New report shows Defense and Treasury lag in doing business with small, disadvantaged and minority-owned advertising companies.
Democratic lawmakers sent a letter to the Defense and Treasury secretaries late Monday, calling on them to award more advertising contracts to small, disadvantaged and minority-owned businesses.
"The Defense and Treasury departments are woefully behind the curve," said Sen. John Kerry, D-Mass., who joined Sens. Harry Reid, D-Nev. and Chuck Schumer, D-N.Y., in signing the letter. Rep. Carolyn Kilpatrick, D-Mich., also signed. The letter asks Defense Secretary Robert Gates and Treasury Secretary Henry Paulson to provide details as to what action the departments are taking to increase the advertising contracts they give to minority-owned businesses.
The letter came in response to a Government Accountability Office report released Monday showing that the two departments lag behind others in fulfilling Executive Order 13170. The order, signed in October 2000 by then President Bill Clinton, calls for agencies to "aggressively" market contracts, including advertising ones, to minority-owned firms.
The report (GAO-07-877), requested by the senators in late 2006, found that the Defense Department accounted for more than half of the total that the government spent on advertising contracts from fiscal 2001 to fiscal 2005, but only 1.8 percent of the money Defense spent on such contracts went to small, disadvantaged and minority-owned firms. By contrast, NASA, which awarded less than 1 percent of all federal advertising dollars during that period, gave 88.9 percent to traditionally underrepresented firms.
Treasury awarded 15.9 percent of the total spent on advertising in the same years, with 1.9 percent of the department's spending going to small firms. Overall, the government awarded 5 percent of advertising contract dollars to these firms between fiscal 2001 and fiscal 2005, the report said.
"I disagree with that amount," said Harry Alford, president and chief executive officer of the National Black Chamber of Commerce, a business association that reaches an estimated 100,000 black-owned businesses. Alford said the amount must be less, particularly since some prominent black media outlets have been bought out by European companies in the past decade. "Those businesses no longer even qualify as minority-owned," he said.
Alford said that if the government wants to work with minority-owned advertising shops, it should maintain a database of such companies and look to that when opportunities arise. He said there are about 50 black-owned advertising agencies in the nation, and about 75 Hispanic-owned.
He also disagreed with the idea that only large firms could create large advertising drives, such as military recruitment campaigns. "It's not like construction where you've gotta buy equipment," he said. "It can be done with a relatively small staff if you've got the background."
Patricia Perez, spokeswoman for the California-based Latin Business Association, agreed. "There are some long-term government vendors who have locks on contracts, so small businesses are forced to be subcontractors getting a very small percentage of the budget to do niche marketing," she said. "[Hispanic ad shops] have the expertise and the skills to be able to do a full-blown general market campaign, if given the opportunity."
Perez said the private sector has done a good job of reaching out to minority-owned businesses. "They give business sessions to small businesses, even ones that do not have contracts with them, on everything from marketing yourself to financing," said Perez, adding that firms send e-mails to minority-owned businesses, maintain "helpful" Web sites and hold contracting fairs. "Those are the things that we haven't seen from the government," she said.
GAO found the executive order followed small business contracting guidelines already laid out in legislation, and most agencies relied on existing training and outreach to fulfill the order's requirements. NASA, for example, offers a three-day training course for small businesses, while the Interior Department advertises contracts to small business trade associations.
The executive order did not set numeric goals for the contract dollars to be awarded to underserved firms.