New Law Helps Minority and Women Contractors Land Big Deals

President Obama signs bill that gives our financial services firms a seat at the table. But is it enough?

Gerald Smith, chairman and CEO of Houston-based Smith Graham & Co. Investment Advisors L.P., says his firm is already benefiting from a new federal law that’s helping minority and women contractors land deals with regulators of the nation’s financial system.

The law allowed Smith’s firm, (No. 7 on the BE ASSET MANAGERS list with nearly $5 billion in assets under management), to land a contract last fall to provide advisory services to the U.S. Treasury Department, Smith says. Smith Graham, through a partnership with Boston-based State Street Global, is advising the Treasury on the management of about $150 billion in mortgage-backed securities, Smith says. “Our goal is to spend more time in Washington and work with these offices, bring more business to the firm, create new opportunities and show them our value added proposition,” he says.

The Treasury is among about 30 agencies that oversee the financial system, including the Federal Reserve, the Federal Deposit Insurance Corp. and the Securities and Exchange Commission, required by the Dodd-Frank Wall Sreet Reform and Consumer Protection Act (signed into law by President Obama last July) to open an Office of Minority and Women Inclusion (OMWI). The offices are charged with tracking diversity within and the pool of contractors who sell the government goods and services.

William Michael Cunningham, social investment adviser at Creative Investment Research Inc., a Washington, D.C., firm specializing in minority banking, estimates the new law could bring at least $136 million in new contract opportunities for women and minority firms.

But the law also has some skeptical observers. Among their concerns: Will the covered agencies actually be held “accountable” to comply with the law, and will it foster a quota system that could discriminate against firms not minority or women owned?

Joset B. Wright, president of the New York-based National Minority Supplier Development Council, one of the nation’s top business member groups, described the intent of the Frank-Dodd Act as “laudable.”

However, she adds, it appears that this requirement would duplicate the functions of the U.S. Department of Commerce’s Minority Business Development Agency and the Small Business Administration.

“The true value in such a provision will be in its enforcement to insure equal access to contracting opportunities for the Asian, Black, Hispanic and Native American suppliers that are certified by NMSDC,” Wright says.

Mark Calabria’s, an economist and director of financial regulation studies at the Cato Institute, a Washington, D.C.-based think tank, said the law requires that covered regulators provide an annual report to Congress on matters like how much in total contracts they’ve awarded and what percentage of their total contract (activity) is going to minorities and women.

But Calabria also is concerned that the law could cause agencies to focus more on reaching an undefined quota instead of finding the best qualified contractor.

Cunningham predicts respectively minority and women owned law firms, investment consultants, accountants, asset management firms, mortgage banking firms, investment banking firms are among those that stand to benefit the most.

Kwabina Appiah, vice chairman and chief operating officer at New York-based Mitchell & Titus, the nation’s largest black owned accounting firm, says the law helped his firm land a monthly contract with the FDIC.

He said the firm provides the regulator a review of the accounting and regulatory practices of the banks the FDIC supervises.

Though Appiah said his firm done work for the FDIC since the 1990s on smaller scale, it has never such a sizeable contract with the regulator.

The nation’s 12 Federal Reserve Banks, stretching from New York to Chicago to San Francisco, have opened OMWI offices, says Bill Cooper, vice president and deputy director of diversity and inclusion at the Federal Reserve Bank of Richmond. He said the banks will look for minority and women contractors to provide many services, including janitorial, transportation, food, office supplies and information technology services to name a few.

In addition to procurement, Cooper said the law requires the Federal Reserve to be inclusive of minority and women contractors also in the areas of workforce (hiring), retention and community outreach. Each of the Fed banks have an OMWI link on their web sites, allowing potential contractors to find jobs and make connections.

“We want to make sure that we have the appropriate processes in place so that they have their greatest potential for success,” he says.

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  • Joseph Vaughan

    Thanks Michael for posting this piece. While it’s true some entities have benefited from the policy, we must acknowledge that we are in the infancy of its implementation. Very few OMWI offices have moved to beyond initial implementation to full integration of the OMWI office’s legislative goals. The agencies have made a good faith effort to roll-out the policy, but it will take committed policy makers within the agencies to fully achieve the full faith and spirit of the law. Thanks again and please keep up your efforts in this space. Regards, Joseph.

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