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.