State Department of Transportation Small Business Programs (2013)

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18 This chapter synthesizes existing state DOT transportation- related small business programs and focuses on effective practices as identified by state DOTs. Although most states currently do not have a small busi- ness program in place other than the race-conscious DBE pro- gram, 15 of the 43 states and territories responding (32.6%) indicated they have a separate state-funded small business program (see Table 9). STATE DEPARTMENT OF TRANSPORTATION DEFINITIONS OF SMALL BUSINESSES A majority of the states with a small business program (9 of 15) have established program definitions that mirror those set out in Part 26. This includes that a SBC, with respect to firms seeking to participate as DBEs in DOT-assisted con- tracts, have gross receipts averaged over a three-year period that do not exceed the size standards set forth in 13 CFR Part 121 associated with the type of business it performs on feder- ally assisted contracts, and in no case exceeds $22.41 million. Nearly one-third of these states also have personal net worth criteria that conforms to the PNW limit of $1.32 million as set forth in the DBE program, while the remaining states do not enforce a personal net worth limit. Responding states with a small business program definition that is different from the CFR are described in Table 10. OPERATING COSTS There were five states that provided information regarding the annual cost of managing their respective small business pro- grams. These costs include staffing requirements that may be in addition to staff utilized for the DBE program (Figure 2). Two of the states indicated that the amount is less than $50,000 per year, whereas another two states listed the cost as from $50,000 to $100,000. One state noted that the annual management cost is between $300,000 and $500,000. The remaining states had not tracked or did not know the cost of managing their program. CERTIFICATION PROCESS Ten states with small business programs have a formal certi- fication process in place for their program. This requires that staff confirm the business size and/or personal net worth of the applicant. Other examples provided by the state DOTs concerning their certification process included the following: 1. Application that requires business, personal, and affili- ate tax returns. 2. Firm must provide notarized statement of compliance with the size standard. 3. Size standard is reviewed and verified. 4. Firm will undergo the same scrutiny as a DBE certifi- cation application. 5. Firm’s annual gross does not exceed $4 million over a three-year period. 6. The Emerging Small Business Enterprise (ESBE) pro- gram mirrors the DBE program in terms of the certifi- cation process and eligibility standards. 7. We have an audit system that audits every firm over a two-year period to ensure that they are in compliance. 8. Small businesses’ personal net worth (PNW) and firm size will be verified for participation in the Small Business Enterprise (SBE) program. 9. There is a registration process for the Small Contract- ing Program. The staff does not check the PNW or business size of all participants. However, participa- tion by DBE, Minority/Women-owned Business Ente r- prise (M/WBE), and Emerging Small Business (ESB) is tracked, all of which must be certified and meet small business size standards as already stated. A few of the state representatives commented that it is a daunting task to certify small businesses separately from DBE firms and maintain a directory with current staff. One DOT said, “We do not have a formal process in place to cer- tify Small Business Enterprises. Our plan for online certifica- tion was rejected because it was considered ‘self-certifying’ even though we intended to review the applications once they were submitted.” This presents a challenge for small businesses as well, because a majority of states do not have a unified certification program in place for small businesses similar to the Unified Certification Program used for the DBE program. Creating a centralized system is advisable to streamline multiple agency certifications and reduce the redundancy and complexity for small and disadvantaged firms. For eight of the states, DBE-certified firms are automati- cally qualified to participate in the small business program. chapter four EXISTING SMALL BUSINESS PROGRAM ELEMENTS AND EFFECTIVE PRACTICES

19 Four states provided additional information regarding why DBE firms do not automatically qualify. 1. DBE must apply to the ESB program. 2. They have to show that their gross is less than or equal to $1.5 million minus materials. 3. Under the DBE program they can have a greater size, up to $22.41 million; SBC only up to $4 million. 4. When the Small Contracting Program was first created existing DBEs were automatically signed up; however, new DBEs must register to participate and are encour- aged to do so during outreach events. SMALL BUSINESS DIRECTORY Only five of the states with small business programs main- tain an online small business directory (Table 11). The other eight states that responded do not have a separate directory. Eleven states provided the number of small businesses that are currently certified or eligible to participate in their small TABLE 9 EXISTING SMALL BUSINESS PROGRAMS State DOT Small Business Program Name Length of Time Program Had Been in Place Indiana Small Business Program <6 months Minnesota Small Business Program <6 months Washington D.C. Small Business Program <6 months Washington State Small Business Enterprise Program <6 months Connecticut Small Business Participation Program 1–5 years Iowa Small Business Development Program 1–5 years California Small Business Enterprise Program >5 years Colorado Emerging Small Business Program >5 years Florida Small Business Program >5 years North Carolina Small Business Enterprise Program >5 years New Hampshire Race-Neutral Practices That Promote Small Business Utilization >5 years New Jersey Emerging Small Business Enterprise Program >5 years Oregon Small Contracting Program/Emerging Small Business Program >5 years Texas Small Business Enterprise Program >5 years Virginia Small, Woman & Minority Owned Business Program >5 years TABLE 10 SMALL BUSINESS PROGRAM DEFINITIONS State DOT Definition Colorado One-half SBA size standard, capped at one-half of DBE size limit. North Carolina Sets a limit of $1.5 million gross minus materials and an independent firm to be eligible. Oregon ODOT identifies “small business” participation by tracking contracting and subcontracting with Disadvantaged Business Enterprise (DBE), Minority-owned Business Enterprise (MBE), Women-owned Business Enterprise (WBE), and Emerging Small Business (ESB) firms that are certified by Oregon’s Office of Minority, Women and Emerging Small Business (OMWESB). ODOT’s CRCT database is updated nightly with current certification data from OMWESB, and these data are used to report on small business participation on ODOT contracts. DBE size is per the 49 CFR 26; M/WBE is per size standards as defined by the Small Business Administration, North American Industry Classification System Codes (NAICS) size standards; and ESB includes two tiers: (1) For Oregon-based firms with 19 or fewer employees, whose average annual gross receipts over the last three years are under $1,699,953 for construction firms and under $679,981 for non-construction-related firms, and (2) for Oregon-based firms with 29 or fewer employees whose average annual gross receipts over the last three years are under $3,399,907 for construction-related businesses and under $1,133,302 for non-construction businesses. Texas The Small Business Enterprise (SBE) Program offers small businesses another avenue of maximizing their opportunities of doing business with TxDOT. The program applies only to highway construction and maintenance projects that are funded entirely by state and/or local funds.

20 business program. A majority of states have less than 150 small business participants in their program and the aver- age was 138. Only North Carolina has more than 500 small business participants. METHODS OF FOSTERING SMALL BUSINESS PARTICIPATION U.S.DOT provided guidelines in the regulation of various methods of fostering small business participation in federally assisted transportation contracts. These guidelines include: 1. Establishing a race-neutral small business set-aside for prime contracts under a stated amount (e.g., $1 million). 2. In multi-year design-build contracts or other large con- tracts (e.g., for “megaprojects”) requiring bidders on the prime contract to specify elements of the contract or spe- cific subcontracts that are of a size that small businesses, including DBEs, can reasonably perform. 3. On prime contracts not having DBE contract goals, requir- ing the prime contractor to provide subcontracting oppor- tunities of a size that small businesses, including DBEs, can reasonably perform, rather than self-performing all the work involved. 4. Identifying alternative acquisition strategies and struc- turing procurements to facilitate the ability of consortia or joint ventures consisting of small businesses, includ- ing DBEs, to compete for and perform prime contracts. 5. To meet the portion of your overall goal you project to meet through race-neutral measures, ensuring that a rea- sonable number of prime contracts are of a size that small businesses, including DBEs, can reasonably perform. 6. Actively implementing program elements to foster small business participation. Doing so is a requirement of good faith implementation of your DBE program. In an effort to determine the methods that have been success- ful, all state DOTs were asked which of these methods they had used and were asked to rate the effectiveness of each tactic. These questions, as well as all other program informa- tion questions, were not required on the survey and therefore the total response count varies. A total of 22 states had structured contracting requirements for small businesses (Table 12). This was the most used strat- egy of all U.S.DOT recommended methods for fostering small business participation. Of the 20 states that rated effectiveness, 16 found it to be effective, very effective, or extremely effec- tive. This was perceived as the best method of all five strate- gies. Only one state DOT did not find this method effective. The second most used method for increasing small busi- ness participation was unbundling contract requirements. A total of 18 responding states had used this method and 13 found it effective, very effective, or extremely effec- FIGURE 2 Operating costs. No. of Small Businesses No. of States Percent <50 2 18.2 50–100 1 9.1 101–150 2 18.2 151–200 0 0 201–300 0 0 301–500 1 9.1 >500 1 9.1 Don't Know 4 36.4 TABLE 11 SMALL BUSINESS DIRECTORY

21 tive. A representative from one state DOT stated, “We have attempted to unbundle contracts but this has not significantly increased DBE participation as primes but it has improved subcontracting opportunities and DBE participation on megaprojects.” Twelve states have used set-aside or restricted project pro- curements for eligible small businesses only. Of those that had used this method and ranked its effectiveness, seven of nine found it to be effective, very effective, or extremely effective. Again, one state DOT found this method to not be effective at all for fostering small business participation. However, a representative from another state DOT stated that they “are following the regulations as outlined and have submitted our plan with a focus on using restricted projects of less than $400,000 as our primary strategy.” Based on follow-up phone interviews, most of the states that use the set-aside method only do so for state-funded proj- ects that do not have any federal assistance. For several states, this method was not permissible under current state law and therefore could not be implemented. Table 13 presents a list of responding states that use small business set-asides and the dollar limit for those restricted projects. A total of ten responding states had attempted to require prime contractors to specify elements or specific subcon- tracts on a megaproject that would be of an appropriate size that a small business or DBE firm could perform. Six of the ten states found this to be effective, very effective, or extremely effective. One state DOT did not find this method effective at all. The least effective method for fostering small business participation was requiring prime contractors to provide sub- contracting opportunities for small businesses and DBEs on contracts without DBE goals. Only New Jersey has found this to be extremely effective; however, the DBE Liaison Officer could not be reached to learn more about how they structure this requirement to make it successful. ADDITIONAL METHODS Two additional methods were provided to survey partici- pants for effectiveness ranking related to fostering small business participation. These methods have been cited by var- ious states DOTs as practices that may assist small businesses in contracting. The methods and the ratings are included in Table 14. Method Have Used Not Effective Somewhat Effective Effective Very Effective Extremely Effective Total Responses Structuring contracting requirements to facilitate competition by small business concerns 51.3% 20 2.6% 1 7.7% 3 12.8% 5 10.3% 4 17.9% 7 100.0% 39 Unbundling of contract requirements to facilitate small business participation in procurements as prime contractors or subcontractors 46.2% 18 5.1% 2 7.7% 3 15.4% 6 12.8% 5 5.1% 2 100.0% 39 Establishing a race-neutral small business set-aside for prime contracts under a stated amount (e.g., $1 million) 23.1% 9 2.6% 1 2.6% 1 5.1% 2 5.1% 2 7.7% 3 100.0% 39 In multi-year design-build contracts or other large contracts (e.g., for “megaprojects”) requiring bidders on the prime contract to specify elements of the contract or specific subcontracts that are of a size that small businesses, including DBEs, can reasonably perform. 25.6% 10 2.6% 1 7.7% 3 5.1% 2 5.1% 2 5.1% 2 100.0% 39 On prime contracts not having DBE contract goals, requiring the prime contractor to provide subcontracting opportunities of a size that small businesses, including DBEs, can reasonably perform, rather than self- performing all the work involved. 23.1% 9 7.7% 3 7.7% 3 2.6% 1 2.6% 1 2.6% 1 100.0% 39 TABLE 12 SMALL BUSINESS UTILIZATION METHODS

22 The more successful of these two alternative methods is ensuring that a reasonable number of prime contracts are of a size that small businesses, including DBEs, can reasonably perform. This is related to unbundling contract requirements, but is actually perceived to be more effective. Fifteen of the 17 states that have used this method found it to be effective, very effective, or extremely effective. Identifying alternative acquisition strategies for small business joint ventures or consortia is also viewed as some- what effective; however, this method was used by the least number of responding states. SUCCESSFUL STRATEGIES USED BY STATE DEPARTMENTS OF TRANSPORTATION WITH SMALL BUSINESS PROGRAMS OPERATING FOR MORE THAN FIVE YEARS There are nine state DOTs that have had state-funded Small Business Programs in place for more than five years. These states have been able to test a variety of small business par- ticipation practices on a long-term basis. By separately ana- lyzing these state’s responses, other states can learn which of the various recommended methods for fostering small busi- ness participation have been most successful. Tables 15–21 show a breakdown of the ranking for each method by state. 1. Structuring contracting requirements to facilitate com- petition by SBCs (Table 15). 2. Unbundling of contract requirements to facilitate small business participation in procurements as prime contractors or subcontractors (Table 16). 3. Establishing a race-neutral small business set-aside for prime contracts under a stated amount (e.g., $1 million) (Table 17). 4. In multi-year design-build contracts or other large con- tracts (e.g., for “megaprojects”) requiring bidders on the prime contract to specify elements of the contract or specific subcontracts that are of a size that small businesses, including DBEs, can reasonably perform (Table 18). 5. Identifying alternative acquisition strategies and struc- turing procurements to facilitate the ability of consortia or joint ventures consisting of small businesses, includ- ing DBEs, to compete for and perform prime contracts (Table 19). 6. On prime contracts not having DBE contract goals, requiring the prime contractor to provide subcon- tracting opportunities of a size that small businesses, including DBEs, can reasonably perform, rather than self-performing all the work involved. 7. Ensuring that a reasonable number of prime contracts are of a size that small businesses, including DBEs, can reasonably perform (Table 20). A comparison of state DOTs with mature Small Business Programs shows that, in general, all of the states that had used any of the recommended methods found them to be at least some- what effective. The most effective methods were Method 3, establishing a race-neutral small business set-aside for prime contracts under a stated dollar amount, and Method 1, struc- turing small business contracting requirements to facilitate competition by small business concerns. Most of the states State DOT Dollar Threshold Arizona $50,000 Colorado $500,000–$1,000,000 Florida $500,000 Iowa $100,000 Mississippi $500,000–$1,000,000 North Carolina $500,000 Nevada $250,000 Oregon $100,000 Rhode Island $500,000 Virginia $500,000 Washington $25,000 TABLE 13 SET-ASIDE METHODS Method Have Used Not Effective Somewhat Effective Effective Very Effective Extremely Effective Total Responses Ensuring that a reasonable number of prime contracts are of a size that small businesses, including DBEs, can reasonably perform 44.7% 17 2.6% 1 2.6% 1 13.2% 5 10.5% 4 15.8% 6 100.0% 38 Identifying alternative acquisition strategies and structuring procurements to facilitate the ability of consortia or joint ventures consisting of small businesses, including DBEs, to compete for and perform prime contracts 27.8% 10 5.6% 2 5.6% 2 8.3% 3 8.3% 3 0.0% 0 100.0% 36 TABLE 14 ADDITIONAL SMALL BUSINESS METHODS

23 State DOT Not Effective Somewhat Effective Effective Very Effective Extremely Effective Have Not Used California X Colorado X Florida X North Carolina X New Hampshire X New Jersey X Oregon X Texas X Virginia X TABLE 15 STRUCTURING CONTRACTING REQUIREMENTS TO FACILITATE COMPETITION BY SMALL BUSINESS CONCERNS (Method No. 1) State DOT Not Effective Somewhat Effective Effective Very Effective Extremely Effective Have Not Used California X Colorado X Florida X North Carolina X New Hampshire X X New Jersey X Oregon X Texas X Virginia X TABLE 16 UNBUNDLING OF CONTRACT REQUIREMENTS TO FACILITATE SMALL BUSINESS PARTICIPATION IN PROCUREMENTS AS PRIME CONTRACTORS OR SUBCONTRACTORS (Method No. 2) State DOT Not Effective Somewhat Effective Effective Very Effective Extremely Effective Have Not Used California X Colorado X Florida X North Carolina X New Hampshire X New Jersey X Oregon X Texas X Virginia X TABLE 17 ESTABLISHING A RACE-NEUTRAL SMALL BUSINESS SET-ASIDE FOR PRIME CONTRACTS UNDER A STATED AMOUNT (e.g., $1 million) (Method No. 3)

24 that had used these methods rated them as very or extremely effective. The most widely used methods by this group were Method 1, structuring small business contracting requirements, and Method 7, ensuring that a reasonable number of prime con- tracts are of a size that small businesses, including DBEs, can reasonably perform. There were variances across the board that showed that some states had found a particular method to be only some- what effective, while another state found that same method to be extremely effective. This could be the result of a variety of factors, including the state’s implementation and education process, the type of work contracted in the state, and the avail- ability and ability of small businesses for the work. OUTREACH AND SUPPORTIVE SERVICES For all responding states, outreach and small business sup- portive services were believed to be the most effective method of increasing small business participation and ensuring suc- cessful small business performance. All but one of the 43 states and territories responding provide supportive services as part of the federally funded DBE program, and 17 states offer some level of these services to all small businesses regardless of whether they are DBE-certified. In some cases, states do not manage supportive services internally but will refer small businesses to outside agencies such as a state-run program or small business development center (SBDC) for assistance. Note that 23 CFR Part 230 allows state DOTs, as recipients of federal funds, to apply FHWA supportive services funds to assist DBEs only; however, if those federal funds are com- State DOT Not Effective Somewhat Effective Effective Very Effective Extremely Effective Have Not Used California X Colorado X Florida X North Carolina X New Hampshire X New Jersey X Oregon X Texas X Virginia X TABLE 18 IN MULTI-YEAR DESIGN-BUILD CONTRACTS OR OTHER LARGE CONTRACTS (e.g., for “megaprojects”) REQUIRING BIDDERS ON THE PRIME CONTRACT TO SPECIFY ELEMENTS OF THE CONTRACT OR SPECIFIC SUBCONTRACTS THAT ARE OF A SIZE THAT SMALL BUSINESSES, INCLUDING DBEs, CAN REASONABLY PERFORM TABLE 19 ON PRIME CONTRACTS NOT HAVING DBE CONTRACT GOALS, REQUIRING THE PRIME CONTRACTOR TO PROVIDE SUBCONTRACTING OPPORTUNITIES OF A SIZE THAT SMALL BUSINESSES, INCLUDING DBEs, CAN REASONABLY PERFORM, RATHER THAN SELF-PERFORMING ALL THE WORK INVOLVED State DOT Not Effective Somewhat Effective Effective Very Effective Extremely Effective Have Not Used California X Colorado X Florida X North Carolina X New Hampshire X New Jersey X Oregon X Texas X Virginia X

25 bined with other state or local funding sources, services may properly be provided to all small businesses. A majority of responding states (24 of 34) reported that their supportive services are federally funded by U.S.DOT as part of the DBE program (Figure 3). Thirteen states also receive funding from their state and one receives funding from local sources. Other sources cited included public–private partnerships and an agency “admin” fund that covers support- ive services and staff salaries. Only eight state DOTs (19.5% of respondents) have funding provided by their agency for supportive services for non-DBE firms. States that do not currently have an approved SBE indi- cated that they are planning on conducting additional out- reach to all small businesses as a primary method of fostering additional race-neutral participation. Events such as business fairs, private industry co-sponsored events, business develop- ment conferences, and training symposiums have been very effective. Many states also send out newsletters to keep the small business community informed about contracting oppor- tunities and other topics of interest. In addition, group training sessions and one-on-one con sulting are highly effective in helping small businesses advance and obtain contracting opportunities. Also, all states that were interviewed mentioned one-on-one consulting and “meet and greet” sessions with “primes” (primary contrac- tors) as highly effective tools. The following is a list of other comments from respondents regarding the type of outreach and supportive services they use to foster small business participation: • Business fair in partnership with the Small Business Administration (SBA) and local banks, one-on-one networking. TABLE 20 ENSURING THAT A REASONABLE NUMBER OF PRIME CONTRACTS ARE OF A SIZE THAT SMALL BUSINESSES, INCLUDING DBEs, CAN REASONABLY PERFORM State DOT Not Effective Somewhat Effective Effective Very Effective Extremely Effective Have Not Used California X Colorado X Florida X North Carolina X X New Hampshire X New Jersey X Oregon X X Texas X Virginia X FIGURE 3 Support services funding.

26 • Non-DBE small businesses are referred to the state pro- gram for supportive services. • Organize meet and greet sessions between primes and “subs” (subcontractors). • Working Capital Loan Fund and Mentor Protégé Program. • Newsletters, statewide training calendars, etc. Leverage services with partnerships with SBA, SBDC, Procure- ment Technical Assistance Centers, and other small busi- ness organizations within the state. • Two hundred and twenty-five small business events per year, mock contracting workshops, mandatory pre-bid meetings for networking, meet the prime (ad hoc and project specific). • [State DOT] runs a mentor protégé program for its ESB firms (many of which are also DBEs). [State DOT] also sponsors Port of Portland’s mentor protégé pro- gram. [State DOT] directly offers training and outreach on how to do business with state agencies and indi- rectly provides other supportive services by sponsor- ing programs such as Turner School of Construction Management. • Provide introductions to prime contractors as needed, educate on state and federal bidding procedures, work with firms as requested to overcome individual challenges as they arise (payment issues, subcontracting issues, bid- ding advice, and education). • We do many outreaches within the state to interest folks in doing business with [State DOT]. We have notaries at these outreaches so they can submit their completed application at that moment for SBE certification. • We have used an outside consultant for ten years to provide supportive services. This has worked very well for us. The consultant does one-on-one sessions, business development, business assessments, newslet- ters, etc. We have found this is the most productive and effective way to facilitate DBE and small business participation. • Annual business development conference with other cooperative agencies, reimbursement of association dues, training symposiums with curriculum devel- oped over last two years including accounting, pre- qualification, etc. • We have an outside consultant who provides support- ive services. The consultant is required to be in the DOT office three days per week for one-on-one con- sultations. This has worked very well. They also pro- vide statewide training on finance, taxes, business law, bidding, and bonding. We are also focusing on getting small businesses up to speed on computer technology. Of our bids, 99% are submitted electronically so it is important that subs submit their quotes to primes elec- tronically. We have established 100 free accounts for DBE firms; however, only 17 originally signed up. We are doing additional outreach to get more DBE firms on board. CASE EXAMPLE: CALIFORNIA DEPARTMENT OF TRANSPORTATION The California DOT (Caltrans) proposed an overall DBE goal for its federal-aid contracts of 13.5%, to be achieved in equal proportions, 6.75% race-neutral and 6.75% race- conscious. For the DBE program, Caltrans had attained a level of 2.48% race-neutral and 5.51% race-conscious. Caltrans fully supports small business and implements a variety of race-neutral programs designed to help increase procurement opportunities between small business owners and the agency. Caltrans completed its first Availability/Disparity Study in June 2007, and is in the process of completing its 2012 Availability/Disparity Study, which will assist the agency in establishing its new overall DBE goals. On any given day, Caltrans administers more than 700 contracts total- ing more than $11 billion. Caltrans also oversees the con- tract administration of more than 600 local agencies as subrecipients. The California Department of General Services (DGS) is the “business manager” for all California state government entities. As such, DGS manages the state SBE program and the state Disabled Veteran Business Enterprise (DVBE) pro- gram. DGS is responsible for SBE/DVBE certification and maintaining BidSync, a proprietary, online contract bidding system. DGS has more than 23,000 certified SBE firms and more than 3,000 DVBE firms. Certification of SBEs and DVBEs allows Caltrans to count only participation on “state- funded” contracts. Caltrans can count only “certified DBE” participation on federally funded contracts. For state-certified SBEs and DVBEs, DGS maintains certifi- cation. For the federal DBE program, Caltrans, along with eight other certifying agencies, maintains DBE certification through the California Unified Certification Program (or CUCP). Through Executive Order S-11-06, all California state gov- ernment departments are required to commit no less than 25% of their state procurement dollars to SBEs and 3% to DVBEs. In the last five years, Caltrans has met and exceeded these goals. For Caltrans, that represents more than $400 million going to SBEs and DVBEs annually. The 2006 Disparity Study outlined more than 190 mea- sures to build race-neutral participation; of those, Caltrans implemented approximately 70. There are nine key elements included in the DBE plan for small business participation. Another four have been proposed as part of the plan submit- ted to FHWA on February 28, 2012. In 2006, Caltrans identified more than 140 race-neutral measures. From this list, more than one-half of the measures were implemented. On February 28, 2012, FHWA, the oper- ating agency that governs state DOT allocations, required

27 that all state DOTs identify new race-neutral elements to its DBE program. This initiative, Fostering Small Business Participation, requires Caltrans to identify any race-neutral measures to help small businesses participate in federal contracts, including DBEs. Caltrans submitted to FHWA an implementation plan of those measures. Caltrans identified 13 measures and is currently implementing nine. These mea- sures represent no-cost technical assistance to small business and are as follows: Key Small Business Initiatives • Websites—Caltrans manages a Contractor Information Table that is inclusive of all the information a small busi- ness would need to do business with the agency. There is also an Opt-In feature that Caltrans calls the “love con- nection for primes” and is similar to an online dating site for contractors. Primes can advertise to subs for multi- tier contract work and subs can contact primes that have been awarded contracts for price quotes and good-faith effort. Primes are able to post upcoming opportunities and search for small businesses (including DBEs), and subs can post information about their company and con- nect directly with the prime. This assists with good-faith effort requirements. – As part of the CUCP database for DBEs, Caltrans created a feature whereby contractors can download the entire DBE database as an Excel spreadsheet that primes can search and sort. • Host mandatory pre-bid construction meetings—Prime contractors are required to attend mandatory pre-bid meet- ings or their bid will be dismissed regardless of whether it is the lowest. Estimators, as well as owners, are encour- aged to attend. This facilitates networking and introduc- tions between small business subs and primes. • All 12 districts have a district small business liaison— These staff members are dedicated to SBE/DVBE/DBE outreach and support, which has allowed Caltrans to effectively cover the entire state and provide support services to small businesses in all districts. Through the dedicated resource, Caltrans participates in more than 225 outreach events annually. • Workshops—These include “meet the prime” and pri- vately funded workshops (banks, financers, bonding com panies, etc.). One key type of workshop is the mock contracting workshop where small businesses (DBE and other) are walked through the entire process of contract- ing and are provided with helpful hints. • SBE events—Caltrans hosts 225 events each year. These are done statewide and cover a variety of topics includ- ing meet and greet with primes, industry, and consul- tants; access to capital, marketing, social media, costing, and estimating; surety bonding; insurance; bookkeeping; certified payrolls, etc. • DBE supportive services—These include no-cost one- on-one counseling, training workshops, technical assis- tance, and outreach. These services are open to all small businesses, but are paid for by funds provided by FHWA. • CalMentor and Mentor-Protégé Program—Mentor– Protégé is designed for construction firms and the CalMentor Program is for A&E firms. This program works best in the larger districts where there are larger projects and more availability of primes to serve as mentors. All districts participate in the CalMentor Pro- gram and a few host Mentor–Protégé Programs. • Memorandum of Understanding (MOU) with U.S. SBA—In 2009, Caltrans became the only state DOT in the country to offer no-cost technical assistance to small business, including DBEs, for surety bonding through a MOU with U.S. SBA. Other Program Measures Unbundling Caltrans has piloted several different programs including an attempt to unbundle contracts. However, they have found that this tactic increases administrative costs to each contract by more than 10%. During the last four years, construction contract bids have come in 15%–20% below the engineer’s estimate. The surplus is then applied to other future projects. When a contract is unbundled, the cost of administering mul- tiple smaller contracts subtracts from that surplus and thus decreases contract opportunities for small business. Pre-advertising to DBEs (prevented by state law to restrict projects) Caltrans is prevented by state Proposition 209 from provid- ing preference in its state-funded contracts. This makes it difficult to set aside or restrict certain projects with state or federally funded contracts without first establishing, as required by federal regulation, egregious instances. Federal contract goals must be achieved using other race-neutral means. Caltrans did try to use pre-advertising as a method to target a project to DBE firms. For example, it selected a small ($800,000) paving project and sent the notice and invitation for bid to all DBE firms with a paving National American Industry Classification System code. The agency encouraged bid participation from DBEs before sending out the notice to the public. They did not receive a single bid from a DBE firm and it was acquired by a non-DBE prime. CASE EXAMPLE: COLORADO DEPARTMENT OF TRANSPORTATION The current DBE program of the Colorado DOT (CDOT) demonstrates an increased focus on race-neutral participa- tion, which is the product of community research, regulation changes, and innovative approaches to supporting small busi- nesses. For FFY 2013–2015, CDOT has proposed a 10.25%

28 DBE overall goal, which consists of 4.15% race-neutral and 6.10% race-conscious goals. In response to the legal outcomes of the Adarand and Western States Paving cases, CDOT conducted its first Dis- parity Study in 1998, an update in 2001, and another Dis- parity Study in 2009. The studies are one of the means that CDOT uses to ensure that the DBE program is narrowly tailored based on current conditions in the contracting com- munity. From these studies, CDOT determined that all DBEs shall be considered underutilized. Additionally, in the most recent Disparity Study, community feedback encouraged the implementation of additional race-neutral measures to obtain the DBE goal. To foster race-neutral participation, over the past two years CDOT has significantly revised the elements of its Emerging Small Business (ESB) program. In 1992, the Col- orado State Legislature authorized the creation of the ESB program, a state-funded program designed to assist small businesses with contracting opportunities regardless of the race or gender of the owner. However, the contracting com- munity believed that the program lacked impact. CDOT developed new program elements based on extensive indus- try research, numerous consultations, focus groups, surveys, and other communication with stakeholders, prime contrac- tors, and small businesses in the transportation community. The revised program rules and guidelines were adopted by the Colorado Transportation Commission in 2011 and new program elements are being rolled out in phases. The ESB program is managed by the CDOT Center for Equal Opportunity. It is aligned with the DBE program, but is a completely separate certification program. Unlike the DBE program, the ESB program applies to both federally assisted contracts and contracts that are solely state funded. The size standard for participation in the ESB program is one-half of the SBA size standards. However, DBE certified firms can also become ESB certified if they meet the eligi- bility requirements. CDOT maintains an ESB directory of certified firms that can be used by prime contractors. There are currently 130 firms certified as ESB and more than 1,200 DBEs certified through the Unified Certification Program. In March 2012, CDOT received approval from FHWA to incorporate the ESB program as the part of the DBE program plan pursuant to the new requirements for fostering small business participation. CDOT uses the following methods to increase race-neutral DBE participation: Key Small Business Initiatives 1. Restricted projects—Identification and advertisement of up to $1 million for bidding by ESB certified firms only. CDOT estimates that at least seven restricted projects will be offered in 2012–2013 and intends to increase that number in the future. 2. Target participation goal—An optional goal for prime contractors to utilize ESB firms for a percentage of the contract. Good faith effort regulations do not apply; primes receive incentives for the utilization of small businesses. 3. New enforcement mechanisms—Where commit- ments are made to utilize ESB firms using a small business subcontracting plan CDOT is researching alternatives for effectively enforcing such commit- ments and thereby increasing small business partici- pation on contracts. 4. Structuring bids for small business participation— CDOT Engineering Contracting and Civil Rights staff evaluate all projects during the annual planning pro- cess and regularly throughout the year to determine if large projects can be unbundled or structured to facilitate competition by small business or participation in procurements as prime contractors. Additionally, CDOT’s projects are advertised for three weeks before the bid opening. This allows DBE and ESB primes adequate time to prepare and submit bids and allows small business subcontractors sufficient time to submit subcontract bids. Larger and more complex projects have even longer advance times. 5. Regional civil rights managers—CDOT has assigned civil rights managers in each of the six CDOT regional offices as a point of contact for small businesses, includ- ing DBEs, in those geographic areas. These CDOT staff members provide focused outreach, such as local procurement fairs and small business events, and one- on-one assistance regarding contracting issues, net- working with local prime contractors, regional bidding opportunities, and other general support services. 6. Cooperative agreement with Colorado Small Busi- ness Development Centers (SBDCs)—In 2012, CDOT entered into a cooperative agreement with the Colorado state SBDCs to offer no-cost technical assistance to small businesses, including DBEs. The program is called Connect2DOT and will be the primary resource for CDOT supportive services. The program is being piloted at the Denver SBDC and will provide free web-based access to construction plans and online bid- ding (BidX) through a co-located kiosk; one-on-one consulting to assist small businesses with business management, marketing, bidding and estimating; and numerous workshops and training sessions for DBE, ESB, and non-DBE firms on relevant business top- ics. The program will be rolled out to a minimum of ten SBDCs statewide over the next two years. 7. Workshops—These include “meet the prime” and reverse trade shows whereby DBE and ESB firms can network with CDOT project engineers and prime con- tractors. In addition to the business and technical training offered by the SBDCs, CDOT conducts small business workshops on topics such as contractor compliance. 8. Outreach—CDOT hosts numerous outreach sessions for small businesses throughout the year. These are

29 often focused on upcoming project opportunities where DBE and ESB firms can learn about the project and meet the prime contractors that are bidding. These ses- sions also provide opportunities for small businesses to meet partners for teaming and joint ventures. 9. Small business forum—CDOT holds a forum every other month to discuss topics relevant to the small business contracting community. These sessions often cover changes to the DBE and ESB programs, avail- able benefits, and upcoming project announcements including ESB restricted projects. They are open to the public and typically attended by the CDOT Center for Equal Opportunity staff, as well as prime contractors and small business owners. Other Program Measures Mentor-Protégé Program For almost ten years, CDOT managed a Mentor-Protégé Pro- gram for design and engineering consultants in cooperation with the American Council of Engineering Companies. Prior to that, CDOT worked with the Colorado Contractors Asso- ciation to implement a similar program for construction con- tractors. Although these programs were successful for a few firms, overall CDOT believed that the programs should be revised. CDOT has temporarily suspended both programs while evaluating strategies and alternatives for improvement. The goal is to create a program that will enhance opportuni- ties for small businesses. Tuition Reimbursement CDOT currently offers tuition reimbursement for DBE and ESB owners who attend a fee-based professional develop- ment course or training session. Firms must apply prior to the training and half of the tuition fee is reimbursed, up to $300 annually. In the future, CDOT hopes to expand the scope of its reimbursement program to be an education and capital improvement grant-based reimbursement. The concept is that firms will seek grants based on ideas to expand and grow their business. For those accepted, CDOT will monitor efforts and improvement and provide financial reimbursements to assist with the costs.