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Delaware business registration now asks for owners’ minority status. What does checking a box mean?

The goal is to increase the number of state contracts to minority, women, veteran and disabled-owned businesses. In the first of a five-part reporting series, here's what you need to know about the change.

Renewing you Delaware business registration? Heres what's new.

(Photo by Cottonbro on Pexels)

When you renew your business registration or register a new business in Delaware this year, you will notice something new: the option to state whether your business is minority, woman, veteran and/or disabled owned.

This optional section follows a Delaware Black Chamber of Commerce (DEBCC) initiative to track underrepresented business data statewide in order to more transparently show how state funds and contracts are distributed.

“As a state, we cannot identify what demographics our businesses belong to,” DEBCC President and CEO Ayanna Khan told Technical.ly. “That caused a problem when the pandemic hit, because we had [Black business owners] saying they didn’t qualify or got denied for pandemic relief. Then [the response was], ‘We don’t know that’s true because we don’t ask for that information.'”

As a result, it’s easy for minority, woman, veteran and disabled (M/W/V/D) owned businesses to fall between the cracks.

What do entrepreneurs need to know about the change? Here’s a rundown:

Should you tick a box?

If you fall into one of the categories, you may be wary of sharing more personal data online or concerned that identifying your business as “minority owned” will lead to disadvantages.

First off: No one is required to check any of the boxes. If you are interested in landing state contracts and getting access to the billions of dollars banks and other corporations have earmarked for minority business growth, checking a box is a step in that direction.

The data from the checked boxes will be sent to the Delaware Office of Supplier Diversity (OSD).

What is the Office of Supplier Diversity?

The OSD an arm of the State of Delaware’s Division of Small Business which, according to its Delaware.gov page, has a mission:

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[To] enhance economic opportunities for the diverse business community of minority, women, veteran, service-disabled veteran and individuals with disabilities owned businesses (M/W/V/D) as well as small businesses of a unique size and assist them in competing for the provision of commodities, services, and construction to State departments, agencies, authorities, school districts, higher education institutions and all businesses.

Those who opt in will then be informed that they may be eligible to become certified by the state, a process that will put them in a public OSD directory of certified businesses, which are at least 51% owned by M/W/V/D business owners. Once certified, businesses have enhanced access to state contracts and other opportunities.

Simply put, certification vets companies that claim to be in one of the categories served by the OSD, so when the state or other entities seek to contract with diverse suppliers, it can be reasonably confident that the company is what it says it is.

Can I bid on state contracts without certification?

You’re free to bid on state contracts as an underrepresented business owner without being certified. Without certification, however, you won’t be eligible to bid on contracts set aside for underrepresented businesses, nor will you be counted as an underrepresented business if the state sets a goal for diverse contracts.

You can, for the record, also apply for certification without checking any boxes on your renewal by going directly to the OSD website. But there is another reason that the data that is being collected can be valuable: It can help make the state’s disparity report more accurate and transparent, helping policymakers to identify gaps and pain points. The more accurate the data is, the more likely discrepancies may be addressed.

How can a lack of transparency hurt underrepresented businesses?

In the example that prompted the DEBCC to advocate for more data collection, the distribution of Paycheck Protection Program (PPP) funds in 2020, the data showed that Black-owned businesses were far less likely to receive the rescue funding, leading to an estimated 41% of Black-owned businesses becoming inactive due to the pandemic. It’s estimated that only about 15 to 20% of Black-owned businesses, including many that reported being discouraged to apply for aid when they tried, received PPP.

But here’s the thing: We don’t really know what the numbers are, because, while the PPP loan application has a section where borrowers could voluntarily state the owner’s demographics, 75% of applicants left it blank.

The federal government and some financial institutions course corrected somewhat in 2021, prioritizing the smallest businesses in the second round of granting the loans. But we still don’t know, on the federal or state level, how large the gap actually was.

In Delaware’s 2022 disparity report, the state found disparity in virtually all areas, including a stark analysis of M/W firm utilization that found that 100% of the firms used for construction procurement in 2021 were non-M/W (in other words, owned by white men).

That may not mean that every M/W firm was rejected. It’s very possible that none applied. But why? And how many industry-relevant M/W firms exist in the state that aren’t applying?

What is the goal?

More comprehensive data collection for businesses could lead to a plan that sets aside a certain number of contracts or sets a goal to award a certain percentage of contracts to M/W/V/D businesses based on data analysis that identifies how many underrepresented companies are in industries like construction in the first place.

As part of Delaware’s 2022 disparity report, it listed different states and municipalities that use different methods of diversifying state contracts — some by race-based means, and some by race-neutral means. Delaware does allow race and gender-based set asides, but only on an extremely limited basis; Delaware does not have M/W/V/D quotas and currently seeks a race-neutral strategy. Race neutral strategies to diversify are controversial but are commonly employed as a way to get around anti-Affirmative Action legal barriers.

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This report appears as part of a five-part series. In the next chapters, we will examine the use of set-asides, diversity goals and strategies; look closer at the certification process on the state and federal level, and the portals that make them more accessible; and explore how increased supplier diversity could impact Delaware businesses.

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