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Recent years have brought minority-owned businesses in the United States
unprecedented opportunities — as well as new and significant risks. Civil rights
activists have long argued that one of the principal reasons why Blacks,
Hispanics, and other minority groups have difficulty establishing themselves in
business is that they lack access to the sizable orders and subcontracts that
are generated by large companies. Now Congress, in apparent agreement, has
required by law that businesses awarded federal contracts of more than $500,000
do their best to find minority subcontractors and record their efforts to do so
on forms filed with the government. Indeed, some federal and local agencies have
gone so far as to set specific percentage goals for apportioning parts of public
works contracts to minority enterprises.
Corporate response appears to have been substantial. According to figures
collected in 1977, the total of corporate contracts with minority businesses
rose from $77 million in 1972 to $1.1 billion in 1977. The projected total of
corporate contracts with minority businesses for the early 1980’s is estimated
to be over 53 billion per year with no letup anticipated in the next decade.
Promising as it is for minority businesses, this increased patronage poses
dangers for them, too. First, minority firms risk expanding too fast and
overextending themselves financially, since most are small concerns and, unlike
large businesses, they often need to make substantial investments in new plants,
staff, equipment, and the like in order to perform work subcontracted to them.
If, thereafter, their subcontracts are for some reason reduced, such firms can
face potentially crippling fixed expenses. The world of corporate purchasing can
be frustrating for small entrepreneurs who get requests for elaborate formal
estimates and bids. Both consume valuable time and resources, and a small
company’s efforts must soon result in orders, or both the morale and the
financial health of the business will suffer.
A second risk is that White-owned companies may seek to cash in on the
increasing apportionments through formation of joint ventures with
minority-owned concerns. Of course, in many instances there are legitimate
reasons for joint ventures; clearly, White and minority enterprises can team up
to acquire business that neither could acquire alone. But civil rights groups
and minority business owners have complained to Congress about minorities being
set up as “fronts” with White backing, rather than being accepted as full
partners in legitimate joint ventures.
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