MBE Magazine Article on Supplier Diversity

The Purchasing Services Supplier Diversity Program was referenced in a recent article in March/April 2005 edition of the Minority Business Entrepreneur (MBE) magazine. The text of the article is listed below. Please direct all questions regarding the Supplier Diversity Program to Colleen Reardon in Purchasing Services.

MWBE - ADVANCED OPPORTUNITY

Three years into launching his own film production company, Ty Ng has already established an impressive client base, which includes several national corporations, as well as a number of regional non-profit organizations, for his Chandler, Arizona-based firm. Recently, however, the ambitious entrepreneur took his business, Twin Tygr Productions, one step further by expanding his target market into an unfamiliar, yet viable industry-higher education.

"I've been hired by The University of Arizona to do a short film about the procurement department," Ng said about his current work-in-progress. "I'll look at the department and try to create a story about the work they do so the audience can become a part of it. I'll be able to present the department in a way that they cannot otherwise do with brochures, etcetera."

Procurement officials at The University of Arizona are hopeful that Ng's services, already used by several notable companies like The Dial Corporation and Austin Commercial, will soon be utilized across the university's departments, campus-wide.

"I believe Ng's work will be a great marketing tool," says Ernie Webster, who is the manager of the small business supplier diversity program, procurement and contracting services, for The University of Arizona. "While he's just making a few thousand dollars right now, I believe his potential here is fantastic, because he's offering us something that we need that's not been done before."

Collectively now a multibillion-dollar industry, universities across the nation are quickly approaching spending levels once only reserved for Fortune 500 companies, providing more and more minority and woman business owners like Ng with new procurement opportunities.

"Supplier diversity is a significant part of each institution's social responsibility program and continues to be a hot topic within higher education," says Gary D. Link, who is the senior vice president of contracts for the Educational & Institutional Cooperative Service, Inc., a not-for-profit, national buying cooperative that represents more than 1,500 college, university, prep school, and medical research institution members. "Many public and private institutions have established policies and/or goals that encourage campus representatives to conduct business with minority business enterprises in an effort to be more socially responsible. Higher education will continue to place a strong emphasis on supplier diversity in an effort to provide more socially responsible procurement."

Money to Spend

With unofficial estimates of colleges and universities collectively spending up to $800 billion each year, and most individual institutions reporting annual goods and services expenditures in the $300 million to $400 million range, there are indeed numerous business opportunities within higher education. Perhaps even more significant to minority and women business enterprises (M/WBEs), most top-spending institutions have specific procurement goals designed to increase their spending with diverse suppliers. In addition, research institutions that receive federal contracts are almost always required to meet standard federal spending standards as well.

At The University of Arizona, increasing the dollar amount spent with small, minority-, and woman-owned businesses has been part of the university's procurement efforts for nearly a decade. The large state institution, which annually enrolls more than 37,000 students, established its formal small business supplier diversity program in July of 1996 under the university's procurement and contracting services department. Today, the program remains strong in its efforts to provide the university with more options in securing goods and services, setting both quarterly and annual goals to increase diversity spend.

Last fiscal year the university spent more than $298.9 million, with more than $112.7 million, or 41.9 percent, of that amount going to small businesses. Although the university had a 5 percent spending goal in place for both disadvantaged/minority- and woman-owned businesses, the school actually spent just 3.57 percent, or approximately $9.6 million, with disadvantaged/minority-owned companies, and 1.68 percent, or approximately $4.5 million, with woman-owned firms.

"We just started setting goals again this year," Webster says about the benchmarks set forth by the university, standards that mirror federal spending goals of 23 percent for small, 5 percent for minority-owned, and 5 percent for woman-owned businesses. "My overall goal for this program is to start with that, but eventually raise it higher."

The University of Miami has similar goals in place. The university, which operates three main campuses and enrolls approximately 15,000 students each year, started its supplier diversity program in the mid 1990s, but only began tracking the dollars spent more earnestly in recent years.

"We have become more sophisticated in our collection of the numbers, and we generally exceed our goals," says Otis Jones, who is the director of the business development program at the University of Miami. "We have a goal of at least 10 to 15 percent [of dollars spent with minorities and women] in different categories. Each department is a little different, so the goals are different for each department."

Last fiscal year, the University of Miami spent more than $44.9 million of its $158.4 million of controllable spending with diverse suppliers-approximately $22.1 million with Hispanic-owned, $15.4 million with woman-owned, $5.6 million with African American-owned firms, and $1.8 million with other minorities. While the University of Miami's supplier diversity program focuses on controllable dollars, which means it eliminates large long-term contracts with companies like Dell and BellSouth from the dollars available to small, minority, and woman-owned businesses, it also requires its large prime contractors to report second and third tier spending with minorities and women.

"The percentage of minority- and woman-owned spend is about 28 percent of controllable dollars," says Jones, who works to encourage more spending and to make each department responsible for supplier diversity. "I don't want minority spending to be something that's pigeonholed into one office. Minority business is the responsibility of all the departments, not just mine. I go to the history department or the engineering department and ask them if they can get their numbers up, and we try to streamline everything to make finding qualified minority- and woman-owned businesses as simple as possible."

The University of Pennsylvania, an institution with one of the longest supplier diversity records, is always working to improve its numbers as well. The university, which has supplier diversity statistics dating back to 1986, spent $40.9 million last fiscal year with minority-owned businesses. The Ivy League school, which annually enrolls approximately 20,000 students, is also already well on its way to exceeding its fiscal year 2005 spending goals, reporting a current fiscal year minority-spend level of $28.5 million. While the university's purchasing services department works to do business with more minority suppliers, the office also strives to make its major strategic suppliers part of the effort as well, encouraging them to do business and establish partnerships with minority businesses.

"In support of the university's Agenda for Excellence and our commitment to the local community, supplier diversity at Penn is a proactive business process that seeks to provide all suppliers equal access to purchasing opportunities," says Colleen Reardon, a procurement specialist in the department of acquisition services at the University of Pennsylvania. "It promotes supplier participation reflective of the diverse business community and encourages local economic development. Our supplier diversity program is built upon a successful collaboration between the university and its supplier community. We understand that the health and vitality of the University of Pennsylvania are inextricably linked to the quality of life in our city and our surrounding neighborhoods."

Good Business Sense

For most universities and colleges, doing business with minority- and woman-owned firms is about more than "doing the right thing." In fact, for many institutions, widening the supplier base has benefited the university as a whole.

"We've actually gotten some terrific partnerships," Reardon says about the business relationships that the University of Pennsylvania has fostered with suppliers from its own West Philadelphia neighborhood. "The bottom line is we've found that whether they are minority or small, they have been terrific suppliers to the university and great partners. We believe it's the right thing to do, but in return we've also gotten suppliers that really understand our market. People who live and work here understand the culture of this area, and that brings an enormous sense of ownership to the account because people are invested in the university itself. You can't put a value on something like that."

As the largest private employer in Dade County, Florida, the University of Miami has a similar philosophy, working to make its many business opportunities, which reach into nearly every industry and specialty, available to the most diverse supplier population possible.

"My vision is to spread the word throughout the university that doing business with minorities is price-effective-that it does make good business sense," Jones says. "When you have a pool of small, minority businesses competing, a lot of times there are diamonds in there, and if you could just work through it, they are very competitive, and they go the extra mile."

For the University of Miami, one such "diamond" supplier is Multi Media Marketing Associates, Inc., a Pembroke Pines, Florida-based full-service provider of state-of-the-art broadcast-quality services, including multi-media, film and video production, and post-production services.

"Multi Media Marketing is a good example," says Jones, who explained that the firm was able to provide the university with a customized solution that went beyond what the larger competing companies were willing to offer. "They've been very successful. They'll do things that the larger companies will not do. A larger company says, 'This is what we offer, you take A or B.' They do the same thing, but when I tell them that's not exactly what we're looking for, they'll come back and find out what we want and work with us to come up with something entirely different that works for us. Smaller companies, particularly minority-owned firms, have a different attitude. This is a person's life. It's all wrapped into his business and it means much more to him."

For Jose and Maria Elena Luya, the husband-and-wife team that run Multi Media Marketing, the contracts they've won from the University of Miami have helped them build their company. Their relationship with the university began in 2002, when Maria, who serves as the company's executive vice president, and Jose, who serves as the company's president and CEO, were formally introduced to university representatives at a networking event co-sponsored by the Florida Regional Minority Business Council and the University of Miami.

"We introduced ourselves to Otis [Jones] and summarized our capabilities," Maria Elena Luya explains. "He was intrigued with our services and thought that our company could bring a lot to the university, offering a medium to current-edge technology. After viewing our portfolio, he was confident that there was a good match between Multi Media Marketing and the University of Miami."

After securing their first contract in June 2003, a deal worth just under $40,000, Multi-Media Marketing continued working with the university, providing the school with a wide range of services including media replication, online interactive training, and comprehensive filming and editing of the 2004 U.S. Presidential Debate, which was held on campus.

"The contract has given us a great opportunity-exposure," Jose Luya says. "We are now recognized within the university as a respected company that over-exceeds expectations. This, in turn, has led to repeated contract awards with other departments within the university."

Challenges to Overcome

While more and more universities are recommitting themselves to supplier diversity, and a handful of M/WBEs are taking advantage of the new opportunities, there are challenges-both within the university systems and the diverse supplier base-that still face the higher education industry as a whole. For starters, some procurement officials say simply that not enough minority and woman entrepreneurs are pursuing contracts within higher education, an unfamiliar industry to most that is well-known for bureaucracy, red tape, and stringent requirements.

"Most of the people that come to me have never done business with us," says Webster, who meets regularly with prospective suppliers, many of whom are often intimidated and confused by large university purchasing procedures. "It's an untapped market for a lot of minority companies. They don't realize that universities spend hundreds of millions of dollars and we do a lot of business. But most universities do purchase everything that a small city would purchase [like] computers and equipment, art supplies, building materials, books, food and groceries, automobiles, auto supplies and repair work, plumbing services, gardening and nursery work, janitorial services, paper projects, film processing…the list goes on and on."

In addition, like many small businesses themselves, universities across the board have been forced to consolidate and cut costs-a challenge that's been difficult to overcome for many supplier diversity managers who are still committed to embracing diverse suppliers. To compound the problem even more, at many universities individual departments often have the power to make their own purchases under a set amount (typically anything under the $3,000 to $5,000 range). And at that level, cost almost always outweighs university-wide procurement goals.

"A larger company can come in and offer a price that a smaller company can't," Jones explains. "Sometimes we have to take a good look at how much we can pay for a particular commodity." Since the departments cannot always absorb the extra cost, supplier diversity managers like Jones are trying to encourage smaller firms to work together or communicate their goals with their larger suppliers and ask them to work with small, minority-owned firms so they too can be included in contracts. Schools like the University of Miami and The University of Arizona are also offering their suppliers training and workshop sessions to ensure M/WBEs are successful within the university systems. Penn has expanded its own efforts as well, offering special supplier recruitment forums and mentorship opportunities.

"As an institution of learning, part of our mission is to include everybody in our area into the learning process," Reardon says. "That means from the pencils we write with to the research equipment we use on campus, we need to include the entire group of people that we touch on a daily basis. We should definitely be a model that supports economic regeneration."

Despite the obvious challenges, individual universities, and the industry of higher education as whole, seem well poised to meet the roadblocks ahead, staying dedicated to their mission to provide M/WBEs with more business opportunities.

"When you put all of these things together, it does make it really hard," Webster says. "It's the nature of the beast, but we're dedicated to attracting more minority- and woman-owned businesses and convincing the departments to take the chance to deal with a new customer. I know we're making progress. I know that our mission here is to get our name out in the community and let them know we are here to help them through the maze. As long as the minority- and woman-owned firms come through for us, we'll come through for them."