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27 DBEs and non-DBEs. The following are statistics on the pro- RIDOT's loan program gives underutilized DBE firms-- gram through July 2009: which in Rhode Island typically have AfricanAmerican, Hispanic, Native American, or Asian owners--the advantage Sixty-seven contracts had been funded, totaling that they need to bid competitively. RIDOT applied for and $51 million received a waiver from the FHWA that allows the department Forty-five contracts were prime contracts, and 23 went to target underutilized DBEs from certain groups with its loan to DBEs. program rather than making loans available to all DBEs. The On 22 contracts, preference points were awarded to program is administered as part of RIDOT's supportive ser- professional services firms that subcontracted to small vices offerings. businesses; 58 small businesses were used as subcon- tractors and 43 firms, or 74%, were DBEs. The program offers two types of loans: those for equipment Fifty-six different firms were awarded one or more of purchases and contract financing that is tied to a specific these 67 contracts RIDOT project. Equipment loans are most often used to pur- Nineteen of these different firms, or 34%, were DBEs. chase construction equipment such as heavy trucks, whereas Six firms were first-time contractors with the contract financing helps firms pay for insurance, supplies, and department. other expenses associated with a specific RIDOT contract. All contracts were graded upon completion, and the aver- Contract loans must be repaid as the project progresses and age grade was a 90 out of 98 possible points (not includ- be paid off by the time the project finishes, but equipment ing bonus points). (Contracts are graded in nine areas, loans may have longer terms, often about six or seven years for including timely completion, mitigating cost and time truck loans. overruns, minimizing impacts to the traveling public, and environmental compliance.) All loans are low-interest, about 2% to 3%, and for many years the financing aspect was handled through an investment The department has received informal feedback from DBEs corporation that provided loans to small businesses, which that they appreciate the program and would like to see it has since closed. When RIDOT first began the program, the expanded, with more contracts reserved. financing was handled in-house, with the department's finance division processing the DBE firm's loan payments. Staff quickly realized that the department was not set up to track and Looking Ahead process multiple loans, and the department sent out a Request States initiating a program such as the Business Development for Proposals seeking a bank or financial group to take over the Initiative today would not face the hurdles in obtaining federal program. approval that FDOT did when the practice was newer; indeed, the FHWA now encourages other states to explore this type of RIDOT's original loan fund had contained approximately program. $4 million, and on average the department has about $1.5 mil- lion in loans outstanding at any given time. There is no set More information on FDOT's Business Development Ini- cap on the amount of any individual loan; this is left up to tiative is available at: staff judgment based on the size of the contract a DBE is tunityoffice/GeneralBDI.shtm. working on. What Works, What Does Not CASE EXAMPLE #2: RHODE ISLAND DEPARTMENT OF TRANSPORTATION: LOAN PROGRAM FOR UNDERUTILIZED Other states that wish to initiate a similar loan program are DISADVANTAGED BUSINESS ENTERPRISE FIRMS advised to select the firms they loan to judiciously, applying the same due diligence that a bank does in qualifying loan RIDOT's low-interest loan program for underutilized DBE applicants. RIDOT puts less emphasis on a firm's credit history firms grew out of RIDOT's efforts to level the playing field or credit rating than a bank might, and the department under- for DBE firms headed by minorities. In Rhode Island, the use stands that a DBE firm may not have a large quantity of assets of DBEs on highway contracts has traditionally been skewed to use as collateral. toward firms owned by Caucasian women, according to RIDOT's Office of Business and Community Resources. Instead, RIDOT places more emphasis on a firm's back- ground and experience, and looks for firms to have commit- Those firms tend to have greater access to capital, which ment letters from prime contractors who pledge to subcontract allows them advantages such as the ability to pay for supplies with them, for example, or contracts on which they intend to up front rather than paying higher prices to finance them. This use the equipment they plan to purchase. The character of the in turn allows them to consistently underbid DBE firms with loan applicant is also important, whether the firm's owner is less capital and to win more RIDOT contracts. hard-working and committed to wanting to do well.