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A supplier diversity program (also called a diverse supplier program) is an organization’s structured effort to include certified diverse businesses, such as minority-, women-, veteran- and other eligible small-business owners, among the vendors it buys from, with goals, a named owner and regular reporting. Programs usually separate Tier 1 spend (paid directly to a diverse supplier) from Tier 2 spend (paid to a prime supplier that in turn buys from diverse suppliers). The federal subcontracting plan in FAR 19.704 is a useful public template for what a program should contain.
This page is for lab managers, procurement staff and clinic administrators who need to understand, set up or report on such a program. It is general information, not legal or compliance advice. For what the certifications themselves mean and how status is verified, see supplier diversity certifications: MBE, WBE and VOSB; this page does not repeat those definitions.
Short answer
A supplier diversity program turns a purchasing intention into something measurable: which supplier categories count, how much spend goes to them, who is accountable, and how the numbers are reported. Two ideas do most of the work. First, the Tier 1 versus Tier 2 distinction decides what dollars are counted. Second, goals only mean something if the method for setting them and the person who administers them are written down, which is exactly what FAR 19.704 requires of federal contractors.
What a supplier diversity program is
A supplier diversity program is a purchasing policy plus the administration behind it. The policy states which kinds of suppliers the organization wants to reach. The administration covers finding those suppliers, confirming their status, tracking spend and reporting results. “Diverse supplier program” is the same idea under a different label, and the two terms are used interchangeably by buyers and by suppliers’ registration pages.
Programs differ in who they cover. A public university may emphasise small and local businesses; a hospital system may report only certified categories; a federal prime contractor must follow the categories in the Federal Acquisition Regulation. The program name tells you little, so read the definitions each buyer publishes.
Tier 1 vs Tier 2 spend
Buyers commonly split diverse spend into two tiers. The definitions below come from a healthcare supply-chain vendor’s blog and one university’s procurement page; there is no single universal standard.
| Term | What is counted | Source |
|---|---|---|
| Tier 1 spend | Spending "directly with a certified diverse supplier". | Taylor, blog on Tier 1 and Tier 2 diversity spend in healthcare |
| Tier 2 spend | Dollars paid to a primary supplier "who then sources the products and services from a certified diverse supplier". | Taylor, same blog |
| Tier 2 spend, as one university defines it | "your company’s own direct and/or indirect spend with diverse suppliers", counted only when reported through the university’s supplier portal. | UMass Procurement, Tier 2 supplier page |
The practical consequence is that the buyer does not control Tier 2 dollars directly. UMass describes its Tier 2 program as a way to extend its diversity initiatives across a broader value chain, and makes the counting depend on the prime supplier reporting.
What a program contains: the FAR 19.704 template
FAR 19.704 describes the subcontracting plan that certain federal contractors must submit. It applies to those contractors, not to a lab or hospital buying with its own funds, but its elements show what a defensible program records. Per the text at acquisition.gov:
- Separate percentage goals by category. The plan must include goals for small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business concerns (FAR 19.704(a)(1)).
- A dollar base. The plan gives a statement of the total dollars planned to be subcontracted and the share going to each category (19.704(a)(2)).
- A stated method. The plan includes "a description of the method used to develop the subcontracting goals" (19.704(a)(4)).
- A named administrator. The plan names an individual employed by the offeror who will administer the subcontracting program, and describes that person’s duties (19.704(a)(7)).
- Payment timing. The plan includes an assurance of on-time payment to small business subcontractors (19.704(a)(15)).
The SBA’s prime-contracting guidance adds that other-than-small businesses winning federal contracts above a threshold need a subcontracting plan, that the requirement follows FAR 52.219-9, and that primes can post opportunities on SBA SubNet and search the Small Business Search database for subcontractors. The SBA page does not state the dollar threshold, so check the current clause text for it.
Program-build checklist
This checklist maps a lab or hospital buyer’s own program to the FAR 19.704 elements above. It is an editorial adaptation of that template, not a requirement that applies to non-federal buyers.
| Program element | Question to settle in writing | FAR 19.704 counterpart |
|---|---|---|
| Categories | Which supplier categories count, and which certification or registration proves each? | Separate goals per category |
| Spend base | What total spend is the goal measured against? | Total dollars planned and share per category |
| Goal method | How were the goals derived, and from what data? | Description of the method used to develop goals |
| Owner | Who administers the program and answers for the numbers? | Named individual administering the program |
| Tiering | Are Tier 1 and Tier 2 tracked and reported separately? | Not addressed in FAR 19.704 |
| Payment | Are diverse suppliers paid on time? | Assurance of on-time payment to small business subcontractors |
Where it matters for lab and clinic procurement
Purchasing teams meet supplier diversity in three places: a supplier-registration form on a university or hospital procurement site, a grant or contract that flows federal subcontracting requirements down, and the vendor evaluation itself. Where a buyer asks suppliers to be considered, the UMass page shows the pattern: Tier 2 dollars count only when reported through the buyer’s portal, so a prime supplier that wants credit has to submit its own diverse spend there. Diversity status is one input among others. The vendor selection criteria framework for lab and clinical procurement covers how to weigh it alongside quality and compliance questions, and 8(a) certification explains one federal route by which a small disadvantaged business is certified.
Common misunderstandings
Self-declared and certified are not the same
The Taylor definitions count spend with a "certified" diverse supplier. A supplier describing itself as diverse is not the same as holding a certification a buyer recognises. How status is verified is covered on the certifications page linked above.
Tier 2 dollars are not automatic
A prime supplier buying from diverse suppliers does not by itself create reportable Tier 2 spend. Under the UMass rule, it counts when the supplier reports it through the buyer’s portal.
The federal categories are not every program’s categories
FAR 19.704 lists six socioeconomic categories for federal subcontracting plans. A hospital or university program may use a different list; read its own definitions.
FAQ
What is the difference between a supplier diversity program and a diverse supplier program?
Nothing material. Both terms describe a buyer’s effort to include diverse businesses in its supply base; buyers choose the label.
What is Tier 1 versus Tier 2 diverse spend?
Tier 1 is spend paid directly to a certified diverse supplier. Tier 2 is spend a prime supplier passes on to its own diverse suppliers (Taylor).
Does FAR 19.704 apply to a university lab or hospital?
FAR 19.704 sets the content of subcontracting plans for certain federal contractors. A buyer using it as a model is borrowing structure, not meeting a legal obligation by doing so.
Sources
- FAR 19.704, Subcontracting plan requirements. acquisition.gov/far/19.704. Date checked: 2026-11-01.
- U.S. Small Business Administration, Prime subcontracting. sba.gov prime subcontracting guide. Date checked: 2026-11-01.
- UMass Procurement, Supplier Diversity Program, Tier 2. umassp.edu Tier 2 supplier page. Date checked: 2026-11-01.
- Taylor, Tier 1 and Tier 2 diversity spend in the healthcare industry (vendor blog, used for definitions only). taylor.com blog. Date checked: 2026-11-01.
