One of the best ways for a small business to grow is to land a large contract. Anchor institutions – including hospitals, universities, government agencies, cultural institutions and large employers – are in a unique position to help local businesses thrive. Channeling procurement dollars towards local businesses can have a meaningful impact in the surrounding community.
But there’s an inherent catch-22: local businesses often lack the scale and experience necessary to handle large contracts. Yet without landing a large contract, it will be difficult for the firms to learn and grow.
Increasingly, anchor institutions are stepping in to bridge this gap. Mentor-protégé programs work to prepare small, local businesses for contracting opportunities with larger firms.
The University of Pennsylvania, perhaps the standard-bearer when it comes to anchor institutions’ commitment to local purchasing, aggressively targets local businesses for mentorship. One such case was with Telrose Corp., a local and minority-owned office supply company. Telrose, then a three-person delivery company, was a subcontractor to Office Depot. Penn persuaded Office Depot to prepare Telrose to become the prime contractor, with Office Depot as its supplier. Over ten years, Telrose was poised to increase its share of the contract from $300,000 to $50 million. Penn then worked with nearby Drexel University to help them shift $1.8 million of its purchasing to Telrose, too.
Recently Columbia University has partnered with New York City to increase the amount of construction dollars they contract with minority, women, and locally-owned (MWL) businesses. Together, they developed a rigorous two-year mentorship program designed to help MWL businesses in the construction field build capacity and access opportunities for designated contracts with the University. The program’s curriculum follows a project’s full lifecycle, from cost estimating to project closeouts. In the first three years of the program’s launch, Columbia had already contracted more than $16 million in construction work with the mentored firms.
In Texas, all state-funded organizations are held to spending requirements with Historically Underutilized Businesses (HUBs). In order to prepare these firms for contracts, the MD Anderson Cancer Center at the University of Texas has a well developed mentor-protégé program. One such example is with HUB-certified Summus Industries. MD Anderson served as the business facilitator, and contracted with Ohio-based Cardinal Health, the world’s leading distributor and manufacturer of medical supplies, in order to mentor Summus Industries. The Houston-based Summus had already been a supplier for MD Anderson, but the mentorship program allows Summus to scale the services it provides for the hospital.
Cardinal Health has helped Summus revise its strategic plan; develop a brand style guide, elevator pitch and new marketing materials; update and revise content on the Summus website; establish a pharmaceutical warehouse model; and create a succession plan for when the company’s owner eventually steps down. Importantly, Summus has now developed the ability to source multiple product lines for customers across the country.
Since the inception of its mentor-protégé program, MD Anderson has worked with more than 30 HUBs to provide these mentoring services. Read the full What Works Case Study on how MD Anderson has incorporated historically underutilized businesses in its procurement strategy.
Mentorship programs such as these are a classic case of anchors creating shared value: the anchors benefit from having a larger pool of qualified vendors with which to conduct business; the local businesses benefit from an increased capacity to contract with larger firms. When both large and small firms thrive, it improves the long-term social and economic health of communities.