Managing and Growing Supplier Diversity Spending
Meet Your Funding Objectives and Help Build a Better World
By Mark Miller
A robust supplier diversity program that includes best practices for meeting diverse spending goals is critical to complying with U.S. federal subcontracting requirements and securing contracts and FDA approvals. But an effective program and spending plan can do more — a lot more.
Understanding Requirements
If your lab or research facility has a contract with the U.S. federal government that exceeds $750,000, you are required to subcontract with small, diverse-owned businesses. Subcontracting plans are approved by agencies such as the General Services Administration (GSA), the United States Department of Veterans Affairs (VA), and the Food and Drug Administration (FDA). Failure to make good faith efforts of an approved plan can result in the termination of current contracts and loss of opportunities for future contracts. Certain state and local government agencies may also have subcontracting requirements.
In Canada, the national government has launched a Supplier Diversity Action plan that outlines concrete steps to increase the participation of businesses from underrepresented groups in federal procurement.
Defining Diverse
In the U.S., diverse-owned businesses, or diverse suppliers, are defined as at least 51 percent owned by a person from a diverse category. This includes ethnic minorities, Native Americans, women, LGBTQ, disabled persons, veterans and service-disabled veterans, businesses in historically underutilized business (HUB) zones, and small business enterprises. Because many of these are small businesses, federal agencies work through the Small Business Administration (SBA) or their own small business offices to help ensure that diverse suppliers receive contracts and spending targets are met.
Diverse suppliers are grouped into two tiers:
- Tier 1 suppliers are those with whom you work directly
- Tier 2 suppliers supply the Tier 1 suppliers — in other words, they are two steps removed from your purchasing organization
Tracking Your Spending
Key to developing an effective, sustainable program is tracking and measuring your diversity spending. By following some proven procedures and practices, you can manage and grow your diversity supply chain to help secure federal funding and approvals.
Create Cross-Functional Teams: Connect and communicate with management, procurement, and other related departments about your spending goals. Gain agreement across teams for spending targets and align them with the overall diversity and inclusion initiatives of your organization.
Capture Data: Put systems in place to identify and categorize Tier 1 and Tier 2 suppliers and capture spending associated with each. Keep the data current and make information available to cross-functional teams.
Observe and Report: Use your data to generate quarterly reports and review them with the appropriate teams. Reports should, at minimum, tell you whether spending is below, on target with, or above your goals.
Look Forward: Communicate with and receive updates from the contacts and agencies involved in your program. Join and participate in business resource groups representing diversity categories to gain insights and forecast trends.
Pick the Right Partners: Your Tier 1 suppliers should understand your diversity spending objectives and be able to recommend Tier 2 vendors aligned with your goals. This relationship is vital to growing your diversity spending and staying compliant.
Greater Good
Diversifying your supply chain is good for diverse-owned businesses, but it’s also good for your organization, the business community, and society as a whole.
An effective program can help you embrace innovation faster through new ideas from small, agile businesses. You can also broaden your sources for distinct needs to improve quality and lower costs.
Most importantly, a more diverse supply chain contributes to the success of more businesses and improves the financial health of underserved communities. It creates jobs and acts as a powerful tool for developing more diverse business ecosystems. These effects ultimately make for stronger, more inclusive societies whose members and businesses enjoy greater economic equity.
At Thermo Fisher Scientific, diversity is part of how we work with our suppliers every day. It’s a source of innovation and competitive advantage and a central part of our Mission: to enable our customers to make the world healthier, cleaner and safer.
In the U.S., visit fishersci.com/supplier-diversity to learn how the Fisher Scientific channel can help customize a diversity spending plan for you.
Mark Miller is a Thermo Fisher Scientific staff writer.
