The implementation of Section 342 of the Dodd-Frank bill has many minority business owners on the fence. Should the provisions supporting diversity and inclusion be taken seriously, or is this simply another round of fluffy feel-good legalese that isn’t really going to have an impact? Alternatively, is the landscape going to shift so dramatically that it would be best to start from scratch?
A real answer lies somewhere in between. It is true that Dodd-Frank is motivated by good intentions, which don’t always translate well to reality. However, the good intentions for inclusion in contracting with the Federal government’s financial regulatory agencies are backed by legislative teeth, including provisions for detailed reporting, monitoring and penalties for non-compliance. Thus, minority suppliers need to prepare to end up somewhere between the grand visions of Section 342’s authors and the harsh realities of the world.
Coming out ahead will be a matter of smart positioning and smart interaction with government agencies. In terms of positioning, firms need to be or get current on their certifications. Dodd-Frank’s monitoring and reporting rules call for strict scrutiny on minority contract behaviors, so federal agencies are going to be looking for easy ways to pass that test, meaning working strictly with certified firms and recognized minority supplier support organizations. In terms of smart interaction, minority and women-owned businesses need to start now with their due diligence and learning about the financial regulatory space in order to develop meaty, value-added proposals that speak to the real needs of the financial services and regulatory industry.
MWBEs that can talk the talk and follow the rules stand to benefit the most in contracting with the risk-adverse, highly conservative cultures of financial firms and regulatory agencies. Firms that bring efficiencies in time and cost will also be highly sought after, especially given the current resource-strapped national budget environment. Knowing the big levers will be essential, and pulling the right levers for clients will ensure long-term contracting success. In this sense, starting from scratch isn’t necessary to win new federal contracts, but brushing up on the new state of affairs and new regulations will be important for suppliers wanting to present a current understanding of the environment to their clients.
From previous diversity legislation, MWBEs need to have learned that it is not enough to simply show up and be diverse. Firms have to bring value to the table, and they have to be able to navigate the highly complex and often drawn out federal contracting process. A strong financial underpinning to stay afloat through negotiations, adaptability to an evolving contracting space, and the patience to research and work with large federal agencies are also key.
Dodd-Frank isn’t going to be a free pass for diverse firms, but neither will its implementation be a non-event. Minority-owned firms who are certified and nimble enough to move into the right place at the right moment (now, in other words) will build a competitive advantage in the emerging environment. Federal agencies and contractors will be looking with increased and focused attention at minority suppliers, so MWBEs firms would do well to have something to show when all eyes turn to them.