The government is channeling billions of dollars yearly into public projects and upgrading physical and IT infrastructures. About one-third to one-half of the taxpayers' dollars are by city administrations to procure products or services from the private sector.

Major US cities' procurement and contracting processes are often archaic, hindering small and minority-owned businesses from getting equitable contracting opportunities.

In a study undertaken by a private procurement expert Michael Garland, titled “Vendor-lock and lack of competition in the government’s software estate”, it has been found that leading IT government software vendors such as Microsoft and Oracle often lock federal agencies into sole-source contracts. They use monopolistic practices that cost taxpayers hundreds of millions of dollars and without genuine competition.

The two companies have received 25-30% government sales in the last decade. The government spends between $10 billion and $15 billion yearly on commercial off-the-shelf software and the cloud. A reduction of just 5% due to competition could save taxpayers up to $750 million annually.

In the post-COVID era, city officials are becoming more conscious about maintaining an equilibrium between big contractors and small and local businesses. Contractor News has previously reported that administrations in San Jose, Toledo, and Baltimore County are undertaking Disparity Studies to see how government agencies can better their procurement process.

Governor of California Gavin Newsom has taken several major steps that have made it mandatory to have 25% SBE participation in the state's procurement process.

Changes can be seen in procurement practices across America.

Mayors in Baltimore, Boston, Chicago, Washington, D.C., and other cities are increasing their emphasis on procurement to achieve equity goals.

Boston Mayor Michelle Wu explained, "We must use every tool possible to ensure equity in city contracting and build wealth in our communities."  

City administrations are expediting the implementation of diversity and equity in the procurement process by:

1. Improving outreach and access to bid for government contracts
2. Cities are downsizing contracts to create multiple smaller contracts instead of one big contract, so minority and women-owned subcontractors have a better chance of winning them.
3. Cities aren't merely aiming to diversify their commercial partners. They are altering the contract terms to ensure that the services for which they are contracting are delivered in an unbiased fashion.

In Lansing, Michigan, the city conducted two webinars last year so that M/WBEs could gain insight into the city’s bidding process for contracts. These small businesses also gained admission to a local chamber of commerce event for diverse suppliers. They received free access to the state of Michigan website, where new contracts are posted.

“Small businesses are cornerstones of communities across the country, and local governments have a powerful means to support their success by ensuring procurement processes are equitable and accessible,” Phoenix Mayor Kate Gallego explains.

City officials are opening dialogue with small business owners to understand better their pain points and how best to alleviate them. This is proving to be successful in many areas. For instance, in Long Beach, California, they surveyed 500 local vendors on improving the contracting process. Officials found that most M/WBEs found the contracting process to be too complex. 

Long Beach officials started going out into the community to events such as outdoor movies and concerts to encourage vendors to bid on city contracts.

A significant lesson is that the most opportune moment for a city to diversify its vendor base is when it procures something new. When a city renews a contract, it is far more difficult for businesses with less experience to outbid incumbents. This is a crucial lesson for present times when the federal government is directing billions of dollars to communities for economic development.