Audit of the Supplier Diversity Office Overview of Audited Entity

This section describes the makeup and responsibilities of the Supplier Diversity Office.

Overview

In November 2020, the Governor filed legislation, which became Chapter 262 of the Acts of 2020, which established the Supplier Diversity Office (SDO) as an independent state agency operating under the oversight of the Executive Office for Administration of Finance. This law went into effect in January 2021. Before this, the functions of SDO were performed by the Operational Services Division (OSD).

According to SDO’s website, its mission statement is as follows:¹

To promote diversity, equity and inclusion in state contracting by:

1.   Certifying diverse businesses (minority, women, veteran, service-disabled veteran, disability and LGBT-owned) and small Massachusetts-based businesses;

2.   Connecting these companies with business opportunities and resources that enhance their marketability when bidding on public contracts; and

3.   Collaborating with Executive Agencies and public organizations to:

          a.   Identify and remove barriers for diverse and small businesses; and

          b.   Increase diverse and small business spending.

SDO started fiscal year 2021 with 13 employees. These employees were originally OSD employees who were transferred to SDO when it became an independent state agency. By the end of that fiscal year, the number of SDO employees increased to 16. By the end of fiscal year 2022, SDO’s employee count had increased again, this time to 28.

According to SDO officials, SDO has expanded its Compliance Unit since becoming an independent agency; however, SDO did not meet its staffing goals for its Compliance Unit until February 2022.

SDO’s budgets were approximately $990,880 for fiscal year 2021 and $2,477,960 for fiscal year 2022.²

SDO Programs

In its mission to provide oversight to promote diversity, equity, and inclusion in state contracting, SDO administers five key programs: the Small Business Purchasing Program, the Certification Program for SDO, the Supplier Diversity Program (SDP), the Municipal Construction Affirmative Marketing Program, and the Individuals with Disabilities in State Procurement and Contracting Program. The scope of this audit covers the following three programs: the Small Business Purchasing Program, the Certification Program for SDO, and the SDP.

Small Business Purchasing Program

The goal of SDO’s Small Business Purchasing Program is to increase state contracting opportunities for small businesses. This program also involves following contract bid solicitation³ criteria, which ensures that state contracting opportunities are available to small businesses across the Commonwealth.

Certification Program for SDO

The Certification Program for SDO involves certification for diverse and small businesses that are interested in public and private business opportunities in the Commonwealth. According to SDO’s website,

SDO certification is a marketing tool used to enhance a firm’s ability to do business in public and private markets. Although certification does not guarantee that a business will be successful every time it bids, it may add a competitive edge to firms seeking contracts with the government.

Through this program, SDO offers and awards business certification in different categories. SDO also recognizes some third-party certifications awarded by partnership organizations. During the audit period, SDO offered, awarded, and/or recognized the following business certification categories:

Business Certification Category	Offered and Awarded by SDO	Offered and Awarded by Third Parties; Recognized by SDO
Minority-Owned Business Enterprise (MBE)	Yes	Yes
Women-Owned Business Enterprise (WBE)	Yes	Yes
Veteran Business Enterprise (VBE)	Yes	Yes
Minority Non-profit Organization	Yes	No
Women Non-profit Organization	Yes	No
Veteran Non-profit Organization	Yes	No
Portuguese-Owned Business Enterprise	Yes	No
Service-Disabled Veteran–Owned Business Enterprise (SDVOBE)	No	Yes
Disability-Owned Business Enterprise (DOBE)	No	Yes
Lesbian, Gay, Bisexual, Transgender Business Enterprise (LGBTBE)	No	Yes

In order for SDO to award and/or recognize a business with one or more of the above certifications, that business’s board and voting body must have a membership majority (or 51%) that meets the specific requirements of the certification category(ies) in question.

SDO’s Diverse and Small Business Certification Unit serves as the first point of contact for businesses seeking any of these certifications. This unit is composed of a director, an intake coordinator, a renewal coordinator, four investigators, and an analyst.

Precertification Workshop

The first step a business must take toward becoming certified by SDO involves attending a two-hour precertification workshop, which is hosted online as a webinar. This workshop includes information about the certification process, qualifications that businesses need in order to become certified, and regulations that certified businesses need to follow to retain their certifications.

After a business successfully completes the precertification workshop, it receives a hyperlink to create a user profile that is connected to the Certrak system (see the “Certrak” section for more information). Once the business creates its profile, it then completes an application form and submits all supporting documents through Certrak. Next, SDO’s intake coordinator reviews the application for completeness and either accepts or rejects the application.

Rejected Applications

If the intake coordinator rejects an application, partially or completely, Certrak generates an email to the business, which is given 30 days to correct deficiencies and upload proper documentation. If a business does not make these updates, then the business’s application is inactivated and an SDO systems analyst informs the business by email about its application’s inactivation. In order to reapply through Certrak, the business must either wait 90 days or request and receive a waiver from SDO’s intake coordinator or director of diverse and small business certification.

Accepted Applications

If an application is accepted by the intake coordinator, a unit director assigns an investigator to the application for review. This investigator conducts a desk audit of the application, which includes reviewing all the business’s submitted documentation. After this, the investigator conducts either a site visit or telephone interview with the business applicant. The investigator then prepares a detailed report for SDO’s Certification Committee, recommending to either approve or deny the application.

SDO’s Certification Committee reviews the report, provides feedback (if any) to the investigator, and makes requests for clarifying information (if any) from the business. SDO’s Certification Committee notifies the business of its decision through either email or certified mail.

SDP

One of SDO’s goals is to increase opportunities for certified diverse and small businesses in state contracting. One way SDO does this is through the SDP and by setting SDP spending benchmarks. Only businesses certified by SDO or SDO-recognized third-party certification organizations qualify for the SDP.

SDO is responsible for setting annual state agency SDP spending benchmarks in consultation with the Office for Access and Opportunity, which falls under the Office of the Governor. SDO sets these annual SDP spending benchmarks for SDP-participating agencies by the following business certification categories: MBEs, WBEs, VBEs, SDVOBEs, DOBEs, and LBGTEs. The annual SDP spending benchmarks are expressed as a percentage of the discretionary budget for each SDP-participating state agency.

In fiscal year 2021, SDO set the SDP spending benchmarks as follows:

Business Certification Category*	Spending Benchmark (Percent of State Agency’s Discretionary Budget)
MBE	8%
WBE	14%
VBE and/or SDVOBE	3%

*      Other business certification categories were not included in this table because they did not have set spending benchmarks during fiscal year 2021.

In fiscal year 2021, 73 organizations participated in the SDP, falling into three organization types: executive branch state agencies, non-executive branch state agencies and constitutional offices,⁴ and quasi-public entities.⁵ Only executive branch state agencies are required to participate in SDO’s procurement programs, which include the Small Business Purchasing Program and the SDP. Non-executive branch state agencies, constitutional offices, and quasi-public entities can voluntarily participate in the SDP.

SDP Participants by Organization Type During Fiscal Year 2021

Participating organizations may use two types of spending to achieve SDP spending benchmarks: direct spending or indirect spending. In order to be considered SDP spending, direct spending must involve statewide or department contractors with at least one of the following certification categories: MBE, WBE, VBE, SDVOBE, DOBE, or LGBTBE. Indirect spending results from business partnerships between a public purchaser⁶ and a contracted vendor that uses MBE-, WBE-, VBE-, SDVOBE-, DOBE-, or LGBTBE-certified vendors or subcontractors.

During the audit period, SDO monitored the progress toward meeting spending benchmarks for the state agencies participating in the SDP—either mandatorily or voluntarily—by requesting SDP spending data from OSD, since OSD manages and collects data on statewide contracts executed by state agencies. SDO analyzes the data and transfers the information into a progress report, which is emailed monthly to each SDP-participating state agency, OSD, and the secretariats that oversee state agencies. This report shows each SDP-participating state agency’s progress toward meeting spending benchmarks.

After the audit period, SDO implemented a new monitoring process in March 2023. This new process includes leveraging the Supplier Diversity HUB system (HUB) (see the "HUB" section for more information), which allows SDO to manage all SDP information available in one system. In addition, SDO started holding mid-year reviews, which are optional meetings with SDP-participating state agencies, in which SDO provides these agencies with feedback and recommendations on ways to improve their progress toward meeting spending benchmarks.

SDP Spending Compliance Verification

All statewide contractors are required to report their spending to OSD. Statewide contractors involved with the SDP have additional obligations: They must report the companies with which they have done business each fiscal year.

To ensure that statewide contractors are fulfilling their contractual obligations, SDO’s Compliance Unit monitors statewide contractors’ indirect spending. To do this, SDO sends a request to OSD for all fiscal year–end indirect spending from statewide contractors, since OSD collects this information. Then, SDO’s Compliance Unit emails the SDP partner,⁷ asking it to categorize as accurate, overstated, or understated the amount they received from the statewide contractor (see the following bulleted list for more information) and to include the dollar amount reported to it. If an SDP partner does not respond, SDO’s Compliance Unit sends it a follow-up email. Once SDO receives a response from the SDP partner, SDO’s Compliance Unit records the following information:

• the diversity spending amount category;

• accurate—the statewide contractor spent within 10% of what it reported to OSD;
• overstated—the statewide contractor spent less than what it reported to OSD;
• understated—the statewide contractor spent more than what it reported to OSD;

• whether the SDP partner responded;
• the reported diversity spending amount from OSD;
• the confirmed amount from the SDP partner; and
• the percent difference between the reported and confirmed diversity spending amount.

For discrepancies greater than a 10% margin of what was reported by the SDP partner, SDO’s Compliance Unit emails the statewide contractor requesting an explanation for the discrepancy and includes OSD on this email, since OSD manages statewide contracts. SDO then works with the statewide contractor to determine the discrepancy. However, not all discrepancies are resolved. If a discrepancy is not resolved, then SDO will escalate the matter to OSD. 

SDO Marketing, Communications, and Training Unit

The Marketing, Communications, and Training Unit is responsible for promoting to diverse and small businesses upcoming contract bidding opportunities. This promotion includes notifying certified businesses of upcoming contract bidding opportunities, hosting training sessions, and providing them with needed resources (e.g., technical assistance) to assist them in submitting a bid.

In addition, this unit manages the SDO website to ensure that it contains accurate and up-to-date information for stakeholders. This information includes topics such as any changes in the certification process or any regulations that may affect certified businesses. The Marketing, Communications, and Training Unit also runs SDO’s social media platforms (e.g., SDO’s accounts with LinkedIn and X, formerly known as Twitter), and a monthly newsletter that goes out to all certified vendors.

This unit also manages training activities. These training activities target public buyers, certified businesses, and potential business applicants. Offered training includes educating participants on how to use HUB and facilitating onboarding processes. According to its website, SDO training is available through instructor-led online sessions, prerecorded videos, and job aids.

Certrak

SDO’s Diverse and Small Business Certification Unit uses a proprietary system called Certrak to oversee the certification process. SDO makes its business certification application available to business applicants through its website using Certrak. SDO also uses Certrak to track the SDP-related information of certified businesses. 

HUB

SDO’s proprietary HUB system allows users to communicate with each other and manage SDO’s efforts to connect with diverse and small businesses. HUB also streamlines agency procurement plans for diverse and small businesses, supports state agency and state contractor reporting compliance, and sends notices to diverse and small businesses, SDP-participating state agencies, and state contractors.

HUB users include SDO, state contractors, certified businesses, and public purchasers. Entities wishing to become HUB users can request access to HUB on SDO’s website. SDO offers its HUB users HUB trainings in the form of prerecorded webcasts and job aids available on its website.

Directory of Certified Businesses

SDO provides public access to lists of certified businesses on its website through its Directory of Certified Businesses, which allows users to search for diverse and small businesses by location, certification category, or business type. SDO also offers a certification self-assessment tool on its website, where businesses seeking SDO certification can complete the self-assessment and see which certifications they are eligible to apply for.

OSD Systems: COMMBUYS, Vendor Report Management Portal, and Uniform Financial Report System

OSD administers the following three systems, which SDO accesses to obtain information so that it can oversee and promote diversity, equity, and inclusion in state contracting:

• COMMBUYS is the state’s web-based procurement platform for Commonwealth agencies and political subdivisions. COMMBUYS allows public purchasers to post contract bid solicitations, enter into contracts with vendors for goods and services, and make purchases on new and existing contracts. COMMBUYS is the only official procurement record system for the Commonwealth of Massachusetts.
• According to OSD’s website, “The Vendor Report Management (VRM) portal is a secure, cloud-based tool to streamline the collection of quarterly Sales Reports and Administration Fee payments from Statewide Contract Vendors.” SDO uses it to collect SDP data from statewide contractors and to provide vendors with access to the spending history that statewide contractors report.
• According to OSD’s website, the Uniform Financial Report System “allows human and social service contractors to file their annual financial statements online. It also provides these statements to the general public at no charge.”

1.   In its Supplier Diversity Office Comprehensive Annual Report Fiscal Year 2022, SDO defines a minority-owned business “as a business that is owned by a racially or ethnically diverse individual. While the [term is] meant to define an ethnically or racially diverse individual or business . . . [it is] not meant to denote a smaller or lesser status of the individuals or businesses included in this definition.”

2.    Note that the fiscal year 2021 budget is significantly lower than the fiscal year 2022 budget because SDO was not established until January 2021. Since fiscal year 2021 started on July 1, 2020, SDO only received a budget for approximately half of that fiscal year.

3.   A contract bid solicitation (which is also known as a request for responses) is an invitation for vendors to offer prices on fulfilling contracts.

4.    Constitutional offices are offices of which the lead administrator is elected—as opposed to appointed—to the position. Examples include the Office of the Governor and the Attorney General’s Office.

5.    Quasi-public entities are not fully public; they are controlled by a government-appointed board and operate independently of the legislative and executive branches. Examples include the Massachusetts Convention Center Authority and the Massachusetts Housing Finance Agency.

6.   Public purchasers include state executive branch agencies, Massachusetts cities and towns, public school districts, housing authorities, and public higher education groups.

7.    An SDP partner is a vendor that provides subcontracted and/or ancillary/operational goods and/or services to a statewide contractor and that is certified in at least one SDO-recognized business certification category.

Date published:	December 23, 2024