Published in Economic Development

Artificial barrier or lack of understanding? Tribal entities struggle to secure key minority business certification

BY Sunday, March 03, 2019 09:20pm

Business entities owned by West Michigan-based Native American tribes face a surprising roadblock in gaining access to programs used to grow minority-owned businesses.

While tribally-owned businesses often receive the Small Business Administration’s 8(a) disadvantaged business certification, they have not found similar success when it comes to getting “minority business enterprise” (MBE) certification through the Michigan Minority Supplier Development Council (MMSDC).

Sims

Although Native Americans qualify as minorities under the MBE program, tribally-owned investment entities can run into problems when they try to certify newly acquired businesses. That’s because tribal economic development groups often are set up as holding companies and take a page from the playbook of private equity firms by leaving existing management in place to operate and grow the companies.

Kurt Trevan, CEO of Gun Lake Investments, the non-gaming arm of the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, told MiBiz that tribes may be losing “a lot of customers and potential customers” because of an “artificial barrier.”

“I don’t think the tribes are asking for any special favors,” he said. “I think we’re asking to be treated like other minorities that have programs that are available.”

The tribally-owned entities want to capture business that many American corporations target as part of their diversity and inclusion program mandates, which help firms calculate the success of their environmental and social governance strategies.

These goals are specifically designed for corporations to source more products and services from minority-owned establishments. Amid heightened demand to source from qualifying businesses, the competitive power of certification also has risen, Trevan said.

According to the MMSDC, once companies are certified and part of the Minority Supplier Development Network, more than two-thirds report increased business.

“Being a tribal business, we’re clearly a minority business,” Trevan said. “A lot of these companies, they have to be able to promote their scorecard, how well they do, and the MMSDC is often the recognized authority on determining if you have a minority-owned company or if you don’t.”

Trevan said his organization has delayed applying for minority-owned business status because of the obstacles that other tribes have faced in the process.

Following procedures

Andrew Sims, vice president of Central and Western Michigan marketing and communication at MMSDC, acknowledged the issue “is not a new conversation,” but said the tribally-owned entities often fail the three-part test the organization uses to certify or ensure minorities own, operate and control the companies in question.

The questions over whether tribally-owned businesses quality for MBE certification have more to do with operation and control than ownership.

“When (economic development arms) acquire those companies as a tribe, particularly white-owned companies, we know they own the company fiscally because we can track that information,” Sims said. “Why I think many of them have struggled is that it is not 51 percent operated and controlled (by minorities) at a leadership level.

“We have very clearly defined rules for that. They’re going to struggle to be certified because they keep the white leadership in place and they don’t fit the three tenets of owned, operated, and controlled.”

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Acquiring existing businesses with proven leadership forms an important part of many tribes’ investment strategies as they diversify into non-gaming operations, according to Larry Romanelli, ogema or chief of the Manistee-based Little River Band of Ottawa Indians.

“If you’re going to buy an existing business that could show profitability, I’m more inclined to do that (than a startup), but it has to include that part that says we’re going to keep the staff on to make sure that it’s going to continue to run, and then bring your tribal members in with training and slide them in,” he told MiBiz. “Making sure it’s profitable: That’s your first line of business and then these other things come along with it, but you have to make sure you’re doing it the right way.”

Yet, in order to align with the mission of the MMSDC, the tribes will have to “interject their own leadership at some levels and critical areas” of newly acquired companies before applying for certification, Sims said.

“There was some lack of understanding around the certification process and now that they own these companies, they think the certification is automatic,” he said. “The certification process … hasn’t changed. It’s not changed to offend Natives. You need to understand the process going into it, and not necessarily go into it and then try to change the process.”

Alone at the table

Businesses owned by Native American tribal citizens that have received the MBE certification say the process has been worthwhile in helping them gain access to new opportunities.

That’s been the case for Jodi van Haren, a member of a Sault Ste. Marie Tribe of Chippewa Indians who started Comstock Park-based Advantage Mechanical-Refrigeration Inc. in 2001.

At the time, she “had no idea” she qualified for services designed to help minority business owners. It wasn’t until van Haren learned about networking opportunities through MMSDC that she decided to pursue an MBE certification.

Advantage Mechanical was successfully certified, and van Haren actively markets the credential and credits it for additional business opportunities and access to a vast network of buyers, executives and other minority business owners.

“It gets you in front of buyers that I don’t know how else I would have gotten in front of without having deep relationships and ties and years back, like a third generation business owner,” she said. “Usually, you do business with people that you know, and that’s where the minority community is wondering where they fit into West Michigan.”

Van Haren, who “married into” a Dutch family, said Native American involvement is intensely underrepresented in the MMSDC, specifically on the west side of the state.

“Whenever I go to these functions with other minority businesses, there are Hispanics, African Americans, and then there’s me as the one Native American,” she said. “I’m proud of my Native American heritage, but there are really not many things for us as business owners in this area.”

According to data from the American Community Survey, American Indians account for about 7 percent of the total minority population in Michigan.

“The (certification) program is there because the opportunities that minorities are given have not been the same (as other demographics). Maybe now the opportunities are there, but there are still people that are keeping communities segregated by who they know,” van Haren said. “For me, to now see all these tribes come together is so cool because that’s what we need to do. We need to have a stronger voice. We need to band together.”

A way forward

The struggle for the tribally-owned entities to participate in the supplier diversity programs is just the latest obstacle in a long history of Native Americans feeling like an “invisible” minority, according to Romanelli.

“I’ve been working with the (MMSDC) for two and a half to three years and trying to get them to understand that we don’t have a seat at the table, and I’m still not sure we’re there,” Romanelli said.

The National Minority Supplier Development Council sets the MBE certification criteria, which is standardized across 23 statewide councils, according to Sims at the MMSDC. Across the country, there are examples of “several successful tribes” that have met the designation and become certified, he said.

“To me, if you really want to be progressive and you say you want this, it would seem that you would have sit down with us as an institution,” Sims said. “Spend a little bit more time understanding, and you may not feel so blindsided or feel like this thing is working against you — because we want their businesses to grow.”

Tanya Gibbs, managing partner of the Grand Rapids office of Rosette LLP, a niche law firm focused exclusively on tribal clients, said the MMSDC’s counterparts in other states “have figured it out” when it comes to certifying tribally-owned entities under the MBE criteria. However, the process has taken time “and trial and error” to sort out for the tribes and the certifying bodies.

“What I heard when I met with the MMSDC is that we need to educate them; they’re not familiar with Indian Country,” Gibbs said, who notes tribes often struggle “to fit in certain boxes” because of their tribal sovereignty and “the nuances of ownership.”

“I think (the MMSDC) understands the intent, but it’s really figuring out how tribes meet their expectations even though we don’t easily fit into a particular box,” she said. “We’ll see what happens. We’re working on it.”

— MiBiz Editor Joe Boomgaard contributed to this report.

Read 735 times Last modified on Monday, 04 March 2019 10:40
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