Jay Inouye is manager of supplier diversity for Freddie Mac (McLean, VA), the stockholder-owned mortgage finance company that supports home ownership. The company's supplier diversity program began some fifteen years ago, he notes.
It started in response to a section of the Federal Housing Enterprise Financial Safety and Soundness Act of 1992 that requires government-regulated enterprises like Freddie Mac to establish minority outreach programs.
The first step was a suppler diversity policy signed by the company's chair and CEO. "And then we began to put together the structure of supplier diversity," Inouye says.
At that time Freddie Mac was spending about $4 million in contracting with M/WBEs, about 2.2 percent of the company's total spend. In 2004 Freddie Mac spent 10 percent of its total, more than $96 million, with M/WBEs.
A variety of certifications
"The diverse suppliers we count and track in our statistical reports have to be certified," Inouye says. It could be the SBA's 8a certification, that of a state government, WBENC, or an NMSDC chapter like the Virginia MSDC (VMSDC).
Freddie Mac is a great supporter of VMSDC, and donates office space in its own HQ to the chapter. The chapter's program director is based there, and Freddie Mac sponsors regular meetings between its corporate program managers and local M/WBEs.
"We consider it an added customer service to the northern Virginia area," Inouye notes with a smile. In addition, "It has helped us locate new diverse suppliers and also helped us market ourselves as an M/WBE supporter and create awareness."
Freddie Mac also supports WBENC, of course. Inouye's supervisor, Brenda Robeson, is on the board of WPEO, the WBENC affiliate chapter for the New York, New Jersey and Washington, DC regions.
The company also seeks diverse suppliers through its presence at trade fairs, membership in industry trade groups like the NMSDC's financial services roundtable, and referrals and references from other companies. Interested diverse suppliers can register online at the freddiemac.com site under "vendor and supplier."
A lot of what Freddie Mac buys is related to IT, of course. It has what it calls an "IT approved-technology vendor pool" for its IT-related suppliers.
"The market is already saturated with IT companies," Inouye notes. "We've created a general pool comprised of ten very competent IT contractors. One of them is an MBE and one is a WBE."
There's also a more technology-specific pool of some seventeen vendors, more than two-thirds of them M/WBEs. This pool, Inouye explains, is made up of IT companies that fill specific niche areas. They might be PeopleSoft practices or groups with significant experience in the secondary mortgage market: something that singles them out from the general crowd of IT contractors.
Working with Pragmatic Solutions
A valued member of the pool is Pragmatic Solutions, Inc. Shanta Patel, its founder and president, is a former accounting manager in Freddie Mac's finance and accounting area. "She brought to the table a solid and complete understanding of the secondary mortgage market," Inouye says.
After leaving Freddie Mac, he notes, Patel "went on to develop a company that provides a great knowledge base and a lot of excellent customer service in business, finance and general IT work."
Patel certified her business as an MBE through the Virginia Department of Minority Business and VMSDC. "I think VMSDC has been a particular plus for her," Inouye says. "She serves on a lot of committees, does a lot of activities sponsorship and knows how to use the network.
"Because of her great track record we pushed to have her put into the approved technology pool. Her business with us really took off from there."
Patel is from Bombay, India, but has been in the U.S. for twenty-five years. In August 1997 she resigned from Freddie Mac for personal and family reasons, but a couple of months later she approached Freddie Mac management, hoping to take on some consulting work.
"I was a sole proprietor," she explains, but one thing led to another, and a number of directors in the company wanted her to work with their groups. It was more than she could possibly do alone.
"At first I would recommend people that I knew could handle the assignments, but it hurt me to think I was turning down business I could have had for myself." In March 1998 Patel formally incorporated Pragmatic Solutions, Inc (Annandale, VA).
She is the founder and president, of course, and owns 95 percent of the stock of the organization.
A CPA with experience
Patel's background is in finance, accounting and management reporting. She's a CPA with years of experience in financial services for the secondary mortgage market. "When I started my company I brought in people to cover all areas, financial, IT and business," she says. But the IT part has interested her more and more, and she's expanded that part of the company.
"The majority of our consultants are also on our payroll," she notes, and most of the subcontracting arrangements are with MBEs and WBEs. "We probably have a resource pool of more than 300 people in our database, and actual placements at Freddie Mac and other client sites may run thirty to forty-five at a time.
"It's like a revolving door."
About two years ago Pragmatic Solutions expanded beyond Freddie Mac to other financial services industry clients. Patel's involvement with the VMSDC helped bring that about. She now does work with Capital One, Fiserv, Inc, a provider of financial technical solutions, and Information Mapping, Inc, a documentation methodology company.
Patel's company has a three-part business model: staff augmentation, permanent placements and a developing consulting practice. Staff augmentation is a big part of its business with Freddie Mac. Through the consulting practice, Patel is reaching out to other clients in the financial services industry to do work in areas like regulatory compliance, risks and controls, data integrity, data warehousing and financial modeling.
In 2004 Freddie Mac gave Patel a minority executive management scholarship. It sent her for a week of intensive work at the University of Virginia's Darden school of business.
"It was really an MBA program that was stuck into five days instead of two years," Patel says. "There are lots of entrepreneurs out there who fail because they don't understand the financial and strategic planning aspects of going into business. We were shown how to avoid those pitfalls."
The networking she enjoyed with other business people at the program was also a major success. "I met John Branch, the COO of Triumph Technologies, and we have entered into a mentor/protégé program," she says. "They are going to mentor us on 8a certification and groom us for federal government business, something we haven't tried at all yet."
Helping out at VMSDC
As Inouye notes, Patel has become an ardent supporter of VMSDC, devoting time and energy to several of its committees. For example, one of them advises the board and council about issues that are "near and dear to minority- and women-owned businesses," Patel explains.
"We volunteer our time and resources and attend board meetings and planning sessions, so it's a big commitment. We get involved with trade fairs." The MBE input council also puts on an awards function at the end of the year.
Patel was recently elected to the VMSDC's board of directors. Last December she was given VMSDC's entrepreneur of the year award.
It's all about relationships
Patel has recently completed an application for WBENC certification. Pragmatic Solutions is also certified as a WBE by the Commonwealth of Virginia.
Patel continues to be grateful to her original sponsor for helping her navigate the complex world of supplier diversity. "Our success story is truly tied to our relationship with Freddie Mac," she declares. The supplier diversity story, she feels, "is all about trust, faith and relationships."