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LEGAL ISSUES

Marriage is Great. Now How About Government Contracts?

For LGBT-owned companies, the goal is federal recognition of minority status.

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Two Supreme Court rulings on Wednesday greatly expanded the rights of LGBT people to marry. But for gay and lesbian business owners, the issues around work are still thorny. For them, same-sex marriage is only the beginning of a much longer road toward full acceptance.

About a month ago, Sam Lehman found out his small business, Columbia Consulting Group, had been turned down for its application under the 8a federal contracting program for certification as a disadvantaged business. Lehman is gay, and his company has been certified as gay-owned. It was on that basis that he hoped Columbia would qualify as "disadvantaged." Columbia creates software and provides IT services and staffing to some of the world's largest companies. It had hoped to provide the services to the federal government as well.

The 8a program is intended to open the doors for minority-owned small businesses under the fiercely competitive federal contracting program. At stake is approximately $100 billion worth of federal contracts awarded annually to small businesses. Among the business owners that the government regularly recognizes under 8a are minorities such as women, Asian Americans, African Americans, and so-called disadvantaged businesses. (Disabled and veteran entrepreneurs are included elsewhere in the contracting process.)

Columbia Consulting is certified as gay-owned under a program conceived and rolled out about five years ago by the National Gay and Lesbian Chamber of Commerce. The certification is similar to that of many women and other minorities, who can get certification for their businesses from programs overseen by the Women's Business Enterprise National Council and the National Minority Supplier Development Council. While the federal government recognizes these other certifications in an attempt to make the federal contracting process more diverse, it does not officially recognize the NGLCC certification.

"We just went through an exhausting process to be 8a certified and did not pass through the certification," Lehman says. "We would like to see the LGBT classification added to 8a, as of right now it isn’t, and the rationale behind this is I could not tell."

Open doors in private enterprise

There are about 1.4 million LGBT-owned business in the U.S., NGLCC estimates. Of those, NGLCC has certified about 500. Less than 10% of LGBT-owned businesses currently work as contractors for state and local government, according to NGLCC research, although 80% say they would like that opportunity.

Columbia Consulting has 65 employees and about $11 million in annual revenues. It has found more open doors with Fortune 500 companies, most of which have written anti-discrimination policies based on sexual orientation and active supplier diversity programs that include LGBT companies.

"At this point, most of these companies have a benchmark for procurement spend," Lehman says. "In the Fortune 500 world, we speak to the chief diversity officer, and if they feel we have what it takes to do the job, we are introduced to the procurement department."

Ernst & Young, which has 167,000 employees globally, added LGBT-certified small businesses to its corporate supplier programs in 2006. The privately-held company spends between eight percent and 10 percent of its procurement budget with diversity suppliers. It would not divulge how much it spends on minority contractors, other than to say the contracts are worth "multi-millions of dollars."

Ernst & Young provides its consulting services to private industry and the federal government, among other customers. The federal government asks it to help meet its contracting goals, some of which are for small businesses in general. Others are for 8a and other minority-owned suppliers. While those minorities are spelled out as women, or disadvantaged businesses, or for veterans, LGBT-owned businesses are not specified, says Theresa Harrison, director of supplier diversity at Ernst & Young.

"There are a number of LGBT suppliers in our federal practices space," Harrison says. "We put those under [the federal agency's general] small business goal."

But Ernst & Young is still an anomaly. In most states--29 to be exact--it's still perfectly legal to discriminate against LGBT people, and their businesses. That includes firing and harassing them because of sexual orientation. Though expansion of the federal definition of marriage to include same sex couples will markedly change the social landscape, there is still no federal recognition of LGBT people as a minority, and until the SCOTUS ruling on Wednesday, the Federal Defense of Marriage Act singled out LGBT people as a class that did not deserve equivalent treatment when it comes to federal benefits.

"Though the vast majority of Americans think it is wrong and should be against the law, [most state] laws do not protect the LGBT workforce from this kind of discrimination," Peter Romer-Friedman, an attorney with Cohen Milstein, a law-firm in Washington, D.C., says.

Romer-Friedman is the attorney representing the LGBT advocacy group Freedom to Work against ExxonMobil, one of the largest government contractors, in a discrimination charge filed in June. When Exxon merged with Mobil in 1998, it revoked the same-sex benefits Mobil's employees had previously enjoyed, and reneged its written policy forbidding discrimination based on sexual orientation. Exxon Mobil has long said it has a verbal anti-discrimination policy. (ExxonMobil did not respond to a request for comment.) In 2012, ExxonMobil had $255 million worth of federal contracts, according to its annual report.

That's important to Lehman,  because 25% of his employees identify as gay and tend to work onsite for other large companies. It would still be legal for companies like Exxon to discriminate against them in states such as Texas, where Exxon is headquartered. Texas does not have anti-discrimination laws that protect LGBT people.

James Nowlin, co-founder and chief executive of Excel Global Partners of Dallas, Texas, a small business that provides financial accounting and enterprise resource planning consulting services, says the federal playing field needs to be leveled for LGBT-owned business to participate and grow.

Nowlin is certified as a minority-owned business with the NMSDC, which makes his company eligible for contracting work for the General Services Admininstration. His NGLCC certification doesn't hold that weight yet.

 "When you look at federal contracting opportunities for the federal government, those opportunities are really provided because of the money from taxes, and there are opportunities for all kinds of businesses and owners of all kinds of backgrounds," Nowlin says. "LGBT owners and employees pay taxes as well."

*This story was updated June 27 to make the following corrections: The advocacy organization is called Freedom to Work, not Right to Work. Also, the total value of small business contracts from the Federal government is $100 billion annually, not $100 million.

IMAGE: © 2013 CQ Roll Call
Last updated: Jun 26, 2013

JEREMY QUITTNER is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.
@JeremyQuittner




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