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CHAPTER FOUR
STATE DISADVANTAGED BUSINESS ENTERPRISE PROGRAM
CHALLENGES AND SOLUTIONS
This chapter discusses the challenges that survey respondents dent mentioned that economic difficulties have led to a rise in
identified in meeting their goals for DBE participation and contractor payment issues, noting that prompt payment claims
pairs them with solutions--both race-neutral strategies that in this state have doubled.
states have found to be effective and additional solutions that
respondents described in their open-ended comments. This None of the respondents proposed a direct solution to
chapter provides insight into how states have used race-neutral this problem; however, the solutions mentioned in the next
measures to address common challenges. two sections are designed to address financial challenges in
general.
The survey asked respondents to rate the severity of 19
challenges in terms of their impact on meeting goals for DBE
participation in highway contracting. These included chal- Challenge #2: DBE firms' lack of access to capital
and/or cash flow issues
lenges related to working with DBE firms and non-DBE prime
contractors, and challenges related to external factors. Solu-
Respondents viewed this as a significant challenge; 87% of
tions that states have used to mitigate 11 of these challenges
respondents identified this issue as a problem, with 60%
were identified, and these 11 challenges are described in this
viewing it as a significant or severe problem. One strategy
chapter. Details of respondents' numerical ratings of the 11
that some DOTs have used to improve DBEs' access to cap-
challenges' impacts on DBE participation accompany these
ital is to participate in loan mobilization programs (assisting
summaries to provide additional perspective.
banks in providing loans to DBEs). Just 28% of states had
used this strategy, but of those that had, 62% found it to be
Respondents' ratings of the impacts of the other 8 chal-
very or extremely effective (rating it a 4 or 5). (For more
lenges are shown in Figure 4 (see chapter two), and detailed
detail on this strategy see Case Example #2 in chapter five.)
ratings of all 19 challenges are available in Appendix B. The
full text of all open-ended survey responses is also available
Another respondent suggested elimination of up-front cost
in Appendix B.
retainage on prime contractors and subcontractors to allow
firms to use this money for other purposes.
FINANCIAL CHALLENGES
Challenge #3: DBEs' inability to obtain bonding
Survey respondents viewed financial obstacles as the greatest
challenge to states in meeting their goals for DBE participa- Most respondents believed this issue was a challenge, with
tion. Lack of access to capital and cash flow issues was viewed 74% of respondents identifying it as a problem and 37% view-
as the most severe problem, with 60% of those responding rat- ing it as a significant or severe problem. "Bonding is a sig-
ing it a significant or severe problem (a 4 or 5 on a five-point nificant barrier," one respondent noted. In addition, all of the
scale). External factors such as the economy and rising fuel states that use 100% race-neutral measures identified this issue
costs were also a significant concern, with 89% of those as a problem.
responding identifying these issues as a problem.
Sixty percent of states had used measures to assist DBEs
with bonding and financing; of those, 57% found this strategy
Challenge #1: Challenges related to
external factors, such as economic to be effective, with 25% rating it a 4 or 5 (very or extremely
conditions or rising fuel costs effective). In addition, 60% of the states that use entirely race-
neutral measures rated this strategy a 4 or 5.
A higher percentage of respondents viewed this issue as a
problem than any other challenge, with 46% viewing it as a Respondents described two types of bonding assistance--a
significant or severe problem. One respondent noted that in bond guarantee program and a bonding fee reimbursement
difficult economic times contractors are keeping their work- program. Another respondent mentioned a third strategy that
forces employed by performing tasks themselves that they relieves financial pressure on both prime contractors and
might once have subcontracted to DBE firms. Another respon- DBEs--elimination of up-front cost retainage.
