Building Opportunity: Addressing the Financial Barriers to Minority and Women-... (EventID=114374)

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Connect with the House Financial Services Committee Get the latest news: https://democrats-financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Thursday, February 03, 2022, at 10:00 a.m. (ET) Diversity and Inclusion Subcommittee Chairwoman Beatty and Ranking Member Wagner will host a virtual hearing entitled, “Building Opportunity: Addressing the Financial Barriers to Minority and Women-Owned Businesses’ Involvement in Infrastructure Projects." ___________________________________ Witnesses for this one-panel hearing will be: • Farad Ali, President & CEO, Asociar • Tawanna Black, President and CEO, Center for Economic Inclusion • Philip Gaskin, Vice President of Entrepreneurship, Kauffman Foundation • Ying McGuire, President & CEO, National Minority Supplier Development Council (NMSDC) • Jeanette Quick, Head of Compliance and Public Policy, Gusto ___________________________________ Purpose This hearing will explore challenges faced by minority-owned businesses, women-owned businesses, and small businesses in obtaining the capital necessary to participate equally in federal contracting opportunities. The hearing will explore possible solutions to encourage the creation and growth of diverse entrepreneurs’ businesses. This hearing will also consider legislative proposals to ameliorate challenges faced by minority- and women-owned small businesses. Background In November 2021, the Infrastructure Investment and Jobs Act (IIJA) was signed into law.1 This significant and bipartisan investment in America’s infrastructure provides an opportunity to not only overhaul America’s crumbling bridges and roads but also build and expand minority- and women-owned businesses (MWBEs). The Act invests nearly $1.2 trillion total, with $550 billion earmarked for federal, state, and local infrastructure projects over the next five years. These large-scale projects offer minorityand women-owned firms an opportunity to expand; however, to do so, they will need access to affordable and timely capital. In 2021, President Biden announced the White House’s plan to increase racial equity and support underserved communities by promoting the equitable delivery of government benefits and contract opportunities for federal government projects. Biden set a “bold new goal: increasing the share of contracts going to small disadvantaged businesses by 50 percent by 2025 – an unprecedented target projected to translate to an additional $100 billion to SDBs [small disadvantaged businesses] over five years.” The passing of the IIJA presents an opportunity for MWBEs to receive substantial work opportunities through government contracts. Barriers in the Government Contracting Process As a result of inequities in capital access, MWBEs often do not have the financial capacity necessary to successfully compete for medium to large government projects. Prospective businesses seeking to engage in government contracts must undergo a bidding process that requires a set amount of cash reserves, insurances, or specific equipment related to the project.4 According to recently released data from the SBA, just 1.7% of federal contracts went to Black-owned small businesses in FY 2020, and 1.8% went to Hispanic-owned small businesses. In order to bid on projects, businesses must secure performance bonds, which guarantee that a contractor will fully perform the contract and offer protections against breach. Minority businesses in particular have identified discrimination from bonding companies and a lack of experience as key barriers in securing bonds.6 Though non-minority businesses also face barriers in the bonding process, a lack of access to capital exacerbates the issue for minority businesses that cannot produce sufficient capital to cover their own bonding. In acknowledgment of this gap, New York State used its 2011 State Small Business Credit Initiative (SSBCI) allocation to provide a bond guarantee assistance program. Through this program, New York added bond surety for contractors allowing them to scale up and, along with other interventions, increased MWBE representation in state contracts from 9.2 to 21 percent.8 Congress reauthorized the SSBCI program with a $10 billion appropriation in 2021, and funds are expected to be leveraged and support up to $100 billion in small business loans and investments. In addition, $2.5 billion is reserved to support socially and economically disadvantaged businesses. Majority-owned businesses often join projects as prime contractors, which allows them to receive starter funds from municipal agencies and begin work immediately. MWBEs serving as sub-contractors do not receive money at the start of the project and must rely on alternative funding to begin work on government... Hearing page: https://democrats-financialservices.house.gov/events/eventsingle.aspx?EventID=409025