How Federal Agencies Can Advance Equity Through Biden’s Second Executive Order

On February 16, 2023, President Joe Biden signed a second executive order to strengthen the administration’s effort to marshal a whole-of-government approach to advancing racial equity. With this latest Executive Order 14091, “Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” the administration makes clear its commitment to addressing the “systemic barriers in our nation’s policies and programs that hold too many underserved communities back from prosperity, dignity, and equality.”¹

Two years ago, on day one of his administration, President Biden began the process by signing Executive Order 13985, “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” which recognized the need for bold and comprehensive action to dismantle deeply rooted inequities within the nation’s social, economic, and political structures.² Crucially, this new directive embeds important policies and processes that centered equity within the confines of government operations across the executive branch and federal agencies.

Critically, by formalizing equity requirements—such as action plans, budget proposals, and procurement policies—as part of normal government processes, agencies will be better positioned to understand, act on, and measure progress toward removing systemic barriers that prevent the government from serving all people equitably.

This issue brief analyzes the avenues the administration and federal agencies can take to better advance equitable outcomes. Specifically, it argues that agencies should:

1. Leverage procurement policies to help close the racial wealth gap.
2. Increase use of equity analysis in the federal budget process.
3. Develop safeguards and training to protect against algorithmic and programmatic biases.
4. Include equity considerations in regulatory benefit-cost analysis.
5. Develop public-facing accountability measures for equity goals.

While the new executive order creates a framework for agencies to continue advancing equity throughout the federal government, implementation of the order will be crucial to achieving equitable outcomes.

Here are five actions that the administration can take to advance equitable outcomes in line with the new directive:

1. Leverage procurement policies to help close the racial wealth gap

To advance its goal of narrowing the racial wealth gap through procurement, the Biden administration should focus on small disadvantaged business (SDB) certification, the newly codified Minority Business Development Agency (MDBA), and equitable procurement policies related to the recent trio of economic investments in infrastructure, climate, and semiconductor manufacturing.

Today’s racial wealth gap remains persistent, with median wealth of white households more than seven times larger than that of Black households—and five times larger than that of Hispanic households.³ The federal government is the largest purchaser of goods and services annually, with the fiscal year 2021 total amounting to $600 billion.⁴ Small businesses⁵—defined by a threshold within each industry of the number of employees and average annual receipts—account for 27.2 percent of total federal contract dollars.⁶ And SDBs⁷—small businesses with 51 percent ownership by someone or multiple people who are socially⁸ and/or economically⁹ disadvantaged—account for 11 percent of total federal contract dollars. The Small Business Act mandates that at least 5 percent of contract dollars go toward SDBs,¹⁰ and the Biden administration has increased its goal from 10 percent to 15 percent by 2025.¹¹

Historically, SDBs have struggled to win contracts due to strict requirements, limited capacity, lack of previous contract wins, and decentralized processes.¹² According to SBA data as of December 2021, there are just 4,237 small businesses active in the 8(a) program, which provides development opportunities to certified SDBs through training and technical assistance.¹³ The Biden administration should equip minority-owned businesses with the ability to better compete for federal contracts. One barrier to participation is the certification process. Currently SDBs can certify either through official processes such as the Small Business Administration’s 8(a) program or self-certify.

To address this issue, the administration can take the following steps:

• Standardize and simplify the certification process for socially and economically disadvantaged businesses across federal agencies. At present, certification is conducted differently depending on the agency. Formal certifications exist, such as the 8(a) Business Development program,¹⁴ recipients of the HUBZone program,¹⁵ or private certifications such as a certified minority business enterprise (MBE).¹⁶ However, some SDBs self-certify and do not follow standardized processes,¹⁷ which means they may not access many of the benefits of SDBs while still counting toward the SBA’s total calculation for SDB awards. Even when the certification process is government-led, it can be inconsistent. For example, the U.S. Department of Transportation’s Disadvantaged Business Enterprise (DBE) program relies on state transportation authorities to dictate the terms and conditions for qualifying as a disadvantaged business.¹⁸

Standardizing certification across agencies with reciprocity would help disadvantaged businesses to compete for more federal contracts and to meet and surpass President Biden’s goal of 15 percent of federal dollars awarded to small disadvantaged businesses.¹⁹

• Leverage the MBDA to cultivate new and sustainable business opportunities for minority-owned businesses. The codification and annual funding provided to the MBDA through the Minority Business Development Act²⁰ within the Infrastructure Investment and Jobs Act (IIJA)²¹ provides capacity for the federal government to support competitiveness and access to capital for minority businesses through minority business development centers. These centers should establish certification processes in coordination with federal agencies and be the liaison for businesses to understand certification requirements and procedures. In addition, the MBDA should work with minority-owned businesses and other federal agencies by providing research, technical assistance, and resource guides on how to bid for contracts related to the IIJA, the CHIPS and Science Act,²² and the Inflation Reduction Act.²³
• Equip agencies distributing new IIJA, CHIPS and Science Act, and Inflation Reduction Act dollars—expected to total in the trillions of dollars over the next decade—with guidance to incorporate equitable procurement policies into awards criteria and rubrics. This includes creating opportunities for disadvantaged businesses to compete for contracts and, separately, ensuring contractors hire a diverse workforce so that employees from disadvantaged groups have access to good-quality jobs and benefits.

On the business side, disadvantaged businesses receive the experience from federal contracts to develop expertise and familiarity. For example, the Department of Transportation’s DBE program, reauthorized through the IIJA, dictates that 10 percent of contracts flow toward DBE entities. But this can include subcontracting awards, meaning that DBEs may have lower operating margins or not gain critical on-the-job experience that would support long-term sustainability and growth.²⁴ The Department of Transportation should structure contracts and awards to ensure that there is a mutually beneficial arrangement for subcontractors that protects and strengthens their ability to compete for future contracts and grow.

On the worker side, this involves facilitating the hiring of a diverse workforce so that employees from disadvantaged groups can access good-quality jobs and benefits.²⁵ In particular, federal agencies managing proposals for these economic investments can score projects that set clear workforce diversity goals more highly due to their downstream impacts on the community, which can help boost wages, benefits, and opportunities for communities of color.²⁶

2. Embed equity into the federal budget process

To advance its goal for advancing equity in governmentwide processes, the Biden administration should embed equity into the federal budget process to help formulate equity analyses and budget recommendations.

The federal budget process provides the plan and corresponding authority for the federal government’s spending, receipts, borrowing, and debts in alignment with government policies and programs.²⁷ While funds are allocated through statutory obligations via specific or general legislation, the executive branch and federal agencies can influence the federal budget through the president’s budget as authorized by the Budget and Accounting Act of 1921 and the Congressional Budget Act.²⁸ Through the budget process, agencies must submit proposals to OMB on their proposed allocation requests for their programs and operations.²⁹ The prior year serves as a starting point and uses guidance and instructions provided by OMB. For example, recent guidance from OMB has asked agencies to consider and have their budget requests reflect “the Administration’s commitment to programs designed to ensure or promote equal opportunity regardless of race, color, religion, national origin, sex (including pregnancy and gender identity), disability, age, sexual orientation, genetic information, or any other non-merit-based factor.”³⁰

In line with this guidance, OMB should include more equity considerations when analyzing where federal dollars are allocated and proposing where new funds should go or which programs to continue. This includes providing federal agencies with additional guidance on evaluating their programs for equity impacts and how to analyze the way adjustments to program spending would affect equity. Administration policy could improve its budget proposal process to include these considerations as agencies submit their budget proposals and equity action plans to OMB annually each September. A model exists in Seattle, for example, where documentation of benefits and burdens of proposed budget changes are detailed to explain how the change will impact racial equity.³¹

To ensure adequate resources for conducting equity analyses, the administration should consider adding training and additional funding for OMB staff to lead and undertake budget equity analysis related to the federal budget.³²

3. Root out racial bias through technology safeguards and equity training

To advance its goal of preventing and addressing discrimination, the Biden administration should develop technology safeguards and conduct equity trainings that protect the integrity of fair access to government programs.

Much like private industry and other sectors of the economy, the federal government is facing pressures related to the safe and fair use of new and emerging technologies.³³ Federal agencies use technology to more quickly deliver government services, conduct analyses, and create efficiencies across benefits, communications, and other necessary activities.³⁴ However, use of emerging technology, such as artificial intelligence (AI), has shown the potential for negative equity impacts.³⁵ For example, recent reports have shown the IRS disproportionately audits the tax returns of Black Americans due to the agency’s algorithm.³⁶ Federal agencies should take action to ensure that disparate impacts from use of technology and algorithmic bias are mitigated in line with the new executive order’s goal of preventing and addressing discrimination using civil rights authorities.³⁷

Existing policy groundwork exists with the Trump administration’s December 2020 executive order on “Promoting the Use of Trustworthy Artificial Intelligence in the Federal Government,”³⁸ which remains in effect; the Biden administration’s release of the White House Office of Science and Technology Policy’s (OSTP) Blueprint for an AI Bill of Rights;³⁹ and the National Institute of Standards and Technology’s (NIST) AI Risk Management Framework.⁴⁰ While these documents from OSTP and NIST are important first steps, they remain general guidance and are not tailored with specific recommendations for application and integration by federal agencies.

Accordingly, OMB and OSTP should issue specific guidance to federal agencies on how to create their automated systems and properly and safely conduct technology equity assessments.⁴¹ This guidance should include how agencies can develop shared policy to ensure that their algorithms demonstrate effectiveness—through proper testing and auditing—without compromising anti-discrimination principles prior to use, as well as technical sufficiency and uniform application across federal agencies.⁴² For example, when agencies create automated systems, they should conduct equity assessments in the system design, data use, pre-deployment testing, and monitoring stages. OSTP and OMB should also provide opportunities for professional training for staff members designing the technology but also using the technology.

For comparison, the United Kingdom’s agencies must document potential and anticipated discrimination before deploying an algorithm, including by explicitly allowing data collection related to race, sexual orientation, and other categories when possible.⁴³ These same principles for equity assessment and evaluation should also be offered across the federal government for other areas of evaluation. This includes those agencies conducting assessments of property, such as property damage assessments conducted by the Federal Emergency Management Agency (FEMA) after a natural disaster⁴⁴—which have been documented to be potentially biased⁴⁵—and other areas where racial bias could lead to disparate outcomes in services or benefits.

These bias and equity training opportunities could be coordinated by the newly formed “agency equity teams” prescribed in this executive order as well as the existing OSTP National Science and Technology Council Subcommittee on Equitable Data,⁴⁶ and training opportunities should build on and complement existing learning opportunities that OMB and DPC facilitate, such as interagency equity learning communities.⁴⁷ This aligns with the executive order on “Diversity Equity and Inclusion in Federal Workforce” and applies to federal contractors serving in evaluation roles.⁴⁸

4. Include equity considerations into regulatory benefit-cost analysis

To advance its goal of developing consistent equitable data practices and embedding equity in governmentwide processes, the Biden administration should adapt regulatory benefit-cost analysis to include equity considerations.

The federal regulatory process governs the actions and analyses that must be undertaken when agencies propose new rules based on federal law. President Biden released a memo on his first day in office stating his commitment to modernizing the regulatory review process, including how improving the regulatory process can “promote public health and safety, economic growth, social welfare, racial justice, environmental stewardship, human dignity, equity, and the interests of future generations.”⁴⁹ As part of the current process when proposing new rules, agencies must conduct benefit-cost analysis of the regulation that evaluates the economic consequences and costs. Namely, this has been implemented to require that the benefits of agency rules “justify” the costs, while deferring to the tax system to address concerns about “distribution” of benefits across society.⁵⁰ Meanwhile, the United States is afflicted by distributional inequities where proposed policies and regulations affect racial, gender, socioeconomic, and other dimensions differently.⁵¹ Therefore, there is an opportunity to expand regulatory impact analysis across federal agencies to include a distributional benefit-cost analysis that accounts for a proposed rule’s distributional impacts on specific communities.

For these reasons, the White House—in coordination with OMB, the Office of Information and Regulatory Affairs, and agency regulatory personnel—should develop policy that allows for agencies to conduct distributional benefit-cost analysis in their rulemaking processes, either to replace the standard benefit-cost analysis or as a supplemental analysis.⁵² Again, the United Kingdom can provide a model for incorporating such analyses into the regulatory process.⁵³

In providing distributional costs and benefits, agency regulations will better meet the administration’s goals of advancing equitable outcomes through a whole-of-government approach. The Biden administration recently issued a new executive order on “Modernizing Regulatory Review,”⁵⁴ which intends to improve regulatory analysis, particularly regarding distributive impacts and equity, by 2024. This is an important step, and the draft update to Circular A-4,⁵⁵ which governs the regulatory analysis process, along with the accompanying guidance,⁵⁶ provides clarity on the direction of distributional analysis the administration intends to take. While not mandating distributional analysis for every regulation, the guidance recommends that agencies conduct distributional analyses when “practical, appropriate, permitted by law, and [likely to] produce relevant and useful information in a specific context.”⁵⁷

Adoption of this revised process will be important to ensuring the regulatory process helps agencies achieve equitable outcomes through their rulemaking.

5. Develop public-facing accountability measures in alignment with equity goals and plans

To advance its goal of increasing engagement with underserved communities through new tools, resources, funding requirements, and removal of barriers, the Biden administration should develop and maintain public-facing accountability measures that allow the public to engage with federal agency equity goals.

The Biden administration’s equity agenda showcases its commitments to advancing equitable outcomes across various sectors of the economy, public health, democratic participation, housing, and environmental justice, among other areas.⁵⁸ However, without accountability measures, it will be difficult for the public, Congress, advocates, and other stakeholders to understand and evaluate how the equity action plans are performing and what adjustments, through policy or otherwise, may be needed to continue to advance equitable outcomes.

Therefore, federal agencies should develop public-facing accountability measures in alignment with the goals of their equity action plans. These could take the form of equity dashboards that showcase some top-line goals,⁵⁹ such as increasing Black homeownership rates,⁶⁰ as well as how the data have changed as these plans are implemented. An example that the administration could draw on is the equity dashboard from Oregon Metro, which makes racial equity goals more transparent and provides baseline levels that could be evaluated over time.⁶¹ This level of transparency will also help with proposal development in the federal budget, federal programs, and other decisions at the agency level that could prioritize the actions that assist the administration reach its equity targets.

The Biden administration’s policies to center equity across the federal government are historic and long overdue. Its decision to reaffirm its commitment to equity is commendable and provides an opportunity for historic progress in the fight for racial equity. But to achieve equitable outcomes, the administration must implement its latest executive order with additional policies and processes that will help deliver on its promise to remove systemic barriers and advance equal opportunity for all.