Before the M/WBE program: What barriers was government trying to address?

Indiana has launched a replacement for its supplier-diversity program. Understanding what comes next starts with why the previous program existed.

This story is part of Our Times’ ongoing reporting on changes to Indiana’s minority- and women-owned business contracting program. [Read our earlier coverage.] Upcoming stories will compare the previous and replacement programs and explore business owners’ experiences with certification and government contracting.

A business can have the skills to perform a government contract and still lack the money to take it on. Employees must be paid. Equipment and materials must be purchased. Insurance and bonding requirements must be met—often before the business receives payment for its work.

“For a small business, that gap can be difficult to absorb, even when the opportunity itself could help the business grow significantly,” said Taylor Weiss, executive director of CDFI Friendly Evansville Region.

Those challenges can affect any small business. But for decades, policymakers and researchers have examined whether minority- and women-owned businesses face additional barriers, and whether government has a role in addressing them.

That question is central to Indiana’s debate over what comes next after Gov. Mike Braun suspended the state’s Supplier Diversity Program in July, ending new Minority Business Enterprise and Women’s Business Enterprise certifications and suspending existing certifications. The order left Indiana Veteran Owned Business certifications unaffected.

Braun announced the launch of the replacement Indiana Small Business Program on Sept. 30.

Understanding that change requires looking at why government intervened in the first place—and whether the barriers that prompted that intervention remain.

Why government intervened

Government contracting is a marketplace, but businesses do not necessarily enter it with equal access to resources and relationships.

Historically, Black Americans and other racial minorities faced explicit discrimination in employment, lending, property ownership and business opportunities. Women also faced legal and institutional barriers to economic participation.

Making discrimination illegal did not necessarily undo those effects. Businesses could have the legal right to bid while still lacking access to financing, contractor networks or the experience required to compete for larger projects.

Diane Clements-Boyd, executive director of the Evansville-Vanderburgh County Human Relations Commission, connected the origins of M/WBE programs to the broader goals of the civil rights movement.

“For decades, racial minorities and women faced systemic exclusion and limited access to opportunity in education, employment, housing, and economic participation,” Clements-Boyd said. “In response, the civil rights movement sought to confront these inequities and to promote fairness, equal opportunity, and meaningful participation in all areas of society.”

Affirmative action emerged in the 1960s as one tool intended to counteract the long-standing effects of discrimination, she said. Targeted initiatives developed in areas including higher education, workforce hiring and business development.

“M/WBE programs were created within this context,” Clements-Boyd said. “Their purpose is to increase participation, access, and economic inclusion for minority and women-owned businesses by addressing disparities in representation and expanding opportunities within public and private contracting.”

Marc H. Morial, president and CEO of the National Urban League, also pointed to a history of exclusion from public contracting.

“Black entrepreneurs and other entrepreneurs of color historically have faced legal segregation, discrimination in public procurement, exclusion from trade associations, unequal access to financing, and barriers to participation in major infrastructure and economic-development projects,” Morial said.

By the late 1960s and 1970s, governments began recognizing that minority-owned firms received only a small share of public contracting dollars despite being qualified to perform the work, he said.

That recognition contributed to the creation of the federal Office of Minority Business Enterprise, later the Minority Business Development Agency, and minority-business-enterprise and disadvantaged-business-enterprise initiatives.

“These programs were designed to address the effects of past and ongoing discrimination, expand competition, and ensure that public spending created opportunities for all segments of the economy,” Morial said.

What Indiana’s studies examined

Indiana has used disparity studies to inform participation goals by comparing actual spending with potential spending on minority- and women-owned businesses.

The 2020 State of Indiana Disparity Study examined construction, professional services, and goods and other services contracts awarded between July 1, 2013, and June 30, 2018. Researchers compared contracting dollars received by minority-, women- and veteran-owned businesses with their availability to perform the work.

Counting how many businesses exist does not establish how often qualified businesses receive government work.

The study also examined access to capital, business ownership and business success, alongside accounts of businesses’ marketplace experiences.

Indiana’s program included both race- and gender-neutral measures and race- and gender-conscious measures, including participation goals, as the Minority Business Development Agency’s overview of the study explains.

Certification did not guarantee a contract. Businesses still had to meet requirements, submit bids or proposals, compete on price and quality, and perform the work.

Likewise, a disparity does not automatically prove that a particular business experienced discrimination. The study identified underutilization in specific contracting categories, including public works, providing a basis for examining what contributed to those gaps.

Capital can determine who competes

For a small business, winning a large contract can create a financial burden before it produces a financial benefit.

Weiss said businesses may have the skills to perform the work but lack the financial resources to accept it.

“Limited working capital, inconsistent cash flow, difficulty accessing affordable financing, and the cost of hiring employees, purchasing equipment, carrying insurance, and meeting other contract requirements can all create barriers,” she said.

As contracts get larger, businesses often must spend more money before receiving payment. They may also need to demonstrate sufficient cash flow, credit capacity, bonding or insurance coverage to pursue the opportunity.

Those requirements can create a difficult cycle.

“A business needs enough financial strength to support the contract, but accessing the capital needed to build that strength can be difficult without an established track record,” Weiss said. “That can create a cycle where businesses have the opportunity to grow but cannot access the resources needed to take advantage of it.”

Research published by the U.S. Small Business Administration’s Office of Advocacy has examined access to capital among young, minority-owned and women-owned firms, as well as financing differences among women- and minority-owned businesses.

Clements-Boyd said those challenges also reflect historical differences in wealth accumulation.

“It is well documented that racial minorities and women have historically faced greater barriers in accessing loans and capital,” she said. “The accumulated wealth of a White family is about six times the wealth of that of a Black family.”

Starting a business requires substantial personal wealth or access to financing, she said.

“These challenges are vestiges of decades of exclusion from mainstream economic systems, where discriminatory practices limited their ability to accumulate wealth, build credit, and participate fully in financial markets,” Clements-Boyd said.

Morial similarly connected business financing to the effects of discriminatory lending.

“Access to capital is the foundation of business growth,” he said. “Redlining and discriminatory lending practices limited the ability of Black families to accumulate wealth and restricted entrepreneurs’ access to startup and expansion capital.”

Black-owned businesses remain less likely to obtain traditional financing and more likely to rely on personal savings or higher-cost capital, Morial said.

“Limited capital means fewer opportunities because firms are unable to build the capacity often required to compete for larger public and private contracts,” he said.

An SBA Office of Advocacy report on minority-owned employer businesses’ credit-market experiences examined financing patterns by owners’ race and ethnicity using 2017 Federal Reserve survey data.

More recently, Federal Reserve Governor Michael S. Barr discussed small-business lending and access to credit in a March 2025 speech, noting that financing challenges can be more pronounced for women and minority business owners.

Changing a contracting requirement does not, by itself, provide a bank loan, lower insurance costs or supply the money needed to cover payroll while awaiting payment.

Those practical conditions will continue to shape who can compete.

The relationship gap

Money is only part of the equation. A business also needs to know where opportunities are posted and how to reach the people awarding the work.

A small company may be qualified to perform part of a large project but need a relationship with the prime contractor responsible for the overall contract.

Indiana’s 2020 disparity study included business accounts of stereotyping, double standards and closed business networks. Supplier-diversity efforts sought to address participation through outreach and assistance as well as certification.

Weiss said losing an established certification or contracting system can affect those connections.

“These systems can provide small businesses with a way to identify opportunities, understand procurement requirements, build relationships with prime contractors, and gain visibility in markets that can otherwise be difficult to enter,” she said.

If those pathways disappear, businesses may have fewer connections and less information about accessing larger contracts.

“The key question is what resources, relationships, and opportunities will be available to fill that gap,” Weiss said.

Morial identified additional barriers, including exclusion from established contractor networks, difficulty meeting bonding and surety requirements, limited procurement information, and fewer chances to build the performance record required to win future work.

“They also were less likely to benefit from the informal relationships, mentorship, and business development networks that frequently generate bidding opportunities and strategic partnerships,” he said.

The size and structure of large contracts could further disadvantage smaller businesses lacking pathways into prime contractor roles, Morial said.

Removing a participation goal changes a requirement. It does not necessarily change the relationships that determine which businesses get introduced, considered or brought into a project.

Businesses seeking state opportunities can find bidding information, registration requirements and procurement guidance through Indiana’s Supplier Resource Center.

Legal context: What tools can government use?

The legal environment surrounding affirmative action and government contracting has changed since these programs began.

Race-conscious government contracting programs face constitutional limitations. Indiana’s 2020 disparity study’s legal analysis reviewed the standards and evidence relevant to such programs.

Clements-Boyd pointed to earlier Supreme Court decisions that shaped affirmative action policy.

The 1978 Regents of the University of California v. Bakke decision prohibited racial quotas in university admissions while allowing race to be considered as one factor, she said.

She also cited Fullilove v. Klutznick, a 1980 decision upholding a federal public-works provision allocating 10% of funds to minority-owned businesses as a remedy for past exclusion.

Those decisions are part of the history of affirmative action, rather than a complete account of the standards governing programs today.

The current debate therefore involves two distinct questions: Do disparities and barriers remain, and what tools can government legally use to address them?

What has improved—and what remains?

The previous M/WBE program did not eliminate every barrier. Its effectiveness, and the effectiveness of its replacement, depend on what happens beyond certification.

Clements-Boyd said minority business ownership has grown substantially.

“Recent Census data shows that minority-owned businesses make up approximately 22.6% of U.S. employer businesses compared to 7%-9% by the late 1980s,” she said. “While there has been growth, minority-owned businesses have lower average revenue, employment and profitability, and access to financing than comparable White-owned businesses.”

The Census Bureau release supporting the 22.6% figure was published in December 2024 and reflects business ownership in 2022.

Morial identified several improvements since these programs began: the elimination of explicit racial exclusion, certification programs, greater transparency in procurement, corporate supplier-diversity initiatives, and more entrepreneurial support and technical assistance.

He also pointed to greater recognition of minority-owned businesses as economic contributors.

However, barriers remain in traditional credit, venture capital and private investment, high-dollar contracts, prime contractor opportunities, business scale and representation among firms receiving government procurement dollars, he said.

For Southwest Indiana businesses, those issues have practical consequences: whether a company can move into larger projects, hire employees and sustain its growth.

Weiss said a new race- and gender-neutral program should help businesses build the capacity to compete, rather than focus only on who qualifies.

“That means connecting businesses to technical assistance, financial education, affordable capital, procurement education, bonding resources, and opportunities to develop relationships with prime contractors,” she said.

Businesses also need help understanding the financial and operational demands of moving from smaller contracts to larger ones.

“If we want businesses to compete successfully, we need to give them the tools and capital to build the capacity to do so,” Weiss said.

How to measure what comes next

The experts interviewed identified several ways to evaluate a replacement program:

• How many businesses participate, submit bids and win contracts.
• The number and value of prime contracts and subcontracts they receive.
• Whether businesses gain access to financing and bonding.
• Whether revenue, employment and the size of projects increase.
• Whether growth continues over time and contracting disparities narrow.

“Ultimately, the measure of success should be whether the program creates real pathways to opportunity and helps businesses build the financial and operational capacity to compete—not simply whether more businesses qualify under the new criteria,” Weiss said.

Morial said policymakers should examine whether Black-owned businesses receive a share of contracts and contracting dollars proportional to their availability in the marketplace.

“Ultimately, these programs should be judged by whether longstanding disparities in contracting outcomes narrow over time,” he said.

“If Black-owned businesses continue to receive disproportionately low shares of procurement dollars despite formally equal access, policymakers should examine whether structural barriers remain and adjust program design accordingly,” Morial said.

Clements-Boyd said organizations should continue examining disparities and their causes.

“Organizations should consistently evaluate where gaps exist, seek to understand the underlying causes, and take deliberate steps to close them,” she said.

Policymakers can support frameworks that consider characteristics such as socioeconomic status, veteran status and disability, she said. But she cautioned against abandoning analysis of racial and gender disparities.

“However, excluding race and sex from analysis does little to advance equal opportunity in Indiana,” Clements-Boyd said.

A new program, an ongoing test

Gov. Mike Braun announced the launch of the Indiana Small Business Program on Sept. 30, ahead of the Oct. 1 deadline his executive order set for developing its procurement policies and procedures. The initiative expands the existing Buy Indiana program to increase state purchasing from Indiana-based small businesses.

The state says participating businesses will have access to technical assistance, training and other programming to help them understand procurement and compete for contracts. Program information and application instructions are available through the Indiana Department of Administration.

For the experts interviewed, the test extends beyond establishing a new program: whether businesses gain the financing, relationships and opportunities to compete—and whether the disparities that prompted government intervention begin to narrow.