Tier 2 diverse spend is what your direct suppliers spend with diverse or small businesses, reported back to you. It shows supplier program results beyond the companies you pay directly. The numbers are only useful if everyone calculates them the same way, and that usually comes down to one split: direct or indirect.
This guide uses two public program documents as examples: ExxonMobil’s Tier II guidance and JPMorganChase’s Tier 2 program page. Your customer’s rules may differ, so treat these as examples and not as a standard. For the wider picture, see our supplier diversity program guide.
What is the difference between direct and indirect Tier 2 spend?
Direct spend can be traced to work for one customer. ExxonMobil’s examples include a subcontract with a diverse business to clean one of its facilities or supply concrete at a specific site. All of it, 100%, is reported to that customer.
Indirect spend supports your company as a whole, so you cannot tie it to one customer. ExxonMobil’s examples include a marketing firm, a janitorial company for your own operations and office supplies. Its diagram also lists an MRO supplier. You share this spend across customers using a formula.
How do you calculate indirect Tier 2 spend?
The common method is to allocate by revenue. JPMorganChase describes it as prorating company-wide spend by the share of your business that the customer represents. ExxonMobil’s worked example looks like this:
| Step | Amount |
|---|---|
| Your sales to this customer this quarter | $2,500,000 |
| Your total company sales this quarter | $50,000,000 |
| Customer’s share of your revenue ($2,500,000 ÷ $50,000,000) | 5% |
| Your diverse spend not tied to this customer’s work | $450,000 |
| Indirect spend you report ($450,000 × 5%) | $22,500 |
Direct spend gets added separately. If you also spent $100,000 with a diverse subcontractor on that customer’s job, this customer would see $100,000 direct and $22,500 indirect. That $100,000 is our own illustration, not part of the ExxonMobil example.
How often is Tier 2 reported?
Quarterly is common in these two programs. ExxonMobil’s reports are due 45 days after each quarter ends, with its system locking on day 45. JPMorganChase also asks for quarterly reports with a 45-day submission period, and describes reporting as voluntary.
What mistakes should you watch for?
- Counting direct spend twice. Take direct spend out before you calculate indirect. ExxonMobil says this plainly.
- Counting one supplier in several categories. If a supplier is women-owned and veteran-owned, ExxonMobil asks you to choose one category for reporting.
- Using the wrong period. Sales and spend should cover the same quarter, or the percentage means little.
- Assuming every customer has the same rules. Check what each one accepts, including whether self-classified suppliers count.
- Weak supplier records. Keep each supplier’s status, certificate date and spend together so you can answer questions later.
How can a prime make reporting easier?
- Flag diverse and small suppliers in your vendor master rather than in a separate spreadsheet.
- Tag purchases for a specific customer at the purchase order, so direct spend does not have to be rebuilt later.
- Run the indirect calculation at the same point every quarter, with the sales and spend figures saved next to it.
- Route everyday buying through a system that records it. Scattered card purchases are hard to report, as our guide to maverick spend explains.
Where Hubzone Depot fits
Everyday supplies are a common source of indirect spend. Hubzone Depot is an SBA-certified HUBZone and Women-Owned Small Business and a WBENC-certified Women’s Business Enterprise, and our marketplace opens inside your procurement system, so those purchases stay on record. Whether that spend counts in a customer’s report depends on that customer’s rules.
Frequently asked questions
What is Tier 2 diverse spend?
It is the money your direct suppliers spend with diverse or small businesses. Those suppliers report it to you, so you can see results beyond the companies you pay directly.
What is the difference between direct and indirect Tier 2 spend?
Direct spend can be traced to work for one customer and is reported in full to that customer. Indirect spend supports the supplier's whole business, so it is shared across customers using a formula.
How is indirect Tier 2 spend calculated?
A common method is to multiply your diverse spend by the customer's share of your revenue. If a customer is 5% of your sales and you spent $450,000 with diverse suppliers, you would report $22,500.
Is Tier 2 reporting required?
It depends on the customer and the program. JPMorganChase describes its program as voluntary, while other customers may ask for it in their supplier requirements. Check what yours expects.
Can MRO and office supply purchases count as indirect Tier 2 spend?
They can in some programs. ExxonMobil lists office supplies from a diverse-owned company as an indirect example and shows an MRO supplier in its diagram. Check each customer's rules.
