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U.S. Department of Transportation U.S. Department of Transportation Icon United States Department of Transportation United States Department of Transportation

Public Roads - July/August 2016

Date:
July/August 2016
Issue No:
Vol. 80 No. 1
Publication Number:
FHWA-HRT-16-005
Table of Contents

Giving A Leg Up

by Kimberly Sarmuksnis

Federally funded, State-administered business development programs are helping level the playing field for disadvantaged business enterprises across the country.

 

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This photograph, taken by a photographer employed by a disadvantaged business enterprise (DBE), shows a construction crew working on the reconstruction of Pennsylvania Avenue, SE, in Washington, DC.

 

Small businesses face a number of barriers on the road to success, particularly in the world of highway construction. They must overcome obstacles such as accessing financing and bonding; understanding how to navigate the Web sites of State departments of transportation to locate procurement opportunities; submitting competitive bids while still making a profit; and marketing themselves to State DOTs, prime contractors, and consultants to participate as prime and subcontractors on State highway projects. Historically, small businesses owned by minorities and women have been especially challenged in competing for highway construction projects.

 

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Antoinette Charles is the owner of a photography company that became DBE certified in Maryland in 2011 and in Washington, DC, in 2012.

 

One way for a small, minority, or woman-owned business to get a leg up when competing for highway projects is to become certified as a disadvantaged business enterprise (DBE). Becoming DBE certified can help these firms land subcontracting opportunities on federally assisted highway contracts with DBE subcontracting goals. Certification can also open new doors to valuable resources, such as programs offered by State DOTs. These services can range from providing awareness of upcoming contracting opportunities and requests for proposals to learning about matchmaking opportunities with prime contractors and participating in capacity-building programs to increase business acumen and marketability.

So how can small businesses participate in DBE certification and the DBE program?

What Is the DBE Program?

The U.S. Department of Transportation’s Office of Civil Rights leads the DBE regulatory program. Three operating administrations--the Federal Highway Administration, the Federal Transit Administration, and the Federal Aviation Administration--require the recipients of Federal transportation funds to administer DBE programs. FHWA’s primary recipients that administer DBE programs are State DOTs.

The DBE program nationwide is designed to remedy discrimination by leveling the playing field for small businesses owned and controlled by minorities, women, and other disadvantaged individuals by assisting them in competing fairly for federally assisted transportation projects. Small businesses receive certification by applying to State DOTs and other certifying State entities, which review applications and determine whether a firm meets all regulatory requirements. This process includes an onsite visit and interviews with the firm’s owners to verify that the disadvantaged owners actually control the company’s day-to-day activities.

To be regarded as economically disadvantaged, an individual’s personal net worth cannot exceed $1.32 million. To be considered as a small business, a firm must meet the appropriate Small Business Administration’s size standards consistent with the type of work performed on USDOT-assisted contracts. Even if a firm meets the listed requirements, its average annual gross receipts may not exceed $23.98 million.

Typically, a State DOT advertises transportation contracts that have a DBE goal. Prime contractors bidding on these contracts must use good faith efforts to subcontract with enough DBEs to meet the goal. Also, DBEs are eligible to participate in State DOTs’ supportive services programs that help the firms to succeed in obtaining contracting opportunities.

 

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Taken by a DBE-certified photographer in the District of Columbia, this photo shows a construction crew compacting asphalt pavement using a drum roller.

 

Supportive Services

FHWA is different from the other two operating administrations in that it is the only mode that has legislative authority to allocate up to $10 million annually to State DOTs to implement DBE supportive services. The purpose is to provide training, assistance, and other services to certified DBEs to facilitate their development into viable, self-sufficient businesses capable of competing for, and performing on, federally assisted highway projects.

Initially, State DOTs used the funds for a variety of services, such as outreach, conferences, and assisting with Web design. Since 2015, however, FHWA has required State DOTs accepting supportive services programs to administer business development programs.

The FHWA requirement to use the supportive services funds, at least in part, to administer business development programs arose in response to a U.S. Office of the Inspector General (OIG) 2013 report titled, Weaknesses in the Department’s Disadvantaged Business Enterprise Program Limit Achievement of its Objectives (OIG Report No. ZA-2013-072).

Among other things, the report stated: “The Department has limited success in achieving its program objective to develop DBEs to succeed in the marketplace because recipients place more emphasis on getting firms certified as DBEs rather than assisting them to identify opportunities and to market themselves for DBE work on federally funded projects.” As an example, the report stated that, as of 2013, Maryland had almost 5,000 certified DBEs, but only about 560 firms or 12 percent of the certified firms ever actually received work on a federally funded project.

Washington, DC's Business
Development Program
Since 2006, under Washington, DC's Business Opportunity and Workforce Development Center, the District Department of Transportation (DDOT) has implemented a business development program titled the Small Business Assistance Program. On October 19, 2011, DDOT launched a supportive services program and subsequently in January 2012 enrolled 25 firms.

The OIG report suggested a possible solution to the problem of underutilized DBEs: “Require that the operating administrations work with recipients to develop ways to improve utilization rates and require the establishment of business development programs for firms that have not received DBE work for several years.”

The regulations governing the DBE program give operating administrations such as FHWA the authority to direct State DOTs to establish business development programs (49 CFR Part 26.53).

Mandatory Business Development Programs

On August 12, 2013, the Office of Civil Rights issued a joint memorandum with USDOT’s Office of Small and Disadvantaged Business Utilization outlining the decision to require State DOTs receiving supportive services funds to implement business development programs. The memo announced that the purpose of a business development program is “to evaluate and provide a structured process for DBEs to receive firm-specific training and guidance to be competitive within the heavy highway or other construction marketplace.”

Selecting DBEs To Participate in a
Business Development Program
  1. Have maintained certification by DDOT and the Washington Metropolitan Area Transit Authority.
  2. Have been in business for 6 months and have attempted to bid on projects or with prime contractors.
  3. Are current with all tax obligations and business license requirements.
  4. Attend at least three prebid conferences throughout the year.
  5. Meet with DDOT’s supportive services program staff or its designee to develop a marketing plan, including an updated capability statement.
  6. Participate in industry-sponsored Occupational Safety & Health Administration training, or other safety training that is required by DDOT during the program year.
  7. Have ready access to the Manual on Uniform Traffic Control Devices (MUTCD), the Work Zone Temporary Control Manual, DDOT’s Standard Specifications for Highways and Structures, and other pertinent DDOT standards and guidelines (http://ddot.dc.gov/page/standards-and-guidelines).
  8. Attend at least three workshops geared toward small businesses sponsored by DDOT or by the Department of Small and Local Business Development, SCORE, the U.S. Small Business Administration, the District of Columbia Small Business Development Center Network, or other small business development entities.

Understanding that State DOTs would be unable to implement business development programs overnight, FHWA did not make the requirement mandatory until fiscal year 2015. The joint memo offered a resource for State DOTs to use in the meantime while creating and implementing their programs.

USDOT’s Office of Small and Disadvantaged Business Utilization funds regional centers called Small Business Transportation Research Centers. These centers provide assistance to all small businesses, such as business development and assistance with access to financing and bonding. The memo encouraged State DOTs to direct their DBEs to the centers to supplement the State’s traditional supportive services program until they could get their business development plans up and running. The memo listed the contact information for the centers across the country.

After FHWA issued the memo to the agency’s division offices and State DOTs, the Office of Civil Rights began to work on guidance for States in creating and implementing successful business development plans. Some States already had a program or some element of one in place prior to the mandate issued in the memo. FHWA turned to those States to learn about best practices that the agency could share with other State DOTs.

Peer Exchange

The idea of sharing best practices led to a proposal for a peer exchange session. The Federal Transit Administration and FHWA set up an event as part of the Transportation Planning Capacity Building Program, which is a joint venture of the two agencies. The peer exchange took place on October 15–16, 2014, in Houston, TX. The Volpe National Transportation Systems Center facilitated it.

Participating peer agencies were the American Public Transportation Association, Capital Metropolitan Transportation Authority, Florida Department of Transportation, Metropolitan Transportation Authority, National Association of Minority Contractors, Texas Department of Transportation, and the Virginia Department of Transportation.

A report that came out of the peer exchange, Disadvantaged Business Enterprises and Business Development Programs, mentions a number of best practices. For instance, Tom Rush, DBE programs manager with the Florida DOT, provided examples from his State. As quoted in the report, Florida’s business development program includes “transitional assistance,” which encourages DBEs “to develop additional job skills that may complement their current work and [that may help] increase work opportunities as subcontractors in specialized, nonconstruction tasks such as aerial photography, drug testing, and signalization.”

Key Elements of a Business Development Program (BDP)
Prerequisites for a Successful BDP Agencies should have the following resources in place before implementing a BDP:
  • A dedicated and competent team of at least two staff members
  • Technological ability to capture metrics of success
  • Advisory committee or other guiding body
  • Senior management support for the BDP
  • Stakeholder involvement and input from DBEs
Clear Objectives When implementing a BDP, an agency should set out a vision and mission statement that clarifies what the BDP is supposed to accomplish. A BDP should aim to help certified DBE firms do business competitively both within and outside of the DBE Program.
Business Assessments Before a firm can participate in a BDP, [it] should be required to complete an assessment that evaluates the business’ access to capital and bonding, available human resources, existing capabilities, and overall training needs. The assessment can take the form [of] a brief set of questions that help identify useful resources for each unique DBE. While the assessment may be used to determine which DBEs are allowed to participate in the BDP, any selection criteria should be generous and should not restrict DBE participation.
Supportive Services BDP supportive services must include mechanisms for delivering specific, focused training that addresses the topics most useful to DBEs, including:
  • Bidding and estimating
  • Relationship building
  • Finance and bonding
  • Agency culture
  • Working with prime contractors
Training should be delivered in small groups, or in a one-on-one setting. In addition to training, BDP supportive services should refer participating DBEs to experts and contacts that will help them develop their business.
Monitoring Plan Recipient agencies should track and monitor all businesses that take part in a BDP. A BDP must include an oversight and monitoring plan that provides a system for measuring the success of the program. An oversight and monitoring plan should include performance measures, an adequate system for collecting data, and annual reporting. The monitoring system should track the following:
  • New DBEs getting work for the first time
  • Race and gender breakdown of DBEs participating in the BDP
  • Overall success rate for DBEs who have participated in the BDP
  • Number of contracts participating DBEs have received inside and outside of the DBE program
  • Characteristics of the contracts awarded to DBEs (such as size, trade area), which can help determine areas of growth for new DBEs and firms seeking to diversify their work
  • Jobs created by contracts awarded to BDP participants
Access to Opportunity for Contracts A successful BDP should help participating DBEs contact prime contractors that regularly participate on federally assisted contracts, introduce themselves to agency staff, identify potential contracts to bid on, prepare bids, and overcome barriers to the contracting process. A BDP should improve DBEs’ access to contracts and could include small business set-asides (or as otherwise permitted by 49 CFR 26.43(b)) for participating agencies. Debriefings after losing a bid also help DBEs to gain knowledge about successful bidding practices and access to contracts.
Business Plans One major outcome of a BDP should be a specific, time-bound action plan for each participating DBE. The plan should address the items identified in the business assessment, and should demonstrate how the DBE is going to expand its business and graduate out of the BDP.
Source: Disadvantaged Business Enterprises and Business Development Programs report from the peer exchange.

Shay Ponquinette, assistant division administrator for civil rights with the Virginia DOT, shared examples such as a template that DBEs can use to create business plans. Other examples provided by Virginia’s Business Opportunity and Workforce Development Center included comprehensive business assessments and professional business profiles. Also, VDOT hosts an annual Transportation Training Symposium, which includes a networking and matchmaking event connecting DBEs and prime contractors.

Martha Arnold, program manager with the Texas DOT, provided additional examples. For instance, TxDOT matches DBEs with proven records of success with less successful DBEs, which helps provide strategies for overcoming common challenges that these firms face.

The peer exchange session in Houston stressed that business development plans should not employ a one-size-fits-all approach. For instance, the Florida DOT offers a 5-week online course for DBEs that are unable to attend classroom training. The online course covers topics such as estimating costs, submitting bids, and compliance. On the other hand, TxDOT specializes in small group classroom training sessions on bonding, bidding, accounting, and marketing. The sessions involve no more than three DBEs in a class.

 

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This photograph, shot by a firm that obtained DBE certification and received a contract, shows construction of a roundabout on C Street in the District of Columbia.

 

The peer exchange was successful in helping transit and transportation agencies share best practices and ideas. The Office of Civil Rights decided that the report should be shared with all State DOTs and FHWA divisions through a webinar, held on September 8, 2015. VDOT agreed to present the webinar and share information about its supportive services program. The webinar provided helpful information and prompted requests to send examples of the templates that VDOT uses for its business development program. To view the webinar, see https://connectdot.connectsolutions.com/p6vgkgbvzdj. In addition to the webinar, the Office of Civil Rights has provided technical assistance to FHWA division offices and State DOTs to continue to develop and implement their business development programs.

DBE Success Stories

One DBE that has participated in a supportive services program is Antoinette Charles Photography. The owner began her business in 2006 with her main focus on weddings and portraits. But Charles soon became interested in the highway construction industry, and in 2009 she won her first contract taking preconstruction, progress, and final photos for the reconstruction of Pennsylvania Avenue in Washington, DC. During her time working on the project, Charles learned about the benefits of being certified as a DBE.

“I was told that having the certification would open up more opportunities for me to do business in my home State--Maryland--and in the District of Columbia,” Charles says.

Her business became DBE certified in 2011 in Maryland and later in the District of Columbia. Within a year, Charles was using resources available through the District DOT’s Small Business Assistance Program, funded in part by FHWA’s supportive services funds. Through the program, Charles worked one-on-one with a consultant to create a capabilities statement that focused on her experience photographing highway construction. The consultant also offered recommendations for redesigning her Web site.

“It was very clear,” says Charles, “that having my DBE certification, my redesigned Web site, and my capabilities statement made a huge impact on my business in subsequent years. Prime contractors were more interested in working with me for my skills and the fact that I was DBE certified. Through my expanded network, I received new projects that included the District DOT’s annual summit for disadvantaged businesses, the grand opening of the 11th Street Local Bridge [in Washington, DC], the DC streetcar maintenance building, and several other construction-related projects.”

Another DBE that has participated in a business development program is Saturn Concrete Construction, LLC, based in Arizona. Ignacio Malave founded the company in 2003, and his company gained DBE certification in 2007. Through the Arizona DOT’s business development program, Saturn participated in a workshop on prevailing wages. The training helped the company’s employees learn how to use a labor tracking software’s Web site and platform. After completing the training, Saturn was able to bid on Federal contracts with prevailing wage rate requirements and recently completed its first prevailing wage project with the city of Mesa, AZ.

Another DBE that has participated in ADOT’s business development program is Kuniklo Corporation. Patti Tellez formed the company in 2003 to expand upon her background in community and economic development. Kuniklo is a compliance and outreach consulting firm with expertise in DBE, equal employment opportunity, on-the-job training, and labor compliance programs. The firm’s services are best suited for complex, mixed-funding, multiple-stakeholder projects, including alternative delivery projects such as design/build, construction manager at risk, and public-private partnerships.

Tellez has participated in many events offered by ADOT’s business development program. One of the most useful was the agency’s DBE Academy, which was a week-long, intensive training program focused on negotiation, risk management, and market positioning.

 

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At the 2014 DBE Summit, (L–R) Linda Fennell, manager of the District DOT’s supportive services program and one of the key organizers of the event, and Sheila Brooks, Ph.D., founder, president, and CEO of SRB Communications, posed next to a sign greeting participants.

 

The event “helped me to survive the economic decline and plan for the cash flow crunch that would come with business growth,” says Tellez. “It also helped me to recognize my strengths and weaknesses in negotiation.”

Another valuable element of Arizona’s business development program is the networking events, she says. “ADOT makes it a point to get DBE firms in front of prime contractors and consultants. The repeated exposure has helped us to be visible and gain credibility in the industry. As a result, we have worked directly with ADOT, its FHWA subrecipients, and on projects with prime contractors and consultants.”

These events have increased Kuniklo’s business. Tellez says, “In the past 5 years, we have significantly increased the number of firms that we are doing business with in the transportation industry. We have recently been selected to participate on the general engineering consultant team to support ADOT’s largest public-private partnership project, the Loop 202–South Mountain Freeway project.”

Networking events are a successful way for DBEs and prime contractors to meet. The District of Columbia Department of Transportation hosts a similar event, the DBE Summit, in Washington, DC. The DBE Summit features a networking session, along with training workshops. The department held its DBE Summit on April 22, 2014.

Results to Date

Because these programs are a new requirement, the results are yet to be seen. The Office of Civil Rights is making performance measurements a mandatory part of the DBE and supportive services programs, including business development programs. Although collecting data on the impacts of the programs has proven to be difficult because of budget constraints, some State DOTs have produced reports.

For example, the Florida DOT uses an equal opportunity compliance system to track all DBE payments and activities. This system enables FDOT to know which DBEs graduated from the agency’s training programs and which DBEs bid on and received work. FDOT is working to track the number of projects where DBEs worked with prime contractors that they met through the agency’s business development program. Recent findings from FDOT’s reports indicate that through the State’s business development program, $11.8 million was contracted to business development initiative firms between July1, 2015, and September 30, 2015.

 

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U.S. Transportation Secretary Anthony Foxx is shown at the podium of the 2014 DBE Summit, which serves as a resource for DBEs looking to network with prime contractors.

 

“Many DBEs continue to grow due to the support and assistance that they have received through business development programs,” says Martha Kenley, national manager of the DBE program for FHWA. “In addition to helping DBEs succeed, business development programs have increased collaborative partnerships and information sharing among agencies.”


Kimberly Sarmuksnis is a transportation specialist with FHWA’s Office of Operations. Prior to that, Sarmuksnis served as program analyst for the Office of Civil Rights. She holds a B.A. in communication and an M.P.A., both from George Mason University.

For more information about the Disadvantaged Business Enterprise Program, see www.fhwa.dot.gov/civilrights/programs/dbess.cfm or contact Martha Kenley at 202–366–8110 or martha.kenley@dot.gov. Or contact Kimberly Sarmuksnis at 202–366–1713 or kimberly.sarmuksnis@dot.gov