N. O. Smelz, owner of Smelz Rug and Carpet Cleaning, learns that Brite Bank has submitted a request for proposal to clean the carpets at their 15 branches in the DFW area. When Smelz reads the request he notices it includes a diversity provision that requires at least 10% of the total amount paid by Brite to go to a vendor, or a subcontractor, that is a minority-owned, woman-owned, veteran-owned, LGBT-owned, or disabled-owned business. Smelz is concerned because he doesn’t fall into any of those categories, and he doesn’t believe any of his long-time suppliers do either.  But because his cleaning company has the best reputation around, Smelz submits his proposal anyway.  Will Smelz get the contract?        

Diversity and Inclusion Provisions in RFPs are Perfectly Okay

Privately-owned businesses may legally adopt supplier diversity programs.  These programs are becoming a more integral part of companies’ procurement efforts.  Almost every large, publicly-traded company, such as AT&T, Capital One, and Walmart, require supplier diversity.

How do Supplier Diversity Programs work?

The programs vary depending on the corporate customer.  Generally speaking, supplier diversity programs can be characterized as single-tier or two-tier.  Single-tier programs mean that the company is looking to contract directly with diversity-owned suppliers.  Two-tier programs mean that the direct vendor may not be diversity-owned, but it can still qualify as long as it subcontracts with a diversity-owned business.

Some companies have diversity policies that require a certain percentage of the dollars they spend on their suppliers to go to diversity-owned suppliers, but the company does not have to have a direct contractual relationship with the diverse supplier.  Other companies may have a goal to spend a certain amount of dollars with diversity-owned suppliers in a particular year.

Tilting the Scales in Your Favor

Brite Bank will not necessarily disqualify Smelz simply because it is not diversity-owned or because it lacks a supply chain that includes diversity-owned vendors.  But because so many companies have adopted, or are adopting, supplier diversity policies, small business contractors such as Smelz can increase the chances of their bid being accepted if they establish a network of their own diversity-owned suppliers that they will utilize if their proposal is accepted.  And, that network may lead to other projects through the diversity-owned suppliers that Smelz never knew existed, or never anticipated landing.