State Department of Transportation Small Business Programs (2013)

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14 The following is a summary of the 44 state DOTs that responded to the survey or participated in a phone interview. STATE DEPARTMENT OF TRANSPORTATION MANAGED DISADVANTAGED BUSINESS ENTERPRISE PROGRAMS Each state DOT was required to submit a revised plan by February 28, 2012. In several of the phone interviews, the DBE program liaisons indicated that they have submitted a revision to U.S.DOT by the deadline as required for a small business element and were either waiting for approval or in the process of making revisions and re-submitting based on U.S.DOT rejecting their original plan. Of the states responding to the survey, 17 were still wait- ing for approval of their small business element; therefore, they did not have a definite date for implementing their new plans (Table 2). U.S.DOT is allowing 9 months after plan approval for implementing small business elements. More than half of the states that responded anticipate launching their new small business element in 2012. For those that indicated they did not have a specific date for implementing the plan, ten states provided comments stating that they will be implementing the new program elements within the 9 month timeframe mandated by U.S.DOT. Most reported that they anticipate needing the entire 9 months to effectively implement program elements. Five states noted that they would be implementing the plan as soon as they receive plan approval from U.S.DOT. The remaining five states providing comments reported that they were awaiting approval or had provided an exception based on their current program or association with another agency such as a state’s Commerce Department. In most cases (74.4%), the state’s legislature is not involved in approving or regulating the state DOT’s small business pro- gram (see Figure 1). Only California, Colorado, Iowa, North Carolina, and Washington State noted having state legislative action requirements and each of these states already had a sep- arate small business program in place prior to the U.S.DOT regulation to include small business elements. For three of the states, the legislative process took approximately one year for approval of the small business program, whereas it was more than two years for one state. When all states were asked if there were any state legisla- tive or legal impediments to implementing a small business program within the organization, a majority of the respondents said no. However, some legal impediments were uncovered relative to state laws that prohibit limiting contracting oppor- tunities based on business size or other factors (set-asides) and, therefore, many states have developed a small business program that follows state statutes. The following comments were received from representa- tives at various state DOTs: 1. “Yes, there are impediments with respect to limiting contracting opportunities based on business size, as there is no authority in the state’s public contracting code to do so. However, [state DOT] SBE works around this issue by targeting supportive services and outreach to small businesses and providing small contracting opportunities.” 2. “If we were to implement small business set-asides (which we will not do at this time), it would require legislative action to change state law.” 3. “We structured our plan to follow State Statute; other- wise we would not be able to implement the plan with- out legislative approval, which would likely not be forthcoming.” 4. “We cannot apply the small business element to state funds because we are legally enjoined from applying the DBE program goal setting to state-only funded projects.” 5. [State DOT] “does have an existing state SBE program and there were some fundamental issues in terms of designating a separate federal SBE program.” 6. “We believe we have developed a U.S.DOT com- pliant program under the legislation but would need to go through the legislative process for a broader program.” PROJECT SIZE State DBE program managers were also asked to provide information related to their contracting activities. This can be used as a gauge for determining if adequate opportunities exist for small businesses. Smaller contracts and unbundling of larger contracts can lead to increased participation by all small businesses, including DBEs. chapter three SUMMARY OF SURVEY RESPONSES

15 The average size of a construction contract for a majority of the states that responded (19) is between $1 million and $5 million. The size of the state does not appear to be a factor in how large is the average contract size. For example, the four states with average contracts of $1 million or less are Maine, Minnesota, South Dakota, and Wyoming, whereas the two states with an average size of more than $10 million are Rhode Island and Texas. This leads to a conclusion that each state has individual procurement methods that may sup- port smaller contracting opportunities regardless of the total budget or infrastructure needs. Table 3 presents the varying levels of construction prime contracts. It is important to note that for all procurement- related data there is a significant percentage of “don’t know” responses. As expected, the average size of construction subcontracts is typically much smaller for all states (Table 4). The major- ity of states (15) have an average size of $350,000 or less, and 19 states reported an average size of less than $750,000. Only two states, Rhode Island and North Carolina, reported having average construction subcontracts of $1 million to $5 million. In general, states with smaller average size prime contracts have smaller average subcontracts. For example, North Carolina reported an average prime contract size of $5 to $10 million, which would correlate to the larger sub- contract size. However, it also opens up opportunities for addi- tional unbundling that may foster additional small business participation. Consultant prime contracts for all state DOTs are generally smaller than construction prime contracts, which is expected given the nature of transportation projects (Table 5). Several states indicated that most of their design work is performed in-house and therefore the average dollar amount is low. All state representatives that knew the dollar value of prime FIGURE 1 Legislative action. Implementation Date No. of States Percent January–March 2012 10 22.7 April–June 2012 3 6.8 July–September 2012 3 6.8 October–December 2012 8 18.2 Don’t Know (please explain) 20 45.5 Total 44 100 TABLE 2 DBE PLAN IMPLEMENTATION DATES Average Size of Prime Construction Contracts No. of States Percent $500,000 or less 1 2.4 $500,001 to $1,000,000 3 7.1 $1,000,001 to $5,000,000 19 45.2 $5,000,001 to $10,000,000 6 14.3 Over $10,000,000 2 4.8 Don’t Know 11 26.2 Total 42 100 TABLE 3 AVERAGE SIZE OF CONTRACTS

16 consultant contracts (24) listed the average as $5 million or less. Three-quarters (18 of 24) indicated that the average is less than $1 million. Similar to construction subcontracts, the average size of consultant subcontracts correlates to the average size of con- sultant prime contracts (Table 6). All state representatives (19) who knew the dollar value of subconsultant contracts listed the average as $750,000 or less. Eighteen of 19 indicated that the average is less than $350,000. This size contract creates significant opportunities for small business; however, the fre- quency and overall dollar amount spent on design/consultant contracts is generally less than construction for all state DOTs. PROCUREMENT STRUCTURES Organizational structures (e.g., how projects are determined, which departments are responsible for contracting) within state DOTs is also an indicator of how easy or difficult it may be to implement small business elements such as restricted projects or prime contractor specifications for utilizing small business subcontractors. Most agencies reported that there are specific discipline-based departments (e.g., engineering, pro- fessional services contracting) responsible for making deci- sions related to how contracts are structured for letting and the size of those contracts. A majority of states responding (33 of 40) indicated that the highway construction/engineering contracting department is responsible for determining how construction contracts are structured for letting. In some cases contracts or procurement (four of 40 states) are responsible (Table 7). The process may also be a collaboration of departments such as program devel- opment and contract administration or regional engineers and contracts. Similarly, architectural/engineering (A&E) or consultant- type contracts are typically structured by the A&E/professional Average Size of Construction Subcontracts No. of States Percent $150,000 or less 9 22 $150,001 to $350,000 6 14.6 $350,001 to $750,000 4 9.8 $750,001 to $1,000,000 0 0 $1,000,001 to $5,000,000 2 4.9 Over $5,000,000 0 0 Don’t Know 20 48.8 Total 41 100 TABLE 4 AVERAGE SIZE OF SUBCONTRACTS Average Size of Prime Consultant Contracts No. of States Percent $500,000 or less 9 22 $500,001–$1,000,000 9 22 $1,000,001–$5,000,000 6 14.5 $5,000,001–$10,000,000 0 0 Over $10,000,000 0 0 Don’t Know 17 41.5 Total 41 100 TABLE 5 AVERAGE SIZE OF CONSULTANT CONTRACTS Average Size of Consultant Subcontracts No. of States Percent $150,000 or less 11 27.5 $150,001 to $350,000 7 17.5 $350,001 to $750,000 1 2.5 $750,001 to $1,000,000 0 0 $1,000,001 to $5,000,000 0 0 Over $5,000,000 0 0 Don’t Know 21 52.5 Total *41 100 *One state provided two responses. TABLE 6 AVERAGE SIZE OF CONSULTANT SUBCONTRACTS

17 Responsible Party No. of States Percent Highway Construction/Engineering Contracting 33 82.5 Procurement/Purchasing 2 5 Other (please describe) 5 12.5 • Capital program development and management • Collaborative effort between the program development division and contract administration • Contract services administrator, oversees the competitively bid contracts coordinator • Contracts division • Region field techs, engineers—most requirements come from the regions TABLE 7 PROCUREMENT PROCESS Responsible Party No. of States Percent A&E/Professional Services Contracting 28 71.8 Procurement/Purchasing 1 2.6 Other (please describe): 10 25.6 Bureau of design Collaborative effort between the program development division and contract administration Contract services administrator, oversees the consultant control coordinator Contracts division Engineering division Executive director/legal counselor Most of our design work is done in-house Same as the construction contracts Office responsible for work requests use of consultant and their division director grants approval to perform selection. Office request outlines services needed. TABLE 8 PROCUREMENT A&E PROCESS services contracting department (28 of 39 states) (Table 8). This process is more diversified across state DOTs, but gener- ally collaboration also happens with contract administration. The size of a contract is typically determined based on the scope of work, engineer’s estimate, and available budget. In some cases, state DOTs may also review factors such as the project location, priority/need, safety, and anticipated bidders. Budget is a primary factor that dictates the size and priority of a project. Reviews by executive management, contract admin- istration, and DBE committee were also cited as factors in the process of determining size. There were no comments related to unbundling or considering small business participation as a part of determining the size of a project.