New Darden Research Uncovers Disparities in Federal STEM-Related Contracts

The federal government awards billions worth of contracts each year — in fiscal year 2023 alone, $763 billion was awarded as contracts to purchase a variety of products and services from external businesses. Such large-scale purchasing decisions provide unique opportunities to build wealth and create economic opportunities for the country’s underserved businesses such as women-owned and minority-owned businesses.

But new research from the University of Virginia Darden School of Business shows these businesses remain severely underrepresented in the fast-growing and highly paid segment of STEM (science, technology, engineering and mathematics)-related federal contracts.

The new research also finds that the disparities in STEM contracts are even greater for Black-owned and Hispanic-owned businesses.

In “A Granular Examination of Gender and Racial Disparities in Federal Procurement,” Darden faculty members Dwaipayan Roy and Chris Parker undertake an in-depth analysis of the representation of women-owned and minority-owned businesses in STEM-related federal contracts. Their work both identifies new trends in these contracts and provides insights that could inform the government’s ongoing efforts to elevate opportunities for underserved businesses and entrepreneurs.

“Taken together, these findings uncover a major obstacle to reducing gender and racial disparities in federal procurement — the limited use of information at the contract level that has the potential to provide a more granular assessment of these disparities and inform actionable policy decisions to reduce these disparities,” Parker and Roy write of their research.

The research uses granular data on 1.6 million federal contracts and 19 categories of products and services purchased through the contracts, which were awarded by 58 federal government agencies between 2019 and 2021 across all 50 states and the District of Columbia.

It broadly defines STEM-intensive contracts as those that are awarded in industries with a relatively higher proportion of the workforce in STEM occupations.

Key findings of the new research include:

• Keeping everything else equal, STEM-intensive contracts are 3.5 times and 3.7 times less likely than other contracts to be awarded to women-owned businesses and minority-owned businesses, respectively.
• Black- and Hispanic-owned businesses are the least likely among different categories of minority-owned businesses to be awarded STEM-intensive federal contracts.
• Black-owned businesses are more likely to receive contracts characterized by lower median pay levels.

Roy and Parker write that the prevalence of gender and racial disparities in the awarding of federal contracts is well documented overall. Statistics from the US Small Business Administration and the US Census Bureau cited in the research, for example, indicate that women-owned businesses and minority-owned businesses received 4.1% and 9.8% respectively of the $637 billion in federal contracts awarded in fiscal year 2021. The federal government routinely reports the breakdown of contract recipients at the agency-level. However, it is the next level of analysis, for example, at the contract level, Parker and Roy said, which offers useful, actionable insights to better understand gender and racial disparities in the increasingly important STEM segment.

The researchers said their findings provide the federal government more clarity around specific areas that deserve more attention in efforts to reduce disparities in contracting. The findings also provide an impetus for the government to establish a more granular review of contracting data that breaks down different categories of minority-owned businesses, rather than grouping them all in a single category of minority-owned businesses.

Roy said the Biden Administration introduced a slew of policy initiatives in 2022 and 2023 that were intended to identify and reduce barriers that women- and minority-owned businesses confront in the federal procurement process.

“By uncovering ‘within-minority’ disparities in federal procurement, our study findings can serve as a basis to make a distinction among the different types of minority-owned businesses while designing these policy initiatives, thereby helping to reduce the initial structural barriers that are inherent in access to federal contracting opportunities,” Parker and Roy conclude in their research.