Lesbian Changer of Commerce, and the US Business Leadership Network who certifies business owned by people with disabilities.) Plus, because we also subcontract to other primes, many of our customers will be in Las Vegas later this month.

So how do we prepare for large networking event? First, we look at the list of sponsors and make a prioritized plan: at least 15 new companies that we want to meet; existing contacts we may have had difficulty maintaining communication with; and, people we want to see again in person. Email and phone calls are great, but there’s nothing like a quick face to face chat to remind a potential client of who you are. Given there will be so many of them in one place for five days, it really makes good use of our time.

We practice our elevator speeches for introductions to new contacts. We make note of new services and projects that we can talk about since last year. We have our new business cards, plenty of them, packed into every spare pocket. And, we divvy up the tasks between the two of us who will be attending. We remind each other to pack comfortable shoes (and clothing) — there’s nothing more annoying than sore feet when traipsing around a huge conference center. Last fall, Alyssa Gregory wrote tips to prepare for a small business conference that definitely apply here.

At an event like this national conference, we’re likely all there for the same reasons – to expand our business’s reach. So, one thing that works best for us, striking up those random conversations, particularly with people waiting in lines, hanging out at the pool, at the breakfast buffet or next to you at the bar. You’re only strangers until you start to communicate. We have established good working relationships with business people we happened to sit next to for breakfast or on the shuttle bus or while waiting for a speaker to arrive. Speaking of speakers, we’re so exited that Octavia Spencer is the keynote speaker at the tribute dinner on June 22nd.

We’ll likely have even more to say after the conference! In fact, we thought we’d do an informal survey to see if others share our belief that conferences and conventions are absolutely the greatest place for SDMWVLGBTBEs to network with corporate sponsors, potential clients and each other.

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For the Veterans Among Us

Not just thank you for your service, although we certainly do! Fourteen states do more than say thank you. They have specifically included VOSBs (Veteran Owned Small Business) and SDVOSBs (Service Disabled Veteran Small Business) in their procurement opportunities and SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) certification programs. This generally translates into specific goals for all contracts issued at the state level, and many more opportunities for a veteran owned business to bid as either prime or sub-contractor.

Virginia has the highest percentage goal for contract participation at 40% for SDMWVLGBTBEs certified in their SWaM (Small, Minority and Women) program, while New York’s overall MWBE (Minority and Women Business Enterprise) goal is 30% and SDVOSB is currently at 6%. Pennsylvania’s governor recently announced his desire for 30% SDMWVLGBTBE participation. Next up, Minnesota with 6% VOSB/SDVOSB goals, followed by Michigan’s SDVOSB bidders may receive up to 10% preference in bidding while Michigan’s SDVOSB spend goal is 5%. In Maryland, the goal is 2% for VOSB, 3% SDVOSB and another 5% for small. (Note: while Maryland may permit combining 10% into a single set aside goal, our experience has been that a certified prime is often restricted on how much of the goal it can self-fulfill on a specific procurement.) Arkansas pulls SDVOSBs into its MWBE program with a 5% goal. California, Illinois, Indiana and Massachusetts have 3% VBE goals. Wisconsin offers a 5% preference in bidding to SDVOSBs, while Washington encourages its agencies to award 5% of contracts to VOSB/SDVOSBs.

Unfortunately, there is not a standard process for state certification of VOSB/SDVOSB enterprises. Each is a little bit different:

  • States that certify VOSBs (no disability required) and SDVOSBs: Florida, Illinois, Indiana (must be VA verified to be eligible), Maryland (must be VA verified to be eligible), Massachusetts (must be VA verified or USBLN certified to be eligible), Minnesota (must be VA verified to be eligible) and New Jersey
  • States that certify SDVOSBs: Arkansas, California, Michigan, Washington and Wisconsin

As noted, a number of states require the business to hold a verification from the VA (Veterans Administration) program, so we’ll talk about navigating that program. Verification (certification by another name) by the VA is a multi-step process, and it does take some time. The first step, make sure all your information is up-to-date in BIRLS (the Beneficiary Identification Record Locator System aka the Beneficiary Identification and Records Locator Subsystem). If you have never claimed benefits, you will need to work with the VA to create your initial record. BIRLS will be cross-referenced when you get to step two … create a vendor profile in the VA’s VIP portal.  When creating your account, you’ll be asked to provide your business’s Dun & Bradstreet – DUNS – Number. If you don’t have one,  get it before you start your profile.  By the way, there is no cost to get a DUNS so shy away if asked for money.  You can apply for a DUNS via this web form. The VIP portal will confirm information in the BIRLS system, of particular interest: date of birth and social security number. You will also have to complete and electronically sign a VA Form 0877 before you begin providing information about your business.

We recently supported a client through the entire VOSB verification process. First thing you should know, the VA has a pretty large backlog of veterans seeking VOSB verification, so be prepared to spend some time waiting. For example, the initial application was completed in January, then a generic list of pre-qualification questions were sent to us. We had the answers prepared well in advance of the verification analyst’s early March request. Once the actual process began there were a couple of stumbling blocks, mostly in interpretation and differences in document names. For example, the client’s home state issues a certificate of formation for all business types. Three times we had to explain that this LLC didn’t have any articles of incorporation (the term the VA used though traditionally LLCs have articles of organization).  This state’s certificate of formation does not include any articles. Once this outstanding document request was  considered resolved the VA issued confirmation of VOSB status at the end of April. The entire verification process took a little over four months.

The states that do not require VA verification have their own certification process to seek  VOSB or SDVOSB status. We’ve found that in those cases most states require that both the business and veteran owner be domiciled within the state. Another fairly standard requirement for SDVOSBs is that the veteran owner must have a service-connected disability of at least 10% or more to be eligible. Always research the certifier’s eligibility requirements before starting the certification process.

Our colleague John Scifers (from SCIGON Solutions) shared that VOSB/SDVOSB certification “can also be helpful at the municipal level. For example, the City of Chicago has a 5% price preference for VOSB/SDVOSB firms on contracts over $100K. Cook County has a similar program.” He also points out that other benefits may be available to veteran owned businesses, such as California’s waiver of business license fees.

Check with your state’s Department of Veterans Affairs or similar agencies and non-profits offering veteran services.  These organizations should be able to provide information on any regional or local procurement benefits that might be available. We also recommend giving John’s article, Tips for Emerging Veteran Entrepreneurs, a read.

We expect this trend of state procurement goals for veteran and service disabled veteran participation to continue as various legislatures work toward increasing opportunities for their returning veteran constituents. You can use this tracker developed by the National Veteran Owned Business Association  to keep up-to-date on what states are doing to increase their engagement with veteran owned businesses.

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Handling Documentation Gaps

So, you want to get certified as a SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) but the list of documents is overwhelming. And, in some instances, the business might not even have everything the certifying agency requires. We know many people who have decided not to pursue certification because they just don’t have the paperwork.

There are legitimate reasons why a business might be missing required documentation.  In our case, the business has moved several times, and we have actually scanned everything to our servers (and, of course backed these materials up in multiple locations!).  During a recent WBENC re-certification visit we were asked to show all of our original stock certificates … and discovered we couldn’t. Somewhere along the way (between 1984 and 2016), one or two got misplaced. We demonstrated that we could print the scanned copies and that seemed to suffice. Fortunately, we found the missing certificates when we finished unpacking (whew!) but even if we had not, we had accurate records in our stock ledger and scanned copies of the originals. Older paperwork can get lost, not just in a move, but a fire or a flood or just because it accidentally got thrown away. Before you apply for certification, make sure you have the business’s organizing documents and if some are missing, talk with your attorney about how to replace them.

Some documents can be retrieved from your state government, if you registered your business as a corporation, partnership, sole proprietorship or LLC.  Most Secretary of State Offices maintain a Bureau of Corporations (or similar name), where you can order copies of your original paperwork.

If you don’t have a required document, you can opt to write an explanation as to why; and sign and date the statement for each missing document. For example, if you have only been in business two years you won’t be able to provide three years of financial statements — common sense, right? Well, in many cases it is just easier to provide an explanation.  You could write — on business letterhead:  “XYZ Company was formed on DATE, and we only have two years of financial records.” The primary business owner should be the one to sign this statement (though if it takes two or more owners to make up the 51% ownership seeking certification, those owners should sign, too). Then scan the document into a Portable Document Format for submission and your records. If you consistently follow a process like this, you can easily offer an explanation as to why you legitimately can’t comply with providing a requested document.

When it comes to business tax returns, the certifiers require three years’ worth.  If your business hasn’t filed in multiple years, most certifiers will accept the owner’s personal tax return instead.  If you are certifying with a state program as a disadvantaged business, they’ll want three years of personal tax returns anyway.

Another often required document is a bank signature card, and sometimes proof of an opening deposit.  If your business is a little older, you might not have everything close at hand. Generally, your bank can provide you with a copy of the signature card — the document that says who can withdraw funds or sign checks. Often, they can provide a report on their letterhead which will detail when you opened the business account and verify its opening deposit. Depending on the structure of your business, the bank may have had you complete a resolution or other legal documents. If you can’t find yours, they are likely able to get you copies.

The best approach, take the list of documents from the certifying agency and just go through the checklist. If you get them all together, in one place, it will make it easier for you to complete the application. And if you’re going to do the work, we highly recommend scanning copies of what you’ve gathered and put them on a CD or flash drive in multiple locations.

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What Your Lawyer Doesn’t Realize Could Hurt Your Business

Lawyers are busy, harried folks who often rely on state sanctioned boilerplates when it comes to the agreements used by many of us SDMWVLGBTBEs (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprises) owners. Not all lawyers specialize in business law, and even those that do may not be familiar with regulations on state or federal certifications.  Sometimes, we even think we’ll save time and money by going through a legal advice web site to quickly form a Limited Liability Company (LLC) or partnership. Unfortunately, using standard forms can be the cause of significant problems when an SDMWVLGBT business enterprise applies for certification or submits revised agreements during an annual review.

Certification of SDMWVLGBT business enterprises generally requires that the business:

  • Be 51% owned and operated by U.S. citizens or permanent legal residents who are minority group members; (individuals who are at least one quarter or 25 percent: Asian-Indian, Asian-Pacific, Black, Hispanic or Native American; and/or are women; and/or members of the veteran, LGBT or PWD [Person With Disabilities] communities);
  • The minority owner or owners must be responsible for management of and control the daily operations of the business;
  • Be physically located in the United States or one of its territories;
  • Be for-profit

Long ago we talked about the issues of control and governance. Essentially, governance refers to the language in a business’s organizing documents that regulates its organizational management. Control, on the other hand, means that the diverse owner(s) has the authority and power to direct, determine or influence what happens in the business today and in the future.

So how can boilerplate language interfere with a business’s ability to get certified?

  • If you have a one person sole proprietorship, LLC or corporation there’s nothing wrong  with using the word unanimous to define a voting agreement’s terms. But, if you have 51%  diverse ownership in an LLC or partnership then this language would effectively restrict your ability to govern your company. In fact, if the business involves a 51/49 split between diverse and non-diverse owner(s), a simple majority of 51% is all that should be required.
  • If you’ve been in business for awhile and want to expand your business by bringing a new member into your existing LLC or partnership, be sure to review the new partnership or operating agreement carefully.  Make certain that the new agreement doesn’t accidentally change the diverse owner(s): position in terms of the most senior, or highest title; right to make final decisions (or manage those who might make other binding decisions); right to approve or accept new members/shareholders; or, right to determine the direction of the business. An inadvertent change could cause concerns with certifying agencies.  If you are a C-corporation selling stock, you’ll want your accountant and attorney to make sure that a sale of additional stock will not dilute the percentage of diverse business ownership.
  • Many businesses have bylaws, typical in Corporations and LLCs, and its definition of a quorum can be critical.  When we were applying for an out-of-state certification, we were asked to clarify our voting procedures, because one certifying agency believed our majority stock owner could be out-voted. So, our bylaws were re-written in 2015 to clearly define a quorum as a majority of shareholders, and that each share of stock is equal to a single vote.  We are a WBE,  82% owned and operated by women  — since our primary owner holds the most stock, she can’t be out-voted.
  • LLCs and Corporations have formal stock or share certificates issued to the share owners, and a ledger that tracks ownership of the shares.  Some companies have written shareholder agreements, and these agreements should reflect control by the diverse owner(s).  Simple majority – one share equals one vote – agreements might be the best option to discuss with legal representation.  And, your attorney can help you acquire the ledger materials and advise you how to keep them current.
  • If there’s a buy/sell agreement between the owners of the business, the language in that agreement should be clear about the diverse owner(s) rights to authorize the sale of any portion of the company. S/he or they, should retain the exclusive right to approve new owners.
  • It may seem odd that single owner LLCs require an operating agreement, but all certifiers require a copy of the operating agreement no matter how many LLC owners  or members there might be.
  • If the company has loans from its owners, make sure your attorney drafts a loan agreement that details repayment terms and interest charges.  If the loan is from a non-diverse owner, ask your lawyer to include language that the person making the loan does not garner any additional control that is already established by the organizing documents or shareholder agreements.
  • When there are multiple owners, your attorney should be cognizant of how any board of directors, managing partners or executive management positions are described in organizing documents. It is generally expected that the diverse owner will hold the highest titles, such as: Chief Executive Officer (CEO); Managing Partner; Chairperson; etc. If multiple diverse owners are involved, talk with your attorney about which owner should have the higher title … taking into consideration the skills and experience of the individuals and the responsibilities of the role being filled.
  • Contributions in starting a business can be very important if there is more than one owner. If it is a 51/49% situation, the 51% owner’s contribution should be at least 51%. Not all start-up contributions have to be cash. An owner can contribute physical assets (e.g. equipment, vehicles, software, etc.), experience or expert knowledge or real estate.

Larger or older business entities may have changed how they operate, without changing their documentation.  Before applying for certification, it is a good idea to review all of these documents to make sure they adequately reflect the diverse ownership.  Part of the review should include verifying that there are no random clauses that infringe on the diverse owner’s rights to govern and control the business.

Don’t think that single owner LLCs and sole proprietorships are the only way to go.  They might be easiest to structure, but multiple owner LLCs, joint ventures, partnerships or C-corporations can be certified.  Choose an attorney familiar with a knowledge of business law and clearly communicate your certification goals. Then make sure s/he is aware of the governance and control issues that influence whether you and your business can become SDMWVLGBTBE certified.

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Small Business Supplier Diversity

Certified small DMWVLGBTBEs (Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprises) reap the benefits of the diversity spend goals set by government agencies and large corporations. These organizations understand the compelling business case for diversity and inclusion.  A couple years ago, we wrote several posts based on the book The Inclusion Dividend: Why Investing in Diversity and Inclusion Pays Off by Mark Kaplan and Mason Donovan.  It is a well written commentary about the history and contemporary aspects of diversity and inclusion (DI) from a human resources and organizational perspective; and, it details how diversity inclusion can impact a large organization’s bottom line.

But why just large organizations?  We think SDMWVLGBTEs should seriously consider establishing our own supplier diversity plans.  We have one because we believe that supplier diversity gives our organization an excellent foundation for providing support to our clients.  We are proud to be a certified small, women-owned and operated company and of our strategic alliances with other SDMWVLGBTBEs.  Our plan defines strategies and tactics to increase our base of diverse suppliers.  It establishes key metrics to be measured and reported semi-annually to our Board of Directors and includes guidelines for both traditional and irregular purchases for goods and services in excess of $1500.

We do mostly state contracting (and sub-contracting, too).  For every proposal we write, we enlist at least one SDMWVLGBTBE partner, usually from the state in which we’re bidding — whether the requesting agency has diversity spend goals or not.  It’s another way we “practice what we preach”.

What can you do?

You can start by creating your own supplier diversity plan. Not ready to take that step yet?  Make links on your web site for potential diverse suppliers, describing the goods and services that you routinely acquire and give them an opportunity to learn how to sell to you. Think about publishing news items about the diverse suppliers you’re currently doing business with.

There are four 3rd party certifying organizations that you could consider sponsoring at some level.  Each of these groups has a slightly different missions, certifying businesses and their owners based upon certain criteria.  You can find out more about them at their websites: www.WBENC.org (women); www.NMSDC.org (minority and/or minority women); www.USBLN.org (people with disabilities); and www.NGLCC.org (LGBT).

Looking for diverse supplier to fill a particular need? If you’re certified by or a sponsor of one of these organizations you have access to their directory where you can search for suppliers based on your need. If you’re not, go to your state’s DBE Directory listing — there you’ll find both minority and women owned businesses who meet the eligibility criteria for the Disadvantaged Business Enterprise certification.

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