By Brian A. Lynch, Esq. Rudolph Friedmann LLP
In Massachusetts, the Supplier Diversity Program is a state program that encourages state agencies to award state contracts to certified diverse businesses. To qualify for the program, companies must be certified as a diverse business in any of the following categories:
- Minority Business Enterprises
- Women Business Enterprises
- Service-Disabled Veteran Business Enterprises
- Veteran Business Enterprises
- Lesbian, Gay, Bisexual, and Transgender Business Enterprises
- Disability-Owned Business Enterprises
The state’s Supplier Diversity Office (the “SDO”) administrates the certification process. The SDO notes on its website, although certification does not guarantee that a business will be successful every time it bids, it may add a competitive edge to firms seeking contracts with the government. In addition to certifying diverse businesses, the SDO also provides certified diverse firms with access to capital, training and development, networking and bidding opportunities.
Application Criteria
Under state regulations defined in 425 Code of Massachusetts Regulations Section 2.00, the applicant must prove it is at least 51% owned and dominantly controlled by principals of the same diverse category(ies). In addition to being owned by a majority of qualified individuals, the regulations require the qualified individuals to demonstrate the following core characteristics:
Control. The diverse owner(s) must demonstrate to the SDO that they have legal authority to make, and in fact do make, all major decisions of the applicant business without being subject to any agreement restricting the diverse owner’s control. The approval or veto of any other person, business, or organization cannot supersede the diverse owner’s authority to control the business. Among other criteria, the diverse owner(s) must have control over day-to-day operations, the background and technical competence relating to the business activities of the company, and a thorough knowledge of the financial structure, policies and affairs of the applicant business.
Independent. The applicant cannot be dependent upon, affiliated with, or influenced by, legally or in practice, any other person, business or organization in connection with any of its day-to-day operations or long-term affairs. Additionally, the applicant business cannot rely on or regularly utilize any employee under the direct control of another person, business or organization other than the applicant business. An applicant will not be considered independent if it presents insufficient evidence to the SDO of having the capability or capacity to perform, with its own workforce, equipment, facilities or other functional assets the services it performs.
Ongoing. The applicant must demonstrate it was not formed for the purpose of taking advantage of the certification program. The business must be actively in business with the resources needed to continually perform its services. This does not preclude the applicant from being recently formed and in operation for less than one year. Instead of looking at how long the business has been in operation, the SDO will require the diverse owner(s) to demonstrate they possess the technical experience and expertise to manage the current and future operations of the company.
Conclusion
Becoming a certified diverse business may provide you with new opportunities to contract with the Commonwealth of Massachusetts. Rudolph Friedmann LLP can advise you and your business on its potential eligibility and guide diverse business owners through the certification process.