It’s never easy getting a small business off the ground — but for women, the challenge is particularly daunting. Women-owned small- and medium- sized enterprises (SMEs) across the world are underfunded by $1.5 trillion.
Estimates of the exact size vary, but the global public procurement market is huge, with the world bank placing it somewhere between 15% and 20% of global GDP. Governments could unlock staggering new funds for these women-owned firms if more of this money was sent in their direction.
But women-owned companies tend to be smaller, less experienced, and often require training and outreach to take advantage of procurement opportunities. So how can governments make sure their spending clout is helping women?
The Canadian approach
Canada is taking a shot at overcoming these barriers.
Currently, 10% of SME suppliers to the government are women-owned. The government hopes to reach 15%, the proportion of SMEs nationwide which are owned by women. The target is ambitious. The United States only hit its target of 5% in 2016 after 20 years of trying. But getting it right could unlock serious funds: between 2013 and 2016, on average, SMEs earned CA$5.5billion (US$4.2billion) annually from the Canadian government.
So how to meet the target? The Canadian government is still working out what tactics it will use, said Dr. Allan Riding of the University of Ottawa’s Telfer School of Management.
A report authored by Riding and colleagues from Telfer in collaboration with Public Services and Procurement Canada (PSPC) found that two of the biggest hurdles to businesses earning contracts were that women didn’t think they were suitable suppliers for government, or they didn’t know how to find contracting opportunities with the government.
One of the government’s strategies “is almost certainly going to be a means of letting businesses, women-owned firms particularly, know what sort of opportunities are available,” said Riding.
Riding’s research also found that the disparity between men’s and women’s participation in procurement differed across sectors — so a good solution should target areas where women lag behind.
But the gender disparity in specific sectors of public procurement is complicated by the nature of the industries women participate in. Women are less likely to own businesses in certain areas of government interest, such as defence and high tech.
“Women tend to be in sectors like retail and less likely to be in sectors like goods production and high tech.”
“There’s a sector-specific factor in our government’s shopping list that in some ways misses where most women-owned firms are located,” Riding said. “Research shows that women tend to be in sectors like retail services and less likely to be in sectors like goods production and high tech.”
Riding also wants the Canadian government to adopt an official definition of what makes a business “women-owned”. Many governments recognise women-owned SMEs as organisations with greater than 50% female ownership, but even an official definition has its shortcomings.
“Consider a businesses that might owned by majority women, but the minority male might be more influential in the decision-making, or vice-versa,” Riding said. “So how do you tell [if the business is women-owned]?”
One solution, currently used by the US, is requiring businesses to get certified as “women-owned” by third-party organisations such as WEConnect to qualify for gender-based government procurement.
A supply challenge
Still, in practice, including women in procurement budgets is not as simple as establishing a target for certified female-owned SMEs and waiting for these businesses to apply for contracts.
Imagine a country sets aside 20% of its procurement budget for women-owned businesses. If the country lacks a pipeline of women-owned SMEs that can supply 20% of the goods and services required by the federal government, then setting quotas might create a shortage of viable suppliers.
“There’s a challenge of supply, not just demand,” said Elizabeth Vazquez, CEO and co-founder of WEConnect. Governments also need to work with the private sector and civil society to develop the supply chain and market for women-owned SMEs, Vazquez said.
Public procurement agency ChileCompra, managed by Chile’s Ministry of Finance, is an example of government investment further up in the supply chain.
The organisation runs Mercado Publico, a public procurement platform for SMEs on which the equivalent of 4.2% of Chile’s GDP was traded in 2016. ChileCompra used the platform to launch a women’s certification scheme similar to the US’s and successfully pushed the government to advise that gender criteria be included in all public agencies’ purchases.
“Governments that do gender-based procurement well will have better access to all of their best suppliers”
But crucially, these changes followed initiatives that fuelled the development of women-owned SMEs in the first place.
ChileCompra launched a six-month mentorship program that taught 260 suppliers how to seek businesses opportunities and negotiate with the state. And in 2015, it began an annual 20-hour commercial management program to hone women’s leadership skills and management techniques.
That led to the launch of Chile’s first organisation of women government suppliers, the Association of Women Entrepreneur State Suppliers (AMEPE). AMEPE now serves as a networking centre for female suppliers and helps other women-owned SMEs obtain certification.
These initiatives contributed to a 25% uptick in women-owned businesses’ participation on Mercado Publico from 2013 to 2017, and were packaged into a policy toolkit that is making its way around the Latin American and Caribbean region.
Ultimately, it’s in all citizens’ — and not just women’s — best interest that these initiatives are adopted, since more supplier options are likely to result in a higher quality of service.
“Governments that do [gender-based procurement] well will have better access to all of their best suppliers,” said Vazquez. “They will be able to do a better job of anticipating and meeting the needs of all of their citizens.” — Alia Shahzad
(Picture credit: Pexels/Christina Morillo)
A previous version of this article cited a third party estimate for the size of the global public procurement market that, on reflection, we do not believe to be robust. It has been removed.