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CVM Supplier Diversity Blog

Understanding Supplier Diversity Compliance

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Studies and real-world results prove over and over that supplier diversity is good for business. Many companies are incorporating diverse suppliers into the supply chain in order to reap the bottom-line benefits of diversity of thought, innovation, and more agile organizations. But for those companies that contract with the federal government, supplier diversity is more than good business practice—it's mandated in the contract.The U.S. federal government requires that a contractor whose contract for goods and services is expected to exceed $700,000 ($1.5 million for construction) must set and meet aggressive goals of subcontracting spend with underrepresented small businesses from specified categories. These categories include ethnic-minority-owned, woman-owned, LGBT-owned, disadvantaged, HUBZone, veteran-owned, and service-disabled veteran-owned businesses.

Even companies that aren't directly supplying the public sector, such as Tier 2 suppliers who provide their goods and services to Tier I suppliers, rather than the public sector, may be required to adhere to these types of requirements if they supply other private-sector companies that are government contractors.

In addition to monitoring affirmative-action employment practices, the Office of Federal Contract Compliance Programs (OFCCP) is tasked with carrying out the interpretation and enforcement of supplier diversity compliance with federal contractors and subcontractors. The OFCCP is increasing the number of compliance reviews that it conducts each year as well as conducting multi-establishment and industry-specific reviews, with particular emphasis on the construction industry, so contractors are advised to maintain careful records in order to avoid missteps.

Supplier diversity compliance requirements can be confusing or intimidating, especially for a company that is new to federal contracting. But the secret to compliance is really the secret to any successful supplier diversity program: establish realistic goals and maintain accurate tracking of your diverse suppliers and your diverse spend.+

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Establish Goals

In order to meet supplier diversity compliance requirements you must set spend goals, expressed as percentages of total planned subcontracting dollars, for subcontractors within the small-business categories noted above. Additionally, your subcontracting plan must include:

  • descriptions of how you developed these goals
  • the principal types of supplies and services to be subcontracted
  • identification of types planned for subcontracting to small business
  • the method used in order to identify potential sources for solicitation purposes.

Your supplier diversity program will benefit from the tools needed to meet these federal requirements as well. Work together with key stakeholders in order to develop short- and long-term goals that align with your organization's core business objectives. Supplier locator tools provide accurate, up-to-date company and supplier contact information that allows you to search and filter by diversity category, certification source, commodity and area of expertise, geographical location, and more.

Finally, document the entire process in a clear, written subcontracting plan in order to set up your company for success as a federal contractor.

Track Diverse Spend

Report, track, and visualize diverse spend data with a software solution that allows you to create custom reports and analyze spend across multiple dimensions. Evaluate growth and measure against your goals in order to ensure that you are meeting federal requirements as well as your organization's corporate objectives.

You can also track Tier 2 spend in order to meet spend goals, ensure that your subcontractors are in compliance, and identify potential problems before they arise. A robust, reliable tracking solution provides you with the data to file federal reports and meet compliance reviews and audits with confidence.

What is the difference between Tier 1 and Tier 2 Supplier Diversity Spend?

Track Diverse Suppliers

Supplier data is constantly changing. Mergers and acquisitions, ownership changes, and other factors can affect a supplier's diversity status. Data enrichment services help you track certification or classification status in order to mitigate risk and maintain the integrity of your diverse spend when preparing government reports.

Contracting with the federal government provides many growth opportunities, but you must be prepared for supplier diversity compliance requirements. Choosing the right tools to establish a solid subcontracting plan and a supplier diversity programbuilt on accurate datawill help you meet those requirements easily and confidently.

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For over a decade CVM's mission has remained unchanged: lead the transformation of Supplier Diversity program management and support Supplier Diversity programs. CVM helps corporate supplier diversity programs in every stage of their evolution; from those that are just getting started, to the most advanced, world-class programs. Equipped with unparalleled data intelligence, superior technology and expertise guidance, businesses can effectively establish and advance their Supplier Diversity initiatives.