We hear stories from SDMWVLGBTBE (Small Disadvantaged or Disabled, Minority, Women, Veteran, Lesbian, Gay, Bisexual or Transgendered Business Enterprise) owners about how a client told him or her to get a diversity certification. And, while we’re perfectly happy to work with those owners, there are a few thoughts we like to share. Because we’re certification neutral, we start by asking who the target customer-base is, or will be. We believe the business owner should choose certifiers based on what is most advantageous for the business, and we wrote about it in strategies. If this possible customer has recommended a specific certification, then you’ll know that company will be able to accept or recognize your certification if they buy goods or services from you. But, unless they are already a client, the one thing you don’t know is whether being certified will actually help you get business from that client. They might not even know, but they are telling you the odds are better if you’re certified.
We’re committed to certification. At last count, our WBE/DOBE (women owned/disabled owned) company holds 29 certificates with one pending. It fits our business model to become certified in each state where we do business because we contract directly with state agencies. Those agencies can’t count the money they spend with us toward their diversity goals unless we are certified in their state. But, some of those certifications have not yet helped us.
These certifications aren’t Golden Tickets to Willy Wonka’s world, as sweet as that might be to imagine. They are really sales and marketing tools — with access to educational, networking and capacity building events when third party certified by organizations like NGLCC, NMSDC, USBLN, and WBENC. Many large corporations and government agencies simply can’t contract directly with small businesses, particularly brand new ones. These potential clients will often expect small, or micro, businesses to be second or third tier suppliers.
First tier, or a Prime vendor is the organization or company that has a direct relationship with the end customer. The Prime performs work/services or provides goods; and bills the customer directly for its goods or services. Yes, a SDMWVLGBTBE can be a prime vendor! Our 35 year old business has served as both first and second tier supplier — sometimes to the same client.
Second tier, or the Sub-Contractor has a direct relationship with the Prime Vendor. The Sub performs work/services or provides goods 1) directly to the Prime or 2) to the end customer under the guidance of the Prime. The Sub bills the Prime for its goods and services. In this scenario, the Prime is the Sub’s direct customer, regardless of which organization consumes the goods or services. Examples of this type of relationship:
- General Contractor (prime) -> Plumbing Contractor (sub)
- Trucking Company (prime) -> Independent Owner Operator (sub)
- Property Management Company (prime) -> Janitorial Service (sub)
- Hospitals/Hospices (prime) -> Hairdresser (sub)
- Convention Center (prime) -> Caterers (sub)
- Automotive Manufacturer (prime) -> Gas Cap Manufacturer (sub)
- Big Four Accounting Firm (prime) -> Independent Auditor (sub)
This is a second-tier relationship because the SDMWVLGBTBE is a step away from a direct relationship with the end customer.
The third tier, or Sub-Sub-Contractor has a direct relationship with the Sub-Contractor. This Sub performs work/services or provides goods 1) directly to the Sub-Contractor, 2) directly to the Prime or 3) to the end customer under the guidance of the Prime. The Sub-sub-contractor bills the sub-contractor, who bills the Prime for the goods or services. In this scenario, the Sub-contractor is the Sub-sub-contractor’s direct customer, regardless of which organization consumes the goods or services. An example of this type of relationship, a large hospital engages a computer software prime vendor, who uses a managed service provider (MSP/gate keeper) to acquire consultants from a moderately-sized consulting firm who partners with a still smaller business. In this scenario, the small business takes direction from the Customer or the Prime, but bills the moderately sized business who bills the MSP who bills the prime who bills the hospital. This is a multi-tiered relationship because the SDMWVLGBTBE is multiple steps away from a direct relationship with the end customer.
The good news, at each of the multi-tiers, there is a good chance that your certification will be considered a value add. Most customers these days expect their Primes to help meet their diversity spend goals — at both commercial enterprises and government agencies. And, the Primes rely on their Subs to help fulfill that mission. So, while your certification isn’t a Golden Ticket, it is entry pass that will help garner your business recognition in the procurement process.