Action:

Create a preference/discount for local businesses in the City’s procurement process and a separate program for MWBEs. Connect local businesses to technical assistance so that they can scale and successfully compete for contracts.

How to Adapt This Approach:

• Decide the type of preference you want to provide (discount vs. set-aside)
  • How you do this may be dictated by state law. Some states forbid specific set-asides for local contracts. If your state has strict rules, you should consult your City attorney. To be compliant, you may need to frame this action as a preference for “familiarity with the local environment”
• Assess the current value of government contracts and set a target for how much spend should be prioritized for local small businesses
• Discuss the proposed program with local business leaders to get feedback
  • Establish a clear definition of a local small business (e.g., size/revenue limit, majority of employees/ principals live in the city)
  • Create strong enforcement mechanisms to hold companies accountable to any requirements regarding subcontractors. These should include fines and the ability to terminate contracts
• Review the proposals/language with the City attorney, administrator, and council; as well as local business leaders and other key stakeholders
• Identify and recruit nonprofit, corporate, and other partners that can provide technical assistance to certified businesses
• Secure buy in from City/county/transit authority/ board of education/other procurement teams to:
  • Create and publish rolling lists of bid opportunities; and
  • Assess each organization’s procurement practices, to see how barriers can be removed and/or contracts can be divided up
• Launch an outreach effort to familiarize local businesses as well as partners, which can support and provide technical assistance to local businesses
• Track metrics on program performance with biannual sharing of data (value of contracts won)

Action:

The City should provide a preference and/or discount for local contractors in its procurement process. By increasing the amount of purchasing at local firms, this action will help maximize the local multiplier effect which is critical, particularly during the deepest parts of the recession. A similar but distinct program should be created for minority-owned businesses, given the persistent disparities. However, this action will only be successful if it is done in conjunction with several others included here, including creating a more entrepreneurial ecosystem, providing funding to help scale, and actively reaching out to prospective local businesses.

How To Adapt this Approach:

1. Determine the type of preference your city wants to provide (e.g., discount in scoring vs. actual set-aside in terms of % of contract)
   • Assess the percentage of current business (in terms of contracting dollars) that goes to government contracts and set a target for how much spend should be prioritized for local small businesses.
   • How your city does this may be dictated by state law. Some states forbid specific set-asides for local contracts. If your state has strict rules, you should consult your city’s attorneys. Some cities may need to frame this action as a preference for “familiarity with local environment” to be compliant with state regulations.
   • Discuss with local business leaders to get feedback on the proposed program
2. Draft administrative code language for local preference program (See template in resources section)
   • Be sure to review with the city’s attorney and other officials
   • Have strong enforcement mechanisms to hold companies accountable to requirements regarding subcontractors. This should include fines and the ability to end the contract.
   • Establish parameters for the definition of a local business (e.g., majority of employees/principals based in the city). Determine which businesses are eligible based on size, revenue limit by industry, etc. These limits will vary according to local circumstances.
3. Review the language with city council, city administrators, local business leaders, and other key stakeholders to confirm that it is satisfactory
4. After passing, launch an outreach effort to familiarize local businesses and support them in their application process
   • Reach out to relevant businesses and launch a communications effort to notify businesses of the program
   • Establish a procedure to actively contact businesses about contracts that may be suitable for them
5. Assign responsibility to government officials – and hire if necessary to augment existing staff – to provide technical assistance
6. Track metrics on program performance with biannual sharing of data. (See template in resources section)

Problem:

Many communities offer programs to start businesses, but less support is given to businesses looking to expand. Access to credit can be difficult, and many large contracts require surety bonds or other guarantees. Yet, businesses with 5-99 employees are critical to the US economy. They account for 29% of all jobs and are often the bedrock of US cities. Supporting these businesses enables them to scale and meet more of the community’s needs. In turn, this expansion creates more jobs and keeps more spending local. Given the growing concerns of the plight of small businesses and the associated economic and employment risks, providing support to help them maintain and expand operations will be critical. This will also help address unemployment and should be done in conjunction with reskilling programs.

Action:

Cities should provide loans through a government-backed fund to help midsize businesses expand and be able to compete for larger government and enterprise contracts. Additional access to capital should be provided as part of a broader program that offers guidance for businesses (e.g., through an entrepreneurial ecosystem).

How To Adapt this Approach:

1. Meet with local businesses to understand the existing markets and landscape, and identify opportunities for growth.
   • Discuss barriers to growth (e.g., why they are not competing for larger contracts, what they would need to be successful)
2. Design program parameters (e.g., maximum loan amount, whether for all government contracts, etc.)
   • The program design will vary by local circumstances. Elements to consider include:
     • Maximum loan amount: in some cities, a $50K loan cap will be sufficient to enable businesses to expand and compete for larger contracts. For other places, this may be closer to $250K. During discussions with local businesses, review what would be necessary. Loan terms should be long-term, with low-interest (e.g., 2% over 10+ years)
     • Government vs. private sector contracts: it may be easier to start with government contracting, but ideally this program would also help the businesses to compete for private-sector contracts.
     • Determine the eligibility of businesses (easier if linked to a small business preference program)
     • Raise funds to cover surety bond guarantees (for public sector contracts). Surety bonds are often required for public sector projects as a promise that the work will be performed. Getting a bond can be challenging for growing or newer companies as it is often contingent on previously performing projects of a similar size. Cities can raise funds for surety bond guarantees by requiring a certain percentage of each department’s contracting budget to go towards this.
3. Build oversight and technical assistance capacity (which can be added on to existing technical assistance services). As businesses take out loans, it will be necessary to support them, while ensuring the funds are being used correctly.
   • Some businesses may not have applied for any significant loan or financing before. Walking them through this process, and ensuring compliance, will be key.
   • This office should also help with bond applications, basic financial controls, and reporting requirements.
   • This office does not need to be housed within your city’s economic development agency. It may be better housed within an existing city department.
4. Draft program language and propose it to city council and other key stakeholders. (See template in resources section)
5. Pilot a small version of the program. The full program could be expensive and will require considerable oversight.
6. Collect learnings from the pilot and launch the broader program.
   • Ensure that businesses are paid on-time and that there is sufficient oversight. Some cities require local businesses to be paid within 30 days of contracts.
7. Track action progress and success, and revise as necessary. (See template in resources section)

Action:

Seek a commitment from local universities and hospitals (“eds and meds”) to procure more goods and services from local, target, small businesses; and help them to identify and engage qualified firms. Tie the program to a small business capacity-building technical assistance program.

How to Adapt This Approach:

• Identify a strong, local nonprofit with a mission to support MWBEs, or galvanize the creation of a consortium
• Allocate dedicated nonprofit and City staff and/or seed funding
• Identify, convene local universities, colleges, hospitals, and other anchor institutions with significant, permanent locations in the city
• Prepare persuasive messaging and data about both the problem and the difference that the institutions could make
• With the support of your Mayor, reach out to at least 3 leaders from these institutions (CEO, finance officer, and government affairs officer). Make sure the leaders are aligned on a common agenda and understand any barriers to the institutions working together
• Convene the institutions’ leaders, encourage them to make commitments to procure local, and to instruct their organizations to cooperate. Encourage them to make these commitments public in due course
• Consider possible incentives, including around land development, and/or tax breaks.
• Go out and pitch for corporate and philanthropic funding, which can be used to recruit staff, purchase data, run events, provide TA, etc.
• Conduct an assessment of each anchor institution’s procurement practices. Develop an individualized action plan and procurement goals with timelines for each institution. Encourage anchors to publish a rolling forward plan of their procurement needs
• Work with local/ethnic chambers, business organizations, and private sector data companies to identify and develop a list of MWBE providers. It is critical that this list is verified and that providers are vetted before being forwarded to anchors. In particular, create a repository of vetted MWBEs through requests for information and market surveys, which evaluate providers’:
  – Products and Services: price, quality, industry experience
  – Management Capacity: RFP development and response, account support
  – Operational Efficiency: staffing, accounting, technology
  – Financial Capacity: revenue growth, bonding
  – External Presence: online presence, community impact, references
• Refer MWBEs, which are found not to be competitive to business support organizations and technical assistance so they can become competitive in the future
• Establish a data-tracking system to capture key metrics to measure success of the program