A recipe for massive corruption, sanctioned by law.
I've dealt with some of these preferred companies. One company that got a contract under an American Indian preferrment was owned by an Alaskan tribe. The only Alaskans employed were in company HQ in Alaska. All of the company operations were in Maryland, DC and Virginia.
During the wars in Iraq and Afghanistan the government bought a lot of containers of lumber and plywood.
Most of the lumber came from eastern European sawmills. These sawmills all arranged to get grade stamps from the WCLIB(West Coast Lumber Inspection Bureau) out of Oregon.
The government RFQ stated the lumber had to be from a US grading agency. This was a way around that.
The wholesalers who sold the lumber to the government were owned by companies where a female either Asian or Native American were the principal owners. I personally know one of the guys who’s wife owned one of the companies. He started the company just so he could sell the government. His wife had nothing at all to do with anything. Just a figurehead. She was Asian American. He did all the buying and selling. These two companies probably sold 95% of the lumber going into those war zones.