Virginia Passes Bill Boosting Women- and Minority-Owned Businesses in State Contracts

As the Trump administration dismantles federal programs designed to boost minority- and women-owned businesses, Virginia's legislature has moved in the opposite direction — passing sweeping procurement legislation that could reshape how billions in state contracts are awarded.

House Bill 61, the Small SWaM Business Procurement Enhancement Program, cleared the Virginia General Assembly in early March 2026 on largely party-line votes, codifying into state law what had previously been an executive order-level aspiration: that 42 percent of discretionary state spending should go to small businesses owned by women, minorities, and service-disabled veterans [1][2].

The bill now heads to the desk of Governor Abigail Spanberger, a Democrat who took office in January 2026 and has signaled support for supplier diversity initiatives [3].

What the Bill Does

Sponsored by Delegate Jeion Ward, a Democrat representing Hampton, HB 61 establishes a formal procurement enhancement program within the Department of Small Business and Supplier Diversity (SBSD). Its key provisions include [1][2][4]:

• A statewide goal of 42 percent utilization of certified small SWaM (Small, Women-owned, Minority-owned, and service-disabled veteran-owned) businesses across all discretionary spending by executive branch agencies
• A requirement that agencies increase their SWaM utilization rate by three percent per year until reaching the 42% target
• Set-asides for SWaM businesses on purchases between $10,000 and $200,000 — a threshold raised from the original $100,000 in the bill's final version
• Allowance for agencies to pay up to 5 percent more to meet diversity goals
• Mandatory disparity studies every five years, with the next due by January 1, 2027
• Creation of a new Division of Procurement Enhancement within SBSD to coordinate compliance across state agencies, VDOT, and public universities

The 42% target encompasses all certified small businesses, not just minority- or women-owned firms. Within that umbrella, a previous version of the legislation (HB 1784, introduced in 2021) proposed allocating 23.1% specifically to women- and minority-owned businesses [5].

A Party-Line Fight

HB 61 advanced through every committee and floor vote on near-perfect party-line splits. The bill passed the House on February 17 with a 64-33 vote, then cleared the Senate on March 4 by a razor-thin 21-19 margin. The House subsequently agreed to the Senate's substitute version on March 6, voting 62-36 [2][4].

The vote margins underscore the deeply partisan nature of procurement diversity policy in 2026 America. Supporters framed the bill as a necessary corrective to well-documented disparities in state contracting. Opponents characterized it as government-mandated racial and gender preferences.

Delegate Ward, who has championed SWaM legislation for years, argued the bill would "enable woman- and minority-owned businesses across the commonwealth to participate" in the economic engine of state contracting [5].

The Disparity That Sparked the Bill

Virginia's push to codify procurement diversity targets rests on a foundation of data. A disparity study conducted by BBC Research & Consulting examined contracts awarded by the Commonwealth between July 2014 and June 2019 and found systemic underrepresentation across virtually every demographic group [5][6].

The numbers were stark:

• Women- and minority-owned businesses comprised 32.8% of certified SWaM firms but received only 13.4% of state contracts
• Black-owned businesses represented 7.1% of certified firms but received just 3.4% of contracts
• Asian American-owned businesses held 6.6% of certifications but captured only 1.1% of contract dollars
• Hispanic-owned businesses made up 5.3% of certified firms but received 3.3% of contracts
• Native American-owned businesses, 2.9% of certified firms, received just 0.1% of contracts
• White women-owned businesses, 10.9% of certified firms, received 5.5% of contracts

Source: BBC Research & Consulting / Virginia SBSD Disparity Study

Data as of Mar 10, 2026CSV

An earlier 2011 study had found that only 2.82% of state contracts went to minority- and women-owned businesses, suggesting that while progress has been made, significant gaps remain [5].

By 2023, SWaM-certified businesses accounted for nearly 29% of all contracts tracked through the state's online platform — roughly $2.7 billion — still well short of the 42% target established by executive order [7].

Federal Headwinds: A Contracting Landscape in Flux

Virginia's legislative action arrives at a moment of profound upheaval in federal minority contracting policy. The Trump administration has taken aggressive steps to roll back decades of diversity-focused procurement programs, creating a vacuum that states like Virginia are now attempting to fill [8][9].

On his first day back in office in January 2025, President Trump signed executive orders rescinding various Biden-era diversity initiatives, including one that revoked Executive Order 11246 — a cornerstone of equal opportunity policy for federal contractors that had been in place since the Johnson administration in 1965 [8]. The orders targeted what the administration called "illegal DEI discrimination" in federal contracting.

The impact on Virginia has been direct and measurable. The federal government spends approximately $700 billion annually on contracts, and the Trump administration slashed the target for minority contracts to just 5%, down from previous goals [9]. In October 2025, the U.S. Department of Transportation removed the presumption that women- or minority-owned businesses are socially and economically disadvantaged from its Disadvantaged Business Enterprise (DBE) program [10].

Source: Bureau of Labor Statistics

Data as of Mar 10, 2026CSV

The ripple effects hit Virginia almost immediately. In January 2026, the Virginia Department of Transportation (VDOT) paused certain activities in its DBE program, stopping progress tracking toward DBE goals while the state Department of Small Business and Supplier Diversity conducted required reviews and recertifications under the new federal rules [10][11].

Under the revised federal framework, all DBE firms — current and new — must now submit personal narratives and net worth statements to individually demonstrate they are socially and economically disadvantaged, rather than relying on the group-based presumption that had been in place for decades [11].

On March 2, 2026, VDOT received approval to move forward with reevaluations, and officials urged all DBE and Airport Concessions DBE firms to apply for recertification [11]. But the future of the entire DBE program hangs in the balance: it expires September 30 unless Congress reauthorizes it as part of the Surface Infrastructure Bill [11].

Diverging State Paths

Virginia's decision to strengthen its minority procurement program stands in sharp contrast to moves by other states. The most dramatic example came from Texas, where Comptroller Kelly Hancock in late 2025 gutted the state's Historically Underutilized Business (HUB) program [12].

Texas removed women- and minority-owned businesses from the program entirely, renaming it the "Veteran Heroes United in Business" (VetHUB) program and restricting eligibility to disabled veteran-owned businesses. Of the 15,762 companies registered in the HUB program, only 485 were owned by service-disabled veterans — and zero of those were owned by women [12].

The legal basis for the Texas action remains contested. The HUB program was created by the state legislature through statute, and critics have questioned whether the Comptroller had the authority to effectively repeal a state law through administrative action [12].

Meanwhile, states governed by Democrats have moved to expand their programs. Washington State launched certification for LGBTQ-owned businesses in 2025, and Maryland maintains a 29% MBE program goal across 70 state agencies [13][14].

The result is a patchwork of diverging state policies that increasingly defines minority business contracting in America — a situation that advocacy groups say creates confusion for businesses operating across state lines and undermines the coherent national framework that federal programs once provided.

The Legal Landscape

Any race-conscious procurement program operates under the shadow of constitutional scrutiny. The U.S. Supreme Court's 1989 decision in City of Richmond v. J.A. Croson Co. established that state and local minority set-aside programs must satisfy strict scrutiny — meaning they must be narrowly tailored to serve a compelling government interest, typically demonstrated through disparity studies showing discrimination [15].

This is precisely why Virginia's HB 61 mandates disparity studies every five years. The Commonwealth's most recent study, initiated in April 2025 and expected by the end of that year, is designed to provide the evidentiary foundation that courts require [6].

The bill's structure — setting aspirational targets rather than rigid quotas, requiring agencies to develop improvement plans rather than face penalties, and encompassing all small businesses rather than exclusively minority-owned firms — reflects an attempt to thread the constitutional needle.

But opponents argue the program is constitutionally vulnerable. On February 7, 2026, a federal appeals court vacated a preliminary injunction against the Trump administration's anti-DEI executive orders, allowing the federal rollback to proceed — a decision that could embolden legal challenges to state-level programs [8].

What's at Stake: By the Numbers

Virginia's total state operating budget for fiscal year 2026 is $127.8 billion, with a general fund budget of $33 billion [16]. While the state does not publicly break out its total discretionary procurement spending, the roughly $2.7 billion in SWaM contracts recorded in 2023 provides a baseline [7].

With the state's population at approximately 8.7 million — including a workforce that is increasingly diverse — the economic stakes of procurement policy are significant [17]. Virginia is home to a substantial defense and government contracting sector, and many of the businesses affected by both state and federal procurement policies operate at the intersection of public and private sector contracting.

For the business owners themselves, the stakes are existential. Small SWaM-certified firms — many of them sole proprietorships or businesses with fewer than 50 employees — depend on government contracts as a reliable revenue stream. When certification programs are paused or dismantled, the impact cascades through local economies.

Looking Ahead

HB 61 now awaits Governor Spanberger's signature. Given the Democratic trifecta in Richmond — Spanberger won the governorship in November 2025, and Democrats control both chambers of the General Assembly — the bill is expected to be signed into law [3].

But passage is only the beginning. The bill gives agencies a phased timeline to reach the 42% target, increasing utilization by 3% annually. The creation of a new Division of Procurement Enhancement signals the state's intent to actively manage compliance rather than simply set aspirational goals.

The mandated disparity study due by January 2027 will provide the first comprehensive look at whether the program is making measurable progress — and whether it can withstand legal challenge.

In the broader national context, Virginia's move represents a bet that state-level action can sustain and expand minority business contracting even as federal support recedes. Whether other states follow Virginia's lead or Texas's path will likely be determined not just by politics, but by the courts — and by the economic data that disparity studies continue to produce.