{"id":2275,"date":"2007-04-05T13:15:00","date_gmt":"2007-04-05T13:15:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2007\/04\/05\/the-price-of-supplier-diversity\/"},"modified":"2021-07-29T09:55:33","modified_gmt":"2021-07-29T13:55:33","slug":"the-price-of-supplier-diversity","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/the-price-of-supplier-diversity\/","title":{"rendered":"The Price of Supplier Diversity"},"content":{"rendered":"

One of the decisions to make when starting a supplier diversity program is whether or not to pay a premium to use more diverse suppliers.<\/p>\n

I know for a fact that some purchasing departments will select a higher-priced diverse supplier if they are within a certain percentage of the low bid. What I don\u2019t know is if these departments measure how much of a premium for diverse suppliers they pay on an annual basis. Are they making a $50,000\/year investment in supplier diversity? A $250,000 investment? $1 million?<\/p>\n

I don\u2019t know.<\/p>\n

I started thinking about this after reading this article in today\u2019s Pittsburgh Post-Gazette. Basically, an employee of a prospective vendor \u2013 Westmoreland Electric (WE) \u2013 is suing the Pittsburgh Public Schools over losing a bid to a higher-priced competitor with more subcontracting dollars directed to diverse suppliers.<\/p>\n

The article points out that the Schools are paying the successful bidder $200,000 more than WE\u2019s bid. Reading closely, it\u2019s not necessarily an issue of paying a premium for diverse suppliers but rather a matter of rules.<\/p>\n

In government purchasing, rules are king. Bottomline benefit doesn\u2019t matter as much as ensuring that rules are followed. And, based on what\u2019s in the article (and not necessarily true), it appears that both sides may have failed to follow the rules.<\/p>\n

The RFP required that 15% of the value of the contract be utilized to subcontract to diverse suppliers. WE\u2019s bid fell 0.38% short of that goal, so their bid was disqualified. WE \u201csaid the district has the right to forgive minor problems with bids, especially if it means saving the taxpayers $200,000.\u201d<\/p>\n

But, you know what? Too bad.<\/p>\n

Just because the Schools have the \u201cright\u201d to waive irregularities with bids, doesn\u2019t mean that they have the obligation to. In government purchasing, a rule is a rule, and setting the bar only to move it later would be unethical in my opinion.<\/p>\n

Now in private industry, sure, $200k to the bottom line might be a more valid reason to waive the irregularity.<\/p>\n

In my mind, the bigger issue is whether the school board broke a rule with regard to awarding \u201cthe bid without the waiting period it usually gives to disqualified bidders for objecting.\u201d If this waiting period is a \u201crule\u201d rather than a \u201ccustomary practice,\u201d then there is likely going to be a battle.<\/p>\n

But, even then, I think that in government purchasing, you cannot waive a requirement even if it makes financial sense to do so. That\u2019s just the nature of the beast.<\/p>\n

You gotta be fair. You gotta follow the rules.<\/p>\n

And I think that WE have to be the loser here, even if they could have saved Pittsburgh taxpayers $200,000.<\/p>\n

But that\u2019s just one small example of paying a premium for supplier diversity. How much of a premium is your organization paying for supplier diversity?<\/p>\n

And, if that number was higher than expected, would your executive-level management make changes to your supplier diversity program? Or would they still consider it a worthwhile investment?<\/p>\n

Food for thought, huh?<\/p>\n

Recommended Reading<\/b><\/span><\/p>\n