What is a diversity pass through and why is it illegal?

A definition of diversity pass-through laws

definition of diversity pass-through laws

In the realm of diversity spend, the illegal practice known as a pass-through refers to a deceptive tactic employed by companies to fraudulently claim credit for meeting diversity spend requirements without actually engaging in meaningful diversity initiatives. This practice undermines the intended purpose of diversity spend initiatives and hampers genuine efforts to promote inclusivity and equal opportunities. We want to include a definition of diversity pass-through laws while offering a solution to provide resellers ways to overcome any appearance of a pass through situation.

A pass-through occurs when a company, in order to meet diversity spend targets, collaborates with a diversity reseller on paper but does not genuinely engage in a mutually beneficial business relationship. Instead, the company uses the reseller as a mere front to channel funds or contracts to a non-diverse entity, essentially bypassing the spirit and intent of diversity spend or diversity reseller programs.

This deceptive practice is not only ethically questionable but also illegal in many jurisdictions. It is considered a form of fraud, as it misrepresents the true nature of the business relationship and violates the principles of fair competition. By falsely claiming diversity spend credit, companies engaging in pass-throughs not only deceive their stakeholders but also disadvantage genuinely diverse suppliers who are committed to fostering diversity and inclusion.

Pass-throughs not only harm the integrity of disadvantaged business spend programs but also perpetuate systemic inequalities. These programs are designed to promote opportunities for historically marginalized groups, such as women, ethnic minorities, and other underrepresented communities. By diverting funds or contracts away from these groups, pass-throughs undermine the purpose of diversity spend initiatives and hinder progress towards a more equitable society.

Regulatory bodies and government agencies are increasingly cracking down on this illegal practice. They are implementing stricter guidelines, conducting audits, and imposing penalties on companies found guilty of engaging in pass-throughs. These measures aim to ensure that disadvantaged business spend programs are effective, transparent, and genuinely contribute to creating a level playing field for all businesses.

Executive Order on Diversity, Equity, Inclusion, and Accessibility in ...
Jun 25, 2021 ... By the authority vested in me as President by the Constitution and the laws ... (b) The term “diversity� means the practice of including the many ...

How to overcome overcome the challenge of not being considered a pass-through

To overcome the challenge of not being considered a pass-through and to demonstrate genuine commitment to diversity, a reseller can take several proactive steps:

  1. Establish a robust supplier diversity program: Develop and implement a comprehensive supplier diversity program that outlines specific goals, strategies, and metrics for engaging diverse suppliers. This program should align with industry best practices and demonstrate a genuine commitment to inclusion.
  2. Engage in meaningful partnerships: Forge strategic partnerships with diverse suppliers and build mutually beneficial relationships. This involves actively seeking out diverse suppliers, understanding their capabilities, and collaborating on projects where both parties can contribute value.
  3. Demonstrate value-add: Showcase the unique value-add that diverse suppliers bring to the table. Highlight their expertise, innovation, and ability to meet specific business needs. By demonstrating the tangible benefits of working with diverse suppliers, a diversity reseller can establish themselves as a valuable partner, rather than merely a pass-through.
  4. Track and report diversity spend: Maintain accurate records of spend with diverse suppliers and regularly report on diversity spend metrics. This transparency helps establish credibility and ensures that diversity spend is accurately accounted for.
  5. Participate in industry certifications and programs: Seek certifications such as Minority Business Enterprise (MBE) or Women-Owned Business Enterprise (WBE) to validate the diversity credentials of the reseller. Active participation in industry-specific diversity programs and events can also help build credibility and foster networking opportunities.
  6. Collaborate with diversity advocacy organizations: Engage with local, regional, or national diversity advocacy organizations to demonstrate a commitment to diversity beyond contractual obligations. Participating in their initiatives, events, and forums can help establish relationships and demonstrate genuine support for diversity.

By taking these proactive measures, a diversity reseller can overcome the perception of being a pass-through and establish themselves as a trusted partner committed to promoting diversity and inclusion.

How can Provision Connect help?

Provision Connect offers e-commerce marketplace solutions and electronic procurement solutions to overcome any appearance of pass through activity and provides a platform that allows governmental agencies, federal entities or corporations looking for spend through a disadvantaged business a proven way to transact with diversity resellers in the following ways:

  1. Buyers place orders directly with the disadvantaged business through the platform that belongs to the diversity reseller and not the non-diversity supplier.
  2. Diversity spend orders are placed directly with the disadvantaged business and the reseller has visibility to review the order within their e-procurement platform before and after it is submitted to the order fulfilling supplier.
  3. The reseller supports the orders from buyers from start to finish.
  4. The order belongs to the reseller and they bill the buyer for the diversity spend orders and can provide reporting on diversity spend.
  5. Allows diversity resellers to provide many value-added services to the relationship with the buyers that would not previously be possible.
  6. Creates an above board relationship between the partners looking to achieve the true goals of diversity spend and diversity inclusion.

For more information, please contact Us: 713-252-5160