ANALYSIS: Government Contracts

Diversity rules can make public work tougher to win

Written by SHERRI DEATHERAGE GREEN
Published in PRWeek,
Sept. 2, 2002

 

            Chasing government contracts isn’t the easiest way to get new business. Those seeking public-sector work must fill out mountains of forms, attend bidders’ conferences, and often submit proposals to procurement bureaucrats who know little about PR. Finalists pitch to committees that can dilute the influence of prior relationships with public affairs officers, and winners often share fees with compulsory subcontractors.

 

            But since easy money is hard to find these days, some large, publicly held PR firms are fighting for government work they might not have pursued a few years ago. “Governments have money to spend. Their funding is ongoing,” explains James Florez, GM of Edelman Texas .

Public funds often come with strings attached, however. Government diversity goals usually mean prime bidders must subcontract with minority- or woman-owned businesses. Even firms with internal ethnic specialty practices may be compelled to bring in minority-owned subs. In such cases, contractors often select minority firms with complementary specialties such as graphic design, media buying or event planning.

“In the last three or four years, I have not entertained any government contract that has not had a minority or woman component to it,” says Armando Azarloza, a public affairs veteran and EVP of Weber Shandwick Worldwide’s U.S. Hispanic practice in Los Angeles. Even in California , which passed an anti-affirmative action proposition in 1996, partnering with such subcontractors gives large firms a competitive advantage, Azarloza believes. That state can’t reserve contracts for women or minorities, but proposals often are graded on scoring systems that give extra points to teams with minority participation, he explains.

Setting aside work for minority-owned companies is the right thing to do, government communicators say. It ensures that public funds are spent equitably and in proportion to population demographics. Using minority contractors becomes even more vital for public outreach campaigns because the skills, perspectives and contacts they bring help reach minority constituents, says Elaine Roberts, executive director for the Columbus Airport Authority in Ohio . The facility is about to undergo an eight-year, $600-million expansion and is working directly with woman- and minority-owned PR firms to reach key audiences.

Dallas/Fort Worth International Airport (DFW) took minority participation seriously in selecting an agency of record this spring, prompting one Texas PR exec to call the process a “HUB free-for-all.” (HUB stands for “historically underutilized business.”) The RFP came on the heels of a consultant’s study that recommended minority contracting improvements at DFW. Such studies must be done periodically to determine whether minority firms remain disadvantaged, explains public affairs VP Ken Capps.

DFW wanted 20-percent participation by minority firms in its $480,000, two-year contract that attracted 19 bidders. The winner, Ackermann Public Relations, funnels 30 percent of the money to minority subs and is woman-owned. “We were looking for PR firms that had strong ties to MBE [minority business enterprise] firms already, and had a track record of getting results,” Capps says. Ackermann also recently developed DFW’s first Spanish-language newsletter.


Getting recognized as a minority

 

Becoming qualified as a disadvantaged business can be daunting, with various government agencies and nonprofit groups offering an alphabet soup or certifications: HUBs, MBEs, WBEs (woman business enterprises), and “8a” small businesses. Even military veteran entrepreneurs can get certified.

“There are many women and minority business owners who are not certified, who do not want to go through the time-consuming and painstaking process required,” says former PR pro Betsy Berkhemer-Credaire, who now runs the Berkhemer Clayton executive search firm in Los Angeles and serves as state president of the National Association of Women Business Owners. “This certification process gets in the way. It’s a barrier more than it is an avenue to business.”

Among those who haven’t yet taken on the certification process is Lon Walls, president and CEO of Walls Communications, a prominent African-American firm in Washington, D.C. “That’s almost a full-time job, just trying to get those certifications,” says Walls. “It’s intimidating.”

But the lack of an MBE designation hasn’t stopped Walls from partnering with big firms. When Leo Burnett and MS&L brought in Walls on the U.S. Army’s recruitment campaign, his firm went through an internal Army certification process to qualify for the work, Walls says.

Other small firms make marketing minority qualifications part of their business models. They get themselves listed on the HUB or M/WBE lists many government agencies provide to prime contractors, offer themselves to large PR firms as potential subs, and try to woo partners at bidders’ conferences. Some big-agency execs complain that a few MBEs push themselves too aggressively, offering their services to more than one agency competing for the same contract.

On the flip side, small firms acknowledge that tokenism does occur. “I think government contracts kind of set that up,” Florez suggests. Contracts often specify minimum M/WBE participation percentage goals that lead firms don’t often exceed, Berkhemer-Credaire believes.

To avoid both problems, frequent bidders suggest bringing minority firms into the process early, when proposals are being developed. “You want to present a unified, integrated team that figured it out together,” recommends Jim Parham, VP and PR director for Hirons & Co., an integrated shop in Bloomington , Ind. Hirons launched a concentrated effort to win government contracts three years ago. “State and federal business provides great stability in hard times,” Parham says.

Two-way communication

When dealing with subcontractors, Parham says his agency negotiates memos of understanding up front that set terms and prevent partners from shopping their services to other firms. Prime bidders that don’t get the contracts they seek should let their subs know, he adds. “I wonder how many times they’re never told what happened?”

Two-way communication is important in maintaining and building meaningful relationships with subs, says Walls, who notes that partnering agencies sometimes get so busy with their own tasks they forget to include each other in meetings and planning sessions. Relationships that lack synergy can fracture an entire project, Florez adds.

Government programs can foster long-term relationships between companies large and small, Berkhemer-Credaire says. To strengthen those ties, Azarloza predicts more large agencies will invest resources in M/WBEs without taking ownership interests. Meanwhile, Berkhemer-Credaire advises small firms to seek out government contracts on their own and invite larger agencies to work with them as prime contractors when they can’t handle the scope of work themselves.

“I suggest that they all get certified so they can participate, then prove themselves through prime contractors,” Berkhemer-Credaire says. “They should see greater and greater percentages of business.”

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MINORITY DESIGNATIONS

 

Public and private organizations on the federal, state, and local levels offer a plethora of certifications that can qualify woman- or minority-owned companies for government set-asides or preferential subcontractor status. Common designations include:

8(a) This nine-year business development program administered by the U.S. Small Business Administration (SBA) provides management, technical, financial, marketing and contract assistance to small businesses owned, controlled and operated by socially and economically disadvantaged individuals.

HUBZone The SBA designates Historically Underutilized Business Zones to stimulate economic development in urban and rural areas. Companies qualify for the HUBZone program, in part, by maintaining primary offices in these areas and employing staff who live in them. They receive preferential status for some government contracts.

M/WBE State, local and national government agencies and nonprofit councils certify companies as minority business enterprises (MBEs) and woman business enterprises (WBE). The National Association of Women Business Owners is among the groups offering WBE certification, for example. The process usually involves on-site visits from representatives of certifying organizations.

 

 

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