Currently, businesses led by women are underrepresented in the awarding of public procurement contracts. It's estimated that less than one percent of the $10 trillion spent annually on global public procurement goes to women-owned businesses.
Various constraints explain this low participation of women-led businesses in public procurement awards. Some of these constraints include limited access to credit for small and medium-sized enterprises (SMEs) led by women, their limited preparedness to leverage digital technologies, their limited experience in participating in the public sector market, and their limited knowledge of the requirements for transactions with public entities.
Given the above, encouraging the participation of women-led SMEs in public procurement processes can help promote gender equality and empower women. It can also benefit the state, as increasing the involvement of women-owned businesses in public procurement promotes competition since more companies can sell to the government, resulting in better value for money, higher quality, and better prices.
How to Identify Women-Owned Businesses in Public Procurement
One of the primary obstacles governments face in promoting gender equality through public procurement is identifying businesses that genuinely belong to women. This is why several countries in Latin America and the Caribbean (LAC) have chosen to create programs to identify and certify women-owned and women-led businesses, known as "Woman-Owned Business Seal" programs.
These programs allow public procurement agencies to officially certify a business as women-owned. Normally, this certification is granted when a company registers its information with the procurement system's provider database, a necessary step for participating in public procurement in most countries.
Having this information is essential for promoting the participation of women-led businesses in public procurement. It enables the procurement agency to focus on disseminating business opportunities in the public sector, training businesses on how to participate in acquisition processes, creating support programs, and evaluating the effectiveness of these programs.
Three Examples of Women-Owned Business Certification Programs Supported by the IDB
Given their potential impact on advancing gender equality and improving public procurement processes in LAC, the Inter-American Development Bank (IDB) has supported the development and implementation of women-owned business certification programs in the region, including in Chile, Buenos Aires, and Honduras.
Innovative Program in Chile
Chile was one of the first countries globally to introduce the "Woman-Owned Business Seal." In 2015, it launched an ambitious action plan that included an identification seal on the electronic public procurement platform www.mercadopublico.cl, training for women-owned businesses on available opportunities and tools, and specific training for public buyers to apply criteria favoring women's participation in public procurement processes.
The country also adapted the regulations of its public procurement law to allow for the inclusion of inclusive development as an evaluation criterion in procurement processes and as justification for direct contracting in lower-value procurements. As a result, the participation rate of women in the public market increased by 25%, according to a 2018 measurement.
Buenos Aires: Beyond Women-Owned Businesses
Buenos Aires City in Argentina was innovative not only as the first subnational experience in LAC to implement a "Woman-Owned Business Seal" but also for instructing the purchasing agency to incorporate sustainability criteria that promote a gender perspective in the procurement of goods and services. To improve effectiveness, the city also focused on generating data to better target women-owned businesses, as well as on training and outreach programs for public buyers and women entrepreneurs.
Honduras: Central America's First "Woman-Owned Business Seal" Program
Honduras is the first country in Central America to adopt a "Woman-Owned Business Seal" program. It has recently completed an assessment of the gender gap in its public procurement. The diagnosis shows a 14-percentage-point participation gap between male-led SMEs and women-led SMEs. The country is currently in the data analysis phase and defining steps to update its supplier registry to identify women-owned businesses in its system. A public-sector working group has been created to supervise the development of the action plan. This step is important because it facilitates the collaboration and contributions of various stakeholders in the initiative, not just the procurement agency.
Key Steps for Implementing "Woman-Owned Business Seal" Certification Programs
Although there is no "one-size-fits-all" model for a "Woman-Owned Business Seal" program, and each country should adapt to its local context and regulations, some common steps for implementing such a program include:
- Diagnostic Evaluation: Before launching a women-owned business certification program, countries should identify participation gaps in the public market through a comprehensive diagnosis. This helps them effectively align demand (public sector) with the supply (women-owned businesses). In this phase, it is also important to review the legal and regulatory environment to see if any updates are needed if countries wish to include the "Woman-Owned Business Seal" as part of their evaluation criteria.
- Definition of Requirements: It's important to have an official definition of the requirements or conditions that businesses must meet to be recognized and accredited as a women-owned business in the public market. Most countries define a women-owned business as one where more than 50% ownership, management, and control are in the hands of one or more women.
- Update Supplier Registry: The supplier registry must be updated to account for businesses certified as women-owned. This is essential for conducting training, awareness, and communication activities with these businesses and for generating data to monitor results.
- Capacity Development: For success, training should be ongoing and directed at both the government procurement agency and women-owned businesses. Training for businesses should focus on successfully participating in the public market and meeting the requirements for bidding on public contracts. For the procurement agency, training should help officials understand how public procurement practices can help achieve gender goals and teach them how to identify and record women-owned businesses in the agency's systems.
- Outreach and Awareness: It's essential to have an outreach campaign to encourage women-owned businesses to register and certify in the system to access business opportunities in the public market.
In summary, public procurement can be an essential tool for governments to empower women and contribute to reducing gender inequality in our region. "Woman-Owned Business Seal" programs, which help governments identify a business as women-owned, can be a powerful ally for countries seeking to advance the gender equality agenda through fiscal management and public procurement. At the IDB, we are working closely with several member countries to support this agenda through innovative policies and solutions with our loans and technical assistance.