In 2021, for the first time in history, the federal government released a racial and ethnic breakdown of executives awarded government contracts. Now is the time for businesses to do the same. After all, Fortune 500 companies like Micron and Intel stand to gain the most revenue and recognition from the trillions of taxpayer dollars currently flowing thanks to historic federal investment laws and the market opportunities they create. It is located in
Consider the size of such a company. The total revenue of Fortune 500 companies in 2023 will be $18 trillion, equivalent to two-thirds of the U.S. gross domestic product. Corporate procurement data is hard to come by, but his 2016 analysis by Bain & Company found that on average, companies spend about 43% of their revenue on procurement. This means the annual purchasing power of the top 500 companies in the United States is approximately $7.7 trillion. This is more than 10 times more than he is in the federal government.
Shortly after President Joe Biden issued his executive order on equity advancement, the federal government announced that just over 1.6% (or $9 billion) of the $560 billion contract budget for fiscal year 2020 for which small businesses are eligible to compete. ) was given to small and medium-sized enterprises. Black-owned small businesses and Latino- or Hispanic-owned small businesses account for just under 1.8% ($10 billion).
While there is certainly a mountain for the government to climb in order to maximize the potential of minority-owned companies, there is also a mountain for America's largest corporations to climb. To achieve minimum contract parity with the federal government, Fortune 500 companies would need to award at least $123 billion in annual contracts to black-owned businesses and $137 billion in contracts to Latino or Hispanic-owned businesses. However, only 39 companies participate in the Billion Dollar Roundtable, which is comprised of companies that sign contracts of at least $1 billion annually with diverse companies. This suggests that Fortune 500 companies are far from achieving parity with governments when it comes to contracting with minority owners, and that millions of top executives and employees have a solid foundation to build generational wealth. excluded from the road.
Transparency in contracts is more important than ever. After the 2020 Black Lives Matter protests, corporations provided significant funding to Black communities, but a Washington Post analysis found that these companies accounted for 90% of their commitments, most of which were loans or loans. It has become clear that they are making a profit from their investment. On the other hand, it is still not known to whom they gave contracts and with them wealth.
The urgency to be informed is even greater now that the federal government is investing historic amounts of tax dollars into infrastructure and advanced manufacturing. To fulfill the contract and build the chip manufacturing plant, Micron and Intel will need to partner with a variety of companies, including construction, IT, banking, security, and even food service companies to feed their growing workforce. be. There are provisions in the CHIPS and Science Act that require investment in workforce and small business development. But companies that win federal awards take a big step further by disclosing who their business partners will be and what proportion of their taxpayer-subsidized wealth they will receive, by race and ethnicity. be able to.
Recent attacks on race-conscious business development have increased the need for greater transparency in companies' contract data. Blacks and Latinos/Hispanics account for approximately 26% of all business owners, and minority-owned businesses, including Blacks, Latinos, Hispanics, Asian Americans, South Asians, and tribal It accounts for more than 30% of all companies. Following the Supreme Court's June 2023 ruling striking down affirmative action in college admissions, the court announced that the half-century-old It has overturned precedent after precedent. The full impact of these court decisions is not yet known. However, apart from data on access to capital, transparency in contract data would allow this country to assess the impact of contracts and their financial impact on a third of our country's voluntary enterprises, as well as more broadly. We will be able to have more informed conversations about social impact.
In fact, disclosure of loan rates by race has been the law in this country since the 1970s, including the Mortgage Disclosure Act. So why not sign a contract? After all, the loan must be repaid, but the contract does not require repayment.
The default refrain is that disadvantaged companies need more technical assistance and training. While important, this shifts the responsibility onto entrepreneurs and service providers rather than acknowledging that buyers can do more to adjust demand and expand their networks. The government partners with thousands of top minority-owned companies in technology, finance, engineering, security and more, and has done nearly $20 billion in business with Black, Latinx and Hispanic businesses. But the federal government is just one organization. Imagine what a Fortune 500 company can do.
Publishing contract data disaggregated by race and ethnicity for Fortune 500 companies is a new frontier for maximizing the strategic and economic potential of our nation's innovators. Our country expects that.