BBC Research & Consulting (BBC) conducted a disparity study to evaluate whether small businesses and microbusinesses as well as minority-, woman-, and service-disabled veteran (SDV)-owned businesses (collectively referred to as small and diverse businesses) face any barriers in the contracts and procurements the Commonwealth of Virginia state agencies and higher education institutions (HEIs) (collectively referred to as the Commonwealth) awarded. As part of the disparity study, we examined whether there are any disparities, or differences, between:

• The percentage of contract dollars the Commonwealth spent with small and diverse businesses during the study period, which was July 1, 2019 through June 30, 2024 (i.e., utilization or participation); and

• The percentage of contract dollars one might expect the Commonwealth to award to those businesses based on their availability to perform specific types and sizes of the prime contracts and subcontracts the organization awards (i.e., availability).

The Commonwealth’s Department of Small Business and Supplier Diversity (SBSD) operates the Small, Women-owned, and Minority-owned Business (SWaM) Program to encourage the participation of small and diverse businesses in its work. Information from the disparity study will help the Commonwealth and SBSD better understand outcomes for small and diverse businesses in its contracts and procurements, and help state agencies and HEIs address any substantial disparities between the participation and availability of those businesses for that work. Moreover, if the Commonwealth determines that it is appropriate use race- and gender-based measures as part of its contracting and procurement processes to address any substantial disparities for minority- and woman-owned businesses (e.g., awarding individual projects with the use of contract-specific participation goals), then the organization can rely on information from the disparity study to help ensure that its use of such measures adheres to the strict scrutiny and intermediate scrutiny standards of constitutional review, respectively.

A. Disparity Study Results

BBC analyzed approximately $27.1 billion worth of contracts and procurements for the construction, professional services, and non-professional services and goods contracts and procurements the Commonwealth awarded during the study period to measure the participation and availability of small and diverse businesses for that work to assess whether any disparities exist between those measures.(*1)

We summarize key results from those analyses below and identify sections of the report that provide more details about the methodology and results of each analysis.

1. Availability analysis (Chapter 6 and Appendix C of the report). BBC conducted a custom census availability analysis to estimate the availability of small and diverse businesses for Commonwealth work while accounting for the specific characteristics of relevant businesses that exist in the state of Virginia (the relevant geographic marketplace, or RGMA) and the specific characteristics of the relevant prime contracts and subcontracts the Commonwealth awards.

Figure ES-1 presents the availability of each relevant group of small and diverse businesses for all relevant contracts and procurements state agencies awarded during the study period, considered together. The availability of small businesses for state agency work is 88.5 percent, indicating that one might expect state agencies to award approximately 88.5 percent of its project dollars to small businesses based on the availability of those businesses for that work. The overall availability of microbusinesses is 40.4 percent.

The overall availability of minority-owned businesses considered together is 23.3 percent. Availability results differed for the individual minority-owned business groups we studied:

• The availability of Asian-owned businesses is 10.5 percent.

• The availability of Black-owned businesses is 7.7 percent.

• The availability of Hispanic-owned businesses is 4.7 percent.

• The availability of Native American-owned businesses is 0.4 percent.

The overall availability of White woman-owned businesses for state agency work is 13.6 percent, and the overall availability of SDV-owned businesses for state agency work is 7.1 percent.

BBC also estimated the availability of small and diverse businesses for tier 2 and tier 3 HEI contracts and procurements.(*2) Tier 2 HEIs have a memorandum of understanding with the Commonwealth that allows them contracting and procurement autonomy in two of the following three areas: procurement, capital outlay construction, and technology. In contrast, tier 3 HEIs have complete autonomy in their contracting and procurement. As shown in Figure ES-2, the overall availability of different business groups for tier 2 HEI work is as follows:

• The overall availability of small businesses is 89.1 percent.

• The overall availability of microbusinesses is 45.4 percent.

• The availability of minority-owned businesses considered together for all tier 2 HEI work is 17.7 percent. Availability results for that work differed for the individual minority-owned business groups we studied:

» The availability of Black-owned businesses is 5.9 percent.

» The availability of Hispanic-owned businesses is 5.9 percent.

» The availability of Asian-owned businesses is 5.5 percent.

» The availability of Native American-owned businesses is 0.4 percent.

• The overall availability of White woman-owned businesses is 11.9 percent.

• The overall availability of SDV-owned businesses is 3.2 percent.

The overall availability of different business groups for tier 3 HEI work is as follows:

• The overall availability of small businesses is 88.2 percent.

• The overall availability of microbusinesses is 38.5 percent.

• The availability of minority-owned businesses considered together for all tier 3 HEI work is 19.1 percent. Availability results for that work differed for the individual minority-owned business groups we studied:

» The availability of Asian-owned businesses is 6.7 percent.

» The availability of Hispanic-owned businesses is 6.5 percent.

» The availability of Black-owned businesses is 4.9 percent.

» The availability of Native American-owned businesses is 1.0 percent.

• The overall availability of White woman-owned businesses is 9.5 percent.

• The overall availability of SDV-owned businesses is 3.0 percent.

2. Utilization analysis (Chapter 7 of the report). BBC also calculated the participation of small and diverse businesses in the relevant contracts and procurements the Commonwealth awarded during the study period.(*3) As shown in Figure ES-3, state agencies awarded 59.0 percent of relevant project dollars to small businesses. The overall participation of microbusinesses in state agency work was 18.6 percent.

Additionally, state agencies awarded 10.7 percent of relevant project dollars to minority-owned businesses considered together. Individual minority-owned business groups exhibited different levels of participation in state agency work:

• The participation of Asian-owned businesses was 8.3 percent.

• The participation of Black-owned businesses was 1.2 percent.

• The participation of Hispanic-owned businesses was 1.1 percent.

• The participation of Native American-owned businesses was 0.1 percent.

In addition, state agencies awarded 4.1 percent of relevant project dollars to White woman-owned businesses and 0.8 percent to SDV-owned businesses.

BBC also assessed the participation of small and diverse businesses in tier 2 and tier 3 HEI contracts and procurements. As shown in Figure ES-4, the overall participation of different business groups in tier 2 HEI work was as follows:

• The overall participation of small businesses was 68.9 percent.

• The overall participation of microbusinesses was 14.3 percent.

• The participation of minority-owned businesses considered together for all tier 2 HEI work was 7.6 percent. Participation in that work differed for the individual minority-owned business groups we studied:

» The participation of Asian-owned businesses was 1.1%.

» The participation of Black-owned businesses was 5.1%.

» The participation of Hispanic-owned businesses was 1.1%.

» The participation of Native American-owned businesses was 0.3%.

• The overall participation of White woman-owned businesses was 7.7 percent.

• The overall participation of SDV-owned businesses was 0.6 percent.

The overall participation of different business groups in tier 3 HEI work was as follows:

• The overall participation of small businesses was 74.9 percent.

• The overall participation of microbusinesses was 20.4 percent.

• The participation of minority-owned businesses considered together for all tier 3 HEI work was 3.3 percent. Participation in that work differed for the individual minority-owned business groups we studied:

» The participation of Asian-owned businesses was 1.0%.

» The participation of Black-owned businesses was 1.0%.

» The participation of Hispanic-owned businesses was 1.2%.

» The participation of Native American-owned businesses was 0.1%.

• The overall participation of White woman-owned businesses was 4.7 percent.

• The overall participation of SDV-owned businesses was 0.3 percent.

3. Disparity analysis (Chapter 8 and Appendix D). The crux of the disparity study was to assess whether any disparities exist between the participation and availability of small and diverse businesses for Commonwealth work. A substantial disparity between participation and availability—that is, a disparity index of less than $0.80—indicates that the group is considered to have been substantially underutilized relative to its availability. Many courts have considered substantial disparities as inferences of discrimination against particular business groups, and they often serve as justification for organizations to use relatively aggressive measures—such as race- and gender-based measures—to address corresponding barriers (for details, see Chapter 2).

Figure ES-5 presents disparity indices for small and diverse businesses for all relevant prime contracts and subcontracts state agencies awarded during the study period. As shown in Figure ES-5, small businesses exhibited a disparity index of $0.67 for all relevant contracts and procurements state agencies awarded during the study period, indicating a disparity where they awarded $0.67 to small businesses for every $1.00 one might expect state agencies to award to those businesses based on their availability for state agency work. Microbusinesses exhibited a disparity index of $0.46 for all state agency work considered together.

Minority-owned businesses considered together exhibited a disparity index of $0.46 for all relevant contracts and procurements state agencies awarded during the study period. Asian-owned businesses (disparity index of $0.79), Black-owned businesses (disparity index of $0.16), Hispanic-owned businesses (disparity index of $0.24), and Native American-owned businesses (disparity index of $0.24) exhibited substantial disparities for state agency work.

White woman-owned businesses exhibited a substantial disparity (disparity index of $0.30) for all relevant contracts and procurements state agencies awarded during the study period. SDV-owned businesses also exhibited a substantial disparity (disparity index of $0.11) for state agency work.

BBC also measured overall disparities of small and diverse businesses for tier 2 and tier 3 HEI contracts and procurements. As shown in Figure ES-6, overall disparity indices of different business groups for tier 2 HEI work are as follows:

• Small businesses exhibited a substantial disparity with a disparity index of $0.77.

• Microbusinesses exhibited a substantial disparity with a disparity index of $0.32.

• Minority-owned businesses considered together exhibited a substantial disparity with a disparity index of $0.43 for all tier 2 HEI work. There were some differences in disparities when considering each individual minority-owned business group separately:

» Asian-owned businesses (disparity index of $0.20), Hispanic-owned businesses (disparity index of $0.18), and Native American-owned businesses (disparity index of $0.65) exhibited substantial disparities for tier 2 HEI work.

» In contrast, Black-owned businesses exhibited a disparity, though not a substantial disparity, for tier 2 HEI work (disparity index of $0.87).

• White woman-owned businesses exhibited a substantial disparity with a disparity index of $0.65.

• SDV-owned businesses exhibited a substantial disparity with a disparity index of $0.19.

The overall disparity indices of different business groups for tier 3 HEI work are as follows:

• Small businesses exhibited a disparity, though not a substantial disparity, with a disparity index of $0.85.

• Microbusinesses exhibited a substantial disparity with a disparity index of $0.53.

• Minority-owned businesses considered together exhibited a disparity index of $0.17 for all tier 3 HEI work. Each individual minority-owned business group exhibited substantial disparities for tier 3 HEI work, though there were some differences in disparities when considering each individual minority-owned business group separately:

» Asian-owned businesses exhibited a disparity index of $0.15.

» Black-owned businesses exhibited a disparity index of $0.20.

» Hispanic-owned businesses exhibited a disparity index of $0.18.

» Native American-owned businesses exhibited a disparity index of $0.12.

• White woman-owned businesses exhibited a substantial disparity with a disparity index of $0.49.

• SDV-owned businesses exhibited a substantial disparity with a disparity index of $0.09.

a. Comparison across project sets. BBC assessed disparities across numerous sets of projects associated with Commonwealth work. Figure ES-7 presents a visualization of various state agency project sets for which relevant small and diverse business groups exhibited substantial disparities, as indicated by black circles. Figure ES-8 presents a visualization of various HEI project sets for which relevant small and diverse business groups exhibited substantial disparities. As shown in Figures ES-7 and ES-8, all relevant small and diverse business groups exhibited substantial disparities for various project sets BBC examined as part of the disparity study.

b. Comparisons to 2020 Commonwealth disparity study. BBC last conducted a disparity study for the Commonwealth in 2020. It is instructive to compare disparity indices for small and diverse businesses in state agency work between the 2020 and 2025 disparity studies to assess whether outcomes are improving for those businesses in state agency work over time.

Since the 2020 disparity study was conducted, BBC made two relevant changes in methodology:

• The utilization analyses in the 2025 study focused only on businesses that had a location in the RGMA. In the 2020 study, BBC included businesses outside of the RGMA as part of the utilization analysis.

• As part of the 2025 study, BBC used Markov Chain Monte Carlo (MCMC) simulations to improve the accuracy of the availability analysis to better account for random error or potential for unintended bias (see Chapter 6 for more details on MCMC analyses). The availability estimates reported in Chapter 6 are the availability estimates we observed adjusted for results from the MCMC process. The 2020 disparity study did not include an MCMC analysis as part of the availability analysis.

To more accurately assess changes in disparity results for minority- and woman-owned businesses since 2020, BBC presents 2025 disparity results in Figure ES-9 based on availability estimates that have not undergone the MCMC analysis and utilization results that include businesses both within and outside the RGMA.

Figure ES-9 presents overall disparity indices for minority- and woman-owned business groups for all relevant state agency projects considered together from the 2020 and 2025 disparity studies. As shown in Figure ES-9, minority-owned businesses considered together exhibited smaller disparities in 2025 (disparity index of $0.44) than in 2020 (disparity index of $0.37). Disparity analysis results differed by individual minority-owned business group and study year:

• Asian-owned businesses exhibited a smaller disparity in 2025 (disparity index of $0.62) than in 2020 (disparity index of $0.17).

• Black-owned businesses exhibited a larger disparity in 2025 (disparity index of $0.20) than in 2020 (disparity index of $0.49).

• Hispanic-owned businesses exhibited a larger disparity in 2025 (disparity index of $0.31) than in 2020 (disparity index of $0.62).

• Native American-owned businesses exhibited a smaller disparity in 2025 (disparity index of $0.31) than in 2020 (disparity index of $0.05).

White woman-owned businesses exhibited a smaller disparity in 2025 (disparity index of $0.39) than in 2020 (disparity index of $0.50).

B. Guidance (Chapter 11 of the report)

The disparity study provides substantial information that the Commonwealth could examine as it considers potential refinements to its implementation of the SWaM Program and other efforts to further encourage the participation of small and diverse businesses in its contracts and procurements. BBC presents several recommendations for the Commonwealth’s consideration.

1. Certification. SBSD certifies small businesses and microbusinesses, as well as minority-, woman-, and SDV-owned businesses, as part of its SWaM Program. Results from the disparity study may suggest that businesses are unaware of the SWaM Program, that certification is a barrier to some businesses that would qualify, or perhaps that businesses may not see benefits to obtaining SWaM certification. The Commonwealth could consider measures it could take to ensure that its certification processes are accessible, efficient, and aligned with the Commonwealth’s broader inclusion objectives. In particular, the Commonwealth could consider:

• Expanding education and awareness of its SWaM Program to encourage more businesses to seek out certification and participate in the program measures; and

• Re-evaluating its certification criteria to ensure that only businesses that are truly small meet the agency’s definition and thus can benefit from program measures reserved for small businesses.

2. Small business support. The Commonwealth already uses a variety of race- and gender-neutral program measures to encourage the participation of all small businesses in its contracts and procurements. To address the disparities that small businesses and microbusinesses experience in its work, the Commonwealth could also explore additional program measures targeted toward small businesses and microbusinesses, with measures tailored to each size tier. In particular, the Commonwealth could consider:

• Refining its use of set asides to ensure that small business set asides are effectively encouraging the participation of small businesses and microbusinesses; and

• Setting contracting goals for small business participation on the individual contracts and procurements it awards.

3. Business development. The Commonwealth could consider expanding its program measures designed to support small and diverse businesses by expanding business development opportunities specifically tailored to helping these businesses build capacity and perform work for the Commonwealth and other public sector organizations. In particular, the Commonwealth could consider:

• Expanding its networking and outreach efforts to introduce new businesses to work opportunities;

• Expanding technical assistance programs, including business incubators, administrative assistance, and bid and proposal support; and

• Re-establishing a Mentor-Protégé Program as a permanent statewide measure to introduce new businesses to prime contractors and Commonwealth decision makers, guide growing businesses, and increase the capacities of these businesses to perform Commonwealth work as prime contractors or prime consultants themselves.

4. Procurement policies. The Commonwealth could consider refining its contract and procurement policies in ways that make Commonwealth work more accessible to a greater number of businesses, including small and diverse businesses. In particular, the Commonwealth could consider:

• Unbundling large contracts into smaller contract elements; and

• Exploring different ways to engage with businesses that have not participated in its work in the past.

5. Monitoring and data collection. The Commonwealth currently maintains comprehensive data on the participation of certified SWaM businesses in Commonwealth work, which it reports as part of its SWaM Expenditure Dashboard. The Commonwealth could continue to collect this information, as well as consider how it can monitor the success of its contracting inclusion methods in greater depth and detail. In particular, the Commonwealth could consider:

• Requiring that all state agencies gather subcontractor data on all subcontractors, regardless of SWaM certification status;

• Requiring bidders and proposers to report whether they plan to work with subcontractors on the project, and if they are planning to do so, provide information about each subcontractor, regardless of certification status, as part of their bid and proposal submissions;

• Strengthening SWaM Program compliance measures with state agencies and prime contractors; and

• In addition to tracking the overall volume and percentage of dollars the Commonwealth awards to small and diverse businesses, tracking other Key Performance Indicators that better reflect all the value that the SWaM Program provides.

6. Race- and gender-based measures. The Commonwealth currently only uses race- and gender-neutral program measures as part of its implementation of the SWaM Program, which are designed to encourage small business participation in Commonwealth work, regardless of the race/ethnicity or gender of business owners. However, disparity study results as well as qualitative evidence collected as part of the disparity study indicate that the Commonwealth could consider whether race- and gender-based measures would help address the disparities that minority- and woman-owned businesses in particular face as part of the organization’s contracting and procurement processes. In particular, the Commonwealth should consider whether it has maximized its use of race- and gender-neutral measures, including fully leveraging existing race- and gender-neutral measures and considering whether additional measures might be sufficient to address disparities without the use of race or gender classifications. If the Commonwealth decides to implement race- or gender-based measures, then it must ensure that its use of those measures meets the requirements of the strict scrutiny standard of constitutional review, including showing a compelling governmental interest for their use and ensuring that their use is narrowly tailored (see Chapter 2 for more information).

7. Overall aspirational goals. Currently, the Commonwealth has an overall aspirational goal for the participation of SWaM-certified small businesses in Commonwealth contracts and procurements. As part of its implementation of the SWaM Program, the Commonwealth could update its overall aspirational goal for the participation of small businesses and establish separate annual overall aspirational goals for the participation of microbusinesses, as well as minority-, woman-, and SDV-owned businesses in its contracting. The Commonwealth could follow a common two-step process to develop overall aspirational goals for small and diverse businesses, which would consist of establishing a base figure (based on the availability of each business group for Commonwealth work) and considering an adjustment to its base figure based on the past participation of those businesses in Commonwealth work, information about local marketplace conditions, and other factors that might impact the ability of those businesses to compete for and perform work on its contacts.
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(*1) BBC assessed results for small and diverse business groups regardless of certification status based on whether a business’ size or ownership characteristics aligned with the corresponding certification criteria for that group. To estimate a business' ability to qualify as a small business or microbusiness, BBC used a combination of primary and secondary data collection as well as data modeling. As part of BBC's business surveys, business representatives were asked to report business size in terms of revenue and number of employees, and to disclose any affiliates, parent companies, or subsidiaries. For non-certified utilized businesses with which BBC did not conduct a business survey, we relied on business size and company structure information from Dun & Bradstreet (D&B). BBC used a predictive regression model to correct for gaps and errors in D&B's business size information. For businesses that have affiliates, parent companies, or subsidiaries, BBC used business size for the entire corporate structure, in terms of revenue and number of employees, to determine business eligibilty as a potential small business or microbusiness, rather than on the structure of ownership interests.
(*2) Tier 2 HEIs are Christopher Newport University, Longwood University, Norfolk State University, Old Dominion University, Radford University, University of Mary Washington, Virginia Community College System, Virginia Military Institute, and Virginia State University. Tier 3 HEIs are the University of Virginia, Virginia Polytechnic Institute and State University, Virginia Commonwealth University, James Madison University, George Mason University, and the College of William & Mary.
(*3) The Commonwealth tracks the participation of small and diverse businesses in its contracting and procurement through its SWaM expenditure dashboard. The percentage of certified small business participation in Commonwealth contracts and procurements reported as part of the disparity study does not align with the percentage reported by the SWaM expenditure dashboard for various reasons. The Commonwealth has established a hierarchy for reporting participation by SWaM-certified businesses, and it does not count any single business in multiple categories (i.e., if a business is certified as a small business and a minority-owned business, the Commonwealth would report that participation as minority-owned business participation; in contrast, BBC would report that participation as both small business participation and minority-owned business participation). In addition, there are various differences in BBC and the Commonwealth’s determination of discretionary spending. See Chapter 5 for information about the types of contracts and procurements that were not considered as part of the disparity study and the volumes of dollars included in each of those categories.