Executive Order 12432

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Executive Order 12432

Minority Business Enterprise Development

Government record

By: Ronald Reagan

Date: July 14, 1983

Source: National archives

About the Author: In 1966, Ronald Reagan was elected the thirty-third Governor of California. He was reelected to the office in 1970. Following that, Ronald Reagan served as the fortieth President of the United States from 1981–1989.

INTRODUCTION

In 1953, the Small Business Act was passed in the Congress, which created the Small Business Administration (SBA). The expressed goal of this entity was to "aid, counsel, and protect, insofar as is possible, the interests of small business concerns." The charter of the SBA provided for a portion of government contracts to be granted to small business. By 1954, the SBA had begun making loans to small businesses, as well as aiding small businesses to win procurement contracts. In 1958, under the Investment Company Act, the Small Business Administration became a permanent federal agency, licensed and regulated. As the political environment changed, the government began to create programs to ensure equality throughout society. One of these programs was established in Executive Order 10925, in which President Kennedy creates the Community on Equal Employment Opportunity. This committee called upon federally funded programs to use "affirmative action" to prevent racial bias in employment.

The 1960s became a time of expanded opportunities for minorities in business as congress passed legislation and presidents signed orders to create business opportunities. Under the Civil Rights Act of 1964, the committee was incorporated into the Equal Employment Opportunity Commission. During this time, the SBA continued its advocacy work for small businesses. In order to encourage the growth of small businesses, the SBA launched the Equal Opportunity Loan Program, which allowed loan applicants who were living below the poverty level relaxed credit and collateral requirement. The purpose of this was to support sound commercial initiatives that would not otherwise be funded due to poor credit. President Johnson continued this work to aid small and disadvantaged businesses by signing Executive Order 11246 which extended affirmative action to government contractors. By 1968, the Minority Small Business and Capital Ownership Development Program was created as a means to increase federal purchases from disadvantaged small business owners. In 1969, Executive Order 11458 created the Office of Minority Business Enterprise within the Department of Commerce.

Strides continued to be made in the 1970s toward enhanced minority business participation within the government. President Nixon signed Executive Order 11518 which tasks the SBA to represent the entire small business community, including those owned by minorities. By 1971, the procurement regulations expressed in title 41, were changed to require that all federal contracts that exceed $500,000 must include a clause encouraging the use of minority subcontractors. President Nixon also signed Executive Order 11625 which calls on federal agencies to construct program goals and broad plans for a national Minority Business Enterprise program for contracting.

On July 14, 1983, President Ronald Reagan signed Executive Order 12432. The executive order requires that each federal agency with grant making capabilities establish an Annual Minority Business Development Plan with the stated goal to increase minority business participation. Agencies are expected to establish programs that assist minority business enterprises to procure contracts and manage those contracts awarded. As a stipulation of the executive order, the progress toward these goals is to be annually reported to the Secretary of Commerce.

PRIMARY SOURCE

By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, including Section 205(a) of the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 486(a)), in order to provide guidance and oversight for programs for the development of minority business enterprise pursuant to my statement of December 17, 1982 concerning Minority Business Development; and to implement the commitment of the Federal government to the goal of encouraging greater economic opportunity for minority entrepreneurs, it is hereby ordered as follows:

Section 1. Minority Business Development Plans.

(a) Minority business enterprise development plans shall be developed by each Federal agency having substantial procurement or grantmaking authority. Such agencies shall submit these plans to the Cabinet Council on Commerce and Trade on an annual basis.
(b) These annual plans shall establish minority enterprise development objectives for the participating agencies and methods for encouraging both prime contractors and grantees to utilize minority business enterprises. The plans shall, to the extent possible, build upon the programs administered by the Minority Business Development Agency and the Small Business Administration, including the goals established pursuant to Public Law 95-507.
(c) The Secretary of Commerce and the Administrator of the Small Business Administration, in consultation with the Cabinet Council on Commerce and Trade, shall establish uniform guidelines for all Federal agencies to be utilized in establishing the minority business programs set forth in Section 2 of this Order.
(d) The participating agencies shall furnish an annual report regarding the implementation of their programs in such form as the Cabinet Council on Commerce and Trade may request, and at such time as the Secretary of Commerce shall designate.
(e) The Secretary of Commerce shall provide an annual report to the President, through the Cabinet Council on Commerce and Trade, on activities under this Order and agency implementation of minority business development programs.

Sec. 2. Minority Business Development Responsibilities of Federal Agencies.

(a) To the extent permitted by law and consistent with its primary mission, each Federal agency which is required to develop a minority business development plan under Section 1 of this Order shall, to accomplish the objectives set forth in its plan, establish programs concerning provision of direct assistance, procurement assistance, and management and technical assistance to minority business enterprises.
(b) Each Federal agency shall, to the extent permitted by law and consistent with its primary mission, establish minority business development programs, consistent with Section 211 of Public Law 95-507, to develop and implement incentive techniques to encourage greater minority business subcontracting by Federal prime contractors.
(c) Each Federal agency shall encourage recipients of Federal grants and cooperative agreements to achieve a reasonable minority business participation in contracts let as a result of its grants and agreements. In cases where State and local governments are the recipients, such encouragement shall be consistent with principles of federalism.
(d) Each Federal agency shall provide the Cabinet Council on Commerce and Trade such information as it shall request from time to time concerning the agency's progress in implementing these programs.

SIGNIFICANCE

Executive Order 12432 directs all federal agencies that possess grant-making capabilities to create a plan that develops minority businesses. Agencies employ their own Office of Small Disadvantaged Business Utilization to carry out their goal to encourage minority businesses to compete for federal contracts. In order to qualify as a small disadvantaged business, the business must be at least fifty-one percent owned by one or more individuals deemed economically or socially disadvantaged, such as African Americans, Hispanic Americans, Asian Pacific Americans, and Native Americans. This minority business enterprise development program requires that each agency report their progress toward meeting these goals to the Secretary of Commerce.