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63 should be required to certify the final amounts actually paid tractor, as applicable, shall make same available at no cost to to each subcontractor.197 AGENCY in written form. Beyond this, the state DOT may wish to consider working CONTRACTOR and its subcontractors shall preserve and make with its IT personnel or engage an outside consultant to available, at reasonable times for examination and audit by develop methods to maintain this data electronically for gen- AGENCY, all financial records, supporting documents, statisti- eral program management use. The collected information cal records, and any other documents pertinent to this Agree- can be integrated into existing data collection systems, or ment for the required retention period of the ____ Public alternately, there are several specialized software products on Records Act, Chapter ____, ____ Statutes, as may be amended from time to time, if applicable, or, if the ____ Public Records the market designed to facilitate this process for DOTs and Act is not applicable, for a minimum period of five (5) years after other public agencies. termination of this Agreement. If any audit has been initiated and audit findings have not been resolved at the end of the reten- tion period or three (3) years, whichever is longer, the books, Methods for Addressing Missing records, and accounts shall be retained until resolution of the Subcontract Data for Current Studies audit findings. If the ____ Public Records Act is determined by AGENCY to be applicable to CONTRACTOR and its subcon- Obtain Missing Data Directly tractors' records, CONTRACTOR and its subcontractors shall from Prime Contractors and Consultants comply with all requirements thereof; however, no confidential- ity or non-disclosure requirement of either federal or state law If the state DOT has not collected and maintained this shall be violated by CONTRACTOR or its subcontractors. Any data, it will be necessary to either request the information incomplete or incorrect entry in such books, records, and directly from each relevant prime contractor or consultant or accounts shall be a basis for CONTRACTOR disallowance and reconstruct the required information by other means. If all of recovery of any payment upon such entry. the necessary subcontract data have not been maintained, it will probably not be cost-effective to recreate it all. It may be CONTRACTOR shall, by written contract, require its subcon- tractors to agree to the requirements and obligations of this more feasible to recreate the missing subcontract information Section." for a statistically representative sample of prime contracts. It is critical to ensure that the samples are properly drawn by Prime contractors are more likely to comply if the data trained social scientists. request includes a letter from the Governor, the Director of Once a sample is selected, the required subcontract infor- Transportation, or other senior official explaining the impor- mation must be requested directly from the prime contrac- tance of the data collection effort to the state and encouraging tors. State contracts usually include audit provisions allowing prime contractors to cooperate. Follow-up telephone calls the state to obtain this information from the prime contrac- must be made to nonresponsive prime contractors, and they tor. This is very useful not only for conducting studies but also are most effective when they are made by the state. This is for program monitoring, so we suggest that all state DOT con- because the state has a pre-existing and in many cases an ongo- tracts include such provisions in the standard terms and con- ing relationship with the prime contractor while the disparity ditions for construction and consulting contracts. Records or availability consultant does not. While the initial round of retention requirements should apply for at least five years. follow up can be made by the consultant if necessary, increas- Below is sample language from an actual contract: ingly higher-level state DOT personnel must become involved for those prime contractors who fail to provide the requested "AUDIT RIGHT AND RETENTION OF RECORDS information. Even under the best of circumstances, this entire AGENCY shall have the right, upon reasonable advanced notice process can be costly and time-consuming. The necessary staff and during ordinary business hours, to audit the books, records, resources to conduct this follow up should be planned for by and accounts of CONTRACTOR and its subcontractors that are the state if it is considering commissioning a disparity or avail- related to this Project. CONTRACTOR and its subcontractors ability study and knows that it will need to supplement its exist- shall keep such books, records, and accounts as may be necessary ing subcontract record. in order to record complete and correct entries related to the Project. All books, records, and accounts of CONTRACTOR and The combination of contract audit provisions, a letter, and its subcontractors shall be kept in written form, or in a form follow-up communications will typically achieve a response capable of conversion into written form within a reasonable rate accounting for 75% or more of the contract dollars in the time, and upon request to do so, CONTRACTOR or its subcon- sample. Extreme cases have required more stringent methods, such as auditing the prime contractor's books or withholding 197If the state DOT makes local assistance grants to other public entities in the progress payments on current work, to achieve cooperation. state, and the contracts funded with such grants are subject to the DBE Program then local recipients should be required to collect and maintain the same level of Finally, the longer the time from award, the more difficult prime contract and subcontract data as the state DOT. it will typically be for the prime contractor to provide the

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64 requested information. In our experience, response rates for ting contract goals and the overall dollar-weighted DBE avail- contracts that are more than 5 years old are substantially ability estimates for use in annual goal setting. lower than those for more recent projects. Where this sam- pling method must be employed, a study period longer than Case 2: Complete Pay Items. To determine the product 5 years may not be feasible or supportable, and is probably dimension of the large state DOT's construction contracting, not necessary. we worked with agency staff to identify all construction con- tracts awarded during the study period. The agency then pro- vided detailed pay item-level cost estimates for each contract. Impute Missing Data Using Bid Tabulations, Ultimately, more than 3,000 contracts consisting of almost Pay Items, or Similar Records 135,000 separate pay items and totaling almost $2.5 billion If subcontract data are missing and obtaining the informa- were included in the study. tion directly from the prime contractors is not feasible, it is We matched each pay item number with its associated still possible to create a proxy for the missing information section from the agency's Standard Specifications. Once all using bid tabulations, pay items, or similar records. However, pay item numbers were linked with a specific section, we these methods do not allow for the empirical determination calculated a dollar-based weight to apply to each section. of the geographic market area and are therefore inferior to These weights were based on adjusted dollar amounts (i.e., and less defensible198 than obtaining data directly from the original award amounts plus all change order amounts). prime contractors. Moreover, this approach is problematic Next, we assigned detailed industry codes to each section of for disparity studies because of the uncertainty introduced the specification manual. Each section could be assigned into utilization and disparity statistics. multiple detailed industry codes, depending on that sec- We have constructed such proxies for two clients, using tion's scope of work. For sections assigned more than one somewhat different methods based on the data that were detailed industry code, a second set of weights was applied available. to reflect the importance of each industry code in dollar terms within the section. These secondary weights were Case 1: Representative Bid Tabulations. In collabora- assigned with reference to published construction estimat- tion with engineering staff from a major metropolitan tran- ing standards.199 sit agency, we first identified the major types of contracts that As a check on the appropriateness of our assignment of were undertaken in a typical year: (1) building construction, detailed industry codes, we asked agency staff to review our (2) heavy elevated construction, and (3) signal construction. selections, and we refined them further based on staff Next, the agency provided detailed cost estimates associated input. For example, we eliminated several industries that with nine upcoming representative construction projects-- agency staff understood to have negligible opportunities for three building projects, three elevated heavy construction proj- prime contracting or subcontracting. Input from agency staff ects, and three signal construction projects. We then worked resulted in several consolidations or expansions of our origi- with agency engineering staff to assign detailed industry codes nal industry code assignments. to each major task and task dollars associated with each upcom- In this manner, as with the bid tabulation method, it was ing project. possible to produce the necessary detailed industry estimates In this manner, it was possible to produce the necessary of DBE availability and the overall dollar-weighted DBE detailed industry estimates of DBE availability for use in set- availability estimates for use in annual goal setting. 198 Cf. 49 C.F.R 26.45(b), requiring that the recipient's goal reflect its market, 199 not the national goal. See e.g., Richardson Engineering Services, Inc. (2000).