GAO: Minority ad agencies got five percent of $4.3 billion spent on gov’t advertising

GAO: Minority ad agencies got five percent of $4.3 billion spent on gov’t advertising

By Sharon McLoone
The Washington Post
(August 14, 2007) The Defense and Treasury departments are among government entities that have been remiss in granting contracts to disadvantaged and minority-owned advertising agencies.

A Government Accountability Office report released Monday found that four federal departments and one agency paid more than $4 billion for advertising from fiscal 2001 to 2005, but did a poor job of directing much of that money to these generally smaller firms.

From fiscal 2001 to 2005 these firms received about 5 percent, or $218 million, of the $4.3 billion for advertising campaigns and related obligations from the departments of Defense, Treasury, Health and Human Services and Interior as well as NASA.

Use of disadvantaged and minority ad agencies varied. For example, the GAO found that Treasury and Defense awarded less than 2 percent of its ad-related dollars to these firms over the five years analyzed, but NASA awarded 89 percent of its contracts to them. The Interior Department offered about 6 percent of its contracts to these businesses.

The Defense Department used 1.8 percent of their contract dollars for minority advertising firms and paid them on average nearly 84 percent less per contract than majority firms, according to the study. The Treasury Department put 1.9 percent of their contract dollars toward minority firms and paid them about 47 percent less per contract than majority firms.

Even before the GAO report was released to the public, Senate and House Democrats released a statement urging federal agencies to take a more active role in increasing the amount of federal advertising contracts awarded to disadvantaged and minority-owned businesses.

"I am deeply concerned that the departments of Defense and Treasury are denying minority advertising firms the opportunity to work with the federal government," said Senate Majority Leader Harry Reid (D-Nev.) "That they may even be discouraging hiring minority firms and paying them nearly 84 percent less than majority firms is even more disturbing."

Reid, Small Business and Entrepreneurship Committee Chairman Sen. John Kerry (D-Mass.), Senate Judiciary Committee member Chuck Schumer (D-N.Y.) and Congressional Black Caucus Chair, Rep. Carolyn Kilpatrick (D-Mich.) sent two letters Monday to the departments of Defense and Treasury expressing concern for their poor record of awarding contracts to minority and disadvantaged businesses. They also requested them to outline steps they are taking to increase contracts with minority advertising firms.

The lawmakers said they requested that the GAO conduct the study because many minority media outlets and advertising firms have said that access to the federal advertising market is "severely limited." They also argued that minorities "have been misrepresented and under- epresented in the media and advertising for years. We believe this problem can be alleviated in part by using minority ad agencies, minority media buyers and minority media outlets in federal advertising campaigns."

The GAO also released a report (pdf) Monday reviewing a government loan program designed to help small businesses obtain credit. The 7(a) program guarantees a portion of each loan, reducing the lender's risk. The GAO noted that determining the program's success is difficult because performance measures only show the number of loans provided, but not the fate of the business loan recipients.

The Small Business Administration said it has plans to develop additional, outcome-based performance measures for the 7(a) program, but is not certain when these measures may be introduced or what they may capture, according to the study.

The GAO found that a higher percentage of 7(a) loans went to minority-owned and start-up businesses compared with conventional loans from 2001 to 2004. But loans guaranteed by the program were more likely to be larger and have variable interest rates, longer maturities and higher interest rates.

Click here for a PDF version of the GAO report

Go to Target Market News homepage


HOME \| STATS \| PUBLICATIONS \| REGISTER \| CONTACT US \| SEARCH \| ARCHIVE
Departments Advertising & PR News Marketing News TV & Cable News Radio News Magazine News Newspaper News Internet News Retailing News Consumer Research Expenditure Data People in the News Industry News Company Bios and Background Register Here STAY IN-THE-KNOW! Are you getting the latest industry news when it happens via e-mail? Click here for free delivery of the Target Market News Bulletin You'll receive news of breaking stories, exclusives, updates and headlines on the latest developments in African American marketing and media Black Stats Frequently requested data on African American consumers Black Buying Power: $719 Billion (2005) Black U.S. Population: 38.3 million Top Five Black Cities - New York - Chicago - Detroit - Philadelphia - Houston Top Five Black Metros: - New York-New Jersey - Washington-Baltimore - Chicago-Gary - Los Angeles - Philadelphia Top Five Expenditures: - Housing $110.2 bil. - Food $53.8 bil. - Cars/Trucks $28.7 bil. - Clothing $22.0 bil. - Health Care $17.9 bil. Click here for more stats from "The Buying Power of Black America." ______________________ Get quick access to key U.S. Census Bureau Data Click here to go to African-American Census Bureau data _____________________ Copyright `© 2007 by Target Market News Inc.` All rights reserved Business address: 228 S. Wabash Ave. Suite 210 Chicago, IL 60604 t. 312-408-1881 f. 312-408-1867 info@targetmarketnews.com	GAO: Minority ad agencies got five percent of $4.3 billion spent on gov’t advertising By Sharon McLoone The Washington Post (August 14, 2007) The Defense and Treasury departments are among government entities that have been remiss in granting contracts to disadvantaged and minority-owned advertising agencies. A Government Accountability Office report released Monday found that four federal departments and one agency paid more than $4 billion for advertising from fiscal 2001 to 2005, but did a poor job of directing much of that money to these generally smaller firms. From fiscal 2001 to 2005 these firms received about 5 percent, or $218 million, of the $4.3 billion for advertising campaigns and related obligations from the departments of Defense, Treasury, Health and Human Services and Interior as well as NASA. Use of disadvantaged and minority ad agencies varied. For example, the GAO found that Treasury and Defense awarded less than 2 percent of its ad-related dollars to these firms over the five years analyzed, but NASA awarded 89 percent of its contracts to them. The Interior Department offered about 6 percent of its contracts to these businesses. The Defense Department used 1.8 percent of their contract dollars for minority advertising firms and paid them on average nearly 84 percent less per contract than majority firms, according to the study. The Treasury Department put 1.9 percent of their contract dollars toward minority firms and paid them about 47 percent less per contract than majority firms. Even before the GAO report was released to the public, Senate and House Democrats released a statement urging federal agencies to take a more active role in increasing the amount of federal advertising contracts awarded to disadvantaged and minority-owned businesses. "I am deeply concerned that the departments of Defense and Treasury are denying minority advertising firms the opportunity to work with the federal government," said Senate Majority Leader Harry Reid (D-Nev.) "That they may even be discouraging hiring minority firms and paying them nearly 84 percent less than majority firms is even more disturbing." Reid, Small Business and Entrepreneurship Committee Chairman Sen. John Kerry (D-Mass.), Senate Judiciary Committee member Chuck Schumer (D-N.Y.) and Congressional Black Caucus Chair, Rep. Carolyn Kilpatrick (D-Mich.) sent two letters Monday to the departments of Defense and Treasury expressing concern for their poor record of awarding contracts to minority and disadvantaged businesses. They also requested them to outline steps they are taking to increase contracts with minority advertising firms. The lawmakers said they requested that the GAO conduct the study because many minority media outlets and advertising firms have said that access to the federal advertising market is "severely limited." They also argued that minorities "have been misrepresented and under- epresented in the media and advertising for years. We believe this problem can be alleviated in part by using minority ad agencies, minority media buyers and minority media outlets in federal advertising campaigns." The GAO also released a report (pdf) Monday reviewing a government loan program designed to help small businesses obtain credit. The 7(a) program guarantees a portion of each loan, reducing the lender's risk. The GAO noted that determining the program's success is difficult because performance measures only show the number of loans provided, but not the fate of the business loan recipients. The Small Business Administration said it has plans to develop additional, outcome-based performance measures for the 7(a) program, but is not certain when these measures may be introduced or what they may capture, according to the study. The GAO found that a higher percentage of 7(a) loans went to minority-owned and start-up businesses compared with conventional loans from 2001 to 2004. But loans guaranteed by the program were more likely to be larger and have variable interest rates, longer maturities and higher interest rates. Click here for a PDF version of the GAO report Go to Target Market News homepage	JUST 2 WEEKS AWAY! Registration Now Just $99 Black Issues Book Review presents the National Book Club Conference - Chicago to be held on Friday and Saturday, August 24 and 25, 2007, in downtown Chicago at the InterContinental Hotel . Hundreds of book club members will be engaged in dialogue with some of the nation's leading African American authors, including: Tina McElroy Ansa ReShonda Tate Billingsley Virginia DeBerry Donna Grant Mary Morrison Kimberla Lawson Roby Lyah Beth LeFlore Eisa Nefertari Ulen Terrie Williams. Special Celebrity Guest: Grammy Award Winner EDDIE LEVERT Co-Author of "I Got Your Back" Click here for more information and to register Sponsored by ________________________ Interep Announces Ninth Annual Power of Urban Radio A Symposium for Multicultural Advertisers, Ad Agencies, and Broadcasters Focusing on the Issues and Opportunities Surrounding Urban Radio September 20th, 2007 In New York City Grand Hyatt Hotel 109 East 42nd Street at Grand Central Terminal Save the Date! For info contact Sherman Kizart, Senior Vice President, Urban Marketing at 312-616-7204. sherman_kizart@interep.com www.powerofurbanradio.com _________________________________________________________________________________________ 13th Edition Now Available New Buying Power report shows more spending by black consumers on 'necessities' Thanks to economic gains in the past two years, black households across the U.S., especially middle-class families, are increasing their purchases of lifestyle and leisure items. According to the newest edition of “The Buying Power of Black America,” there are indications that black households are feeling more confident about making purchases that... Story continued... _________________________________________________________________________________________ The African-American Book Publishing Authority Now in its ninth year of publication, Black Issues Book Review is the only nationally distributed magazine devoted exclusively to covering the latest news and reviews on black books. BIBR also provides up-to-date news on forthcoming author signings, book fairs and book clubs. Want this issue? Get it with your new subscription. Click Here A TARGET MARKET NEWS PUBLICATION _________________________ Click here to read more ________________________ SUBSCRIBE TODAY! The trade publication for in-depth coverage of Black Consumer Marketing and Media news