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More Power To You

A new empowerment contracting program offers small business a huge advantage.

Empowerment zones were one of those rare political ideas that evoked real excitement, quite simply because they made sense for all involved. Economically distressed areas would receive an injection of life, business owners would get to tap a market in need, and the federal government could encourage employment and discourage crime.

Too good to be true? Maybe not. Recently, the Commerce Department took the biggest step toward making empowerment contracting a reality since President Clinton first promoted the idea in August 1994. "One component of [Clinton's] affirmative action speech was his plan to establish a program that would provide preferences for businesses, regardless of race or gender, that were located in distressed areas," says Larry Parks, assistant to the secretary of the Commerce Department, and director of the Office of Regional Growth. "He wanted to use the government contracting system as a way to stimulate business growth in distressed areas."

This spring, after what Parks describes as "a lot of internal action," the Commerce Department plans to start testing its empowerment contracting program. Small-business owners have quite a bit to be excited about, as the program offers them a considerable advantage over big businesses. "When you're a federal contractor, you look for competitive advantages," says Parks. "And this is one of them. There is a huge advantage for small businesses in using the program."

The Commerce Department, says Parks, has set up a point preference program, which allows the government to "score" bidders. Though contracts traditionally go to the lowest bidder, this point system opens the door for higher bidders that are located in areas in which at least 20 percent of the population is considered distressed. Three qualifications would give businesses an edge in qualifying for government contracts: Fifteen to 25 percent of the employees would have to be residents of the distressed areas, at least
25 percent of the business's physical plant would have to be located there, and at least 15 percent of the subcontracting done would have to be with businesses in the distressed area.

According to Parks, big businesses have to meet two of these three criteria, while small businesses have to meet only one of the three, giving entrepreneurs great opportunities. "There have been a lot of changes in the federal procurement system designed to make it easier to do business with the government. However, a lot of small businesses feel that when we move to this efficiency level, we're actually just scaling back on dealing with small businesses," Parks acknowledges. "This gives them reassurance that that's not the case."

And, perhaps more important, it provides them with a chance to make a difference. "[Empowerment zones] can add to the tax base of communities that are really struggling," says Parks, "and employ people who are most in need. This represents a ray of hope for these communities, too. It shows them that the government is going to do everything it can to encourage new businesses to come there."

Starting in April, the Commerce Department will post Internet notices of empowerment contracting opportunities in the Commerce Business Daily.

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This article was originally published in the March 1997 print edition of Entrepreneur with the headline: More Power To You.

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