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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Suggested Citation:"Chapter 4 - State DOT Initiatives for DBE Success." National Academies of Sciences, Engineering, and Medicine. 2019. Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program. Washington, DC: The National Academies Press. doi: 10.17226/25538.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

27 State DOTs establish their DBE programs in accordance with the regulations of the U.S. DOT. As a condition of receipt of funding, state DOTs agree to comply with 49 CFR Part 26. Respon- sibilities of state DOTs include the following: • Creating a level playing field on which DBEs can compete fairly for U.S. DOT-assisted contracts; • Helping to remove barriers to the participation of DBEs in U.S. DOT-assisted contracts; and • Assisting in the development of firms that can compete successfully in the marketplace out- side the DBE program. Surveys from 41 state DOTs (including the District of Columbia) provided information on how state DOTs are assisting DBEs on their paths to business success. The research team also collected basic information about DBE program operation for the 10 non-respondent states. In addition, the research team conducted in-depth interviews with 18 DOTs. State DOTs described their supportive services and business assistance that help DBEs gain the skills necessary to develop business strategies, grow their firms, compete in the marketplace, and flourish in their industries. State DOT Business Assistance The research team explored different types of assistance that state DOTs provide to DBEs. The research team also examined the perceptions of DBE program managers and other leadership at state DOTs about which types of assistance have been contributing to or would contribute to the advancement of successful DBEs. Results come from written surveys completed by 41 state DOTs, supplemented by in-depth interviews with 18 state DOTs. The following presents results in the order in which questions were asked in the written survey. Classes and Training State DOTs provide a broad range of group training and one-on-one business assistance to DBEs. The first column of Table 14 lists types of assistance provided by state DOTs. The second column shows the percentage of the state DOTs responding to the survey that have provided a specific type of assistance in the past 3 years. Two-thirds or more of state DOTs offer classes or other training concerning: • Record-keeping, contract compliance, and other office functions; • Company financial statements; • Preparing bids and proposals; • Other company marketing; and • Access to capital. C H A P T E R 4 State DOT Initiatives for DBE Success

28 Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program Nearly 80% of state DOTs also reported that they have training academies and general training courses. Most of the state DOTs report that that type of training contributed to the advancement of successful DBEs (as shown in the “Contributed to the advancement of success- ful DBEs” column of Table 14). The research team also asked state DOTs whether they thought the specific type of assistance would help a DBE once it was successful (“successful DBEs” include those that have gradu- ated and those that have not). The “Would be helpful once a DBE is successful” column in Table 14 shows the percentage of state DOTs that responded affirmatively. More state DOTs Type of assistance provided by state DOTs Specific classes, training sessions, or online training on: Record-keeping, contract compliance, and other office functions 80 % 54 % 56 % 22 % Human resources 49 37 54 12 Company financial statements 80 61 44 12 Company websites 63 51 46 10 Preparing bids and proposals 85 76 49 39 Other company marketing 71 54 46 12 Access to capital 66 63 66 22 Bonding 63 56 61 24 Insurance 59 51 63 5 Safety 63 49 59 5 Training academies/general training courses 78 59 46 32 One-on-one business assistance from state DOT staff or consultants 85 73 54 32 Reimbursement for training or other expenses 51 49 46 20 Mentor-protégé programs 37 32 54 20 Business development programs 78 63 56 32 Dissemination of DBE directory 76 41 29 0 Routine notification of DBEs of contract opportunities 76 54 61 17 Meet and greets with public sector staff 73 61 56 15 General networking events with primes 73 59 63 34 DBE conferences and events 80 68 68 20 Project-specific outreach events 59 54 73 15 Prompt payment and return of retainage requirements 63 56 63 5 DBE contract goals 73 66 56 20 Small contract bidding restricted to small businesses 39 32 44 7 Unbundling of contracts suitable for bidding by DBEs as primes 37 34 49 17 Other contract goals 17 7 20 0 Other efforts to increase DBE participation as primes 17 10 20 0 Would be helpful once a DBE is successful Among 5 most important to advancement Provided within the past 3 years Contributed to advancement of successful DBEs Table 14. State DOTs reporting provision of types of assistance to DBEs in the past 3 years and the effects of the assistance.

State DOT Initiatives for DBE Success 29 identified “project-specific outreach events” as helpful than any other type of assistance. In gen- eral, roughly one-half of the state DOT respondents indicated that one of the types of classes or other training would still be helpful to a successful DBE. Finally, the survey asked state DOTs to identify the top five types of assistance that contrib- uted to the advancement of successful DBEs. Among the classes and other training listed in the survey, classes on preparing bids and proposals were identified as a top type of assistance by 39% of respondents. Many state DOTs participating in interviews reported that they mostly serve construction contractors. One DOT specifically prioritizes businesses in the construction industries for ser- vices. Only a few state DOTs indicated serving professional services firms and it is rare that they tailor programs to those businesses. One representative of a state DOT commented that a profes- sional services firm’s success is largely based on “reputation” and that few participate in support- ive services programs. She recalled only one such firm showing up for meet-and-greet events. General Training General business assistance training is commonly offered by state DOTs. For some states, the training is relatively basic and mostly oriented to skills needed by new businesses. For example, the representative of the Oklahoma DOT indicated that it provides training in basic business skills such as using Excel and QuickBooks, complying with Occupa- tional Safety and Health Administration regulations, designing a website, and marketing. The types of classes and other training listed in Table 14 are just some of the needs addressed by state DOTs. Many state DOTs indicated that they offer DBE supportive services in highway- specific topics such as understanding plans and specifications, navigating the highway con- struction process, and learning how to perform certain types of work. The Ohio DOT, for instance, reported on DBE bootcamps that provide specialized training in heavy construction, trucking, and other industries. Some of this training is offered in partnership with other groups such as heavy highway contracting associations, other trade associations, the SBA, local colleges and universities, and small business development centers. Another approach to delivering training is to offer reimbursement for classes or technical assistance that DBEs obtain through other sources (not shown in Table 14). For example, the Oregon DOT partners with the Small Business Development Center network to offer reim- bursement for DBEs enrolled in small business programs in community colleges. State DOTs offering reimbursement for training or other expenses within the past 3 years include Alaska, Connecticut, Delaware, Iowa, Kansas, Minnesota, Montana, Ohio, Oklahoma, Pennsylvania, Virginia, and Washington. Representatives of these state DOTs reported that such reimbursement has contributed to the advancement of successful DBEs and would still be help- ful once a DBE is successful. Training on Access to Capital and Bonding Many state DOTs reported that they provide classes and training concerning access to capital and bonding. Representatives of state DOTs often reported bonding and access to capital as among the top five types of assistance that contributed to the advancement of successful DBEs. Some state DOTs combine classroom training with real-world practice that leads to immedi- ate and tangible results. In partnership with the SBA, the Hawaii DOT offers a workshop series on access to capital that combines strategies for preparing loan and bond requests with a trial pitch to real bankers.

30 Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program The Georgia DOT provides practical training to help DBEs obtain financing and bonding. DBEs are able to sit down with lending and bonding professionals to start applications during the sessions hosted by the Georgia DOT. Some DBEs are able to leave a session with a letter indicating that they will receive bonding. Training on How to Work with the State DOT Several DOTs offer training on how to prepare bids for state DOT contracts as part of broader business assistance. For example, the Florida DOT makes estimating and bidding a part of its Management Development Program, a 3-week series of classes on how to work with the Florida DOT. The Arizona DOT’s “Business Coach on Demand” is a web portal that includes business assistance specific to navigating the state DOT’s procurement process, including bidding and contract compliance. The portal serves businesses in construction, architectural and engineering design, and goods and other services seeking to do work with the Arizona DOT. Higher-Level Training Several DBEs reported higher-level training such as sophisticated technical assistance for DBEs seeking to move from subcontracting to prime contracting. The Missouri DOT, for instance, offers an advanced contractor training program to serve growing businesses seek- ing to expand services. The representative of the Arizona DOT is developing a “Prime DBE Academy” training program to help DBEs better position themselves as prime contractors. The Minnesota DOT offers advanced business skills training programs for “mature” DBE firms. As an example, the Minnesota DOT representative indicated that since more established firms may have outgrown QuickBooks, Minnesota DOT will offer training on more powerful systems. The Louisiana DOT provides more established DBEs with training on tax and payroll compliance. Although no state DOT reported that they provide services to DBEs with the intent to help them “graduate,” many deliver supportive services to more established DBEs to assist with their continued growth and success. According to the representative of the West Virginia DOT, at one time the West Virginia DOT/DBE Section aggressively worked with certified DBEs to prepare them for when they exit the DBE program. One component of this assistance was an Entrepreneurial Development Institute offered several times a year. Entrepreneurial Development Institute topics included submitting job quotes to prime contractors, requirements for a subcontractor to bid as a prime contractor, and prequalification. Some state DOTs may also benefit from more sophisticated training such as safety and risk management training for its DBE contractors. The Wisconsin DOT reported that the training it provides on risk management and safety is particularly important when an owner-controlled insurance program is applied to a project. Training Offered by Other Service Providers Some state DOTs indicate that DBEs utilize resources offered by other organizations such as trade associations (e.g., Associated General Contractors [AGC], Small Business Development Centers, and colleges and universities). Some examples are the following: • The Hawaii DOT encourages its DBEs to become members of industry associations and other business-related associations in order to secure higher-level training, strengthen business credibility, and build relationships with prime contractors and others.

State DOT Initiatives for DBE Success 31 • A representative of the District of Columbia DOT reported that the DOT is partnering with local small business associations to develop a series of training clinics to encourage participa- tion in the DBE program, as well as assist in their development. Some outside service providers grant certificate credentials at the completion of training (e.g., AGC Certificate of Management—Lean Construction [CM-Lean]). A representative of the Nevada DOT described the development of a “collaborative” that integrates multiple commu- nity resources into a single supportive group to help small businesses to grow. A representative of the Texas DOT indicated that the DOT has partnered with AGC to launch a DBE technical assistance program. Individualized Business Assistance Most state DOTs reported that they offer one-on-one training (85%) or operate business development programs (80%). Many reported that they thought these programs contributed to the advancement of successful DBEs and that this assistance would continue to be helpful to DBEs that are already successful. About one-third of state DOT respondents placed one-on- one training in the top five types of assistance most important to the advancement of successful DBEs, similar to the responses for business development programs. One-on-One Supportive Services When asked for more details about the business development programs for DBEs, many state DOTs provided a list of training topics much like the list of classes, training sessions, or online training provided in Table 14. Some also mentioned networking when describing assistance under their business development programs. Some state DOTs, such as the South Dakota DOT, indicated that assistance under the busi- ness development program is highly tailored to the individual DBE and might include business management consulting for that company. Assessments and coordination of services are per- formed by a supportive services consultant. Other state DOTs described similar success with one-on-one assistance delivered through support services consultants. A representative of the New Hampshire DOT reported individual assistance for DBEs regarding their bids, and com- mented, “We looked at if they were bidding high or within range. We received positive feedback from this process.” A representative of the Alaska DOT reported developing the “Map to Success Technical Assis- tance Program,” which provides in-depth analysis of a DBE’s business infrastructure. As part of the program, DBEs are shown their strengths and weaknesses. The DBEs are then coached to help them implement recommendations. DBEs in Virginia use a “business readiness tool” to identify their strengths and weaknesses. The Virginia DOT services are then tailored to the needs of each business. Services can include pro- posal writing, estimating and bidding, cash flow analysis, construction management, and more. The Maryland DOT runs the Business Development Accelerator Program in collaboration with the College of Southern Maryland. After initial assessment, each DBE is paired with a sub- ject matter expert for specific areas of need. For example, if a DBE has challenges with hiring, the DBE is paired with a human resource professional. A few interviewees from state DOTs discussed how they deliver one-on-one assistance across their states. This can be challenging for all but the smallest states. The Louisiana DOT, for example, is expanding its centralized one-on-one training program to two regionally deliv- ered programs.

32 Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program Many state DOTs regularly survey DBEs to identify what types of assistance are valuable, what can be improved or dropped, and what new programs are needed. Sometimes states have DBE advisory groups that also help guide the state DOTs as they set priorities for DBE train- ing. For example, the Tennessee DOT has a DBE advisory committee consisting of primes, subs, DOT and legal staff, and others who give input on sustaining and improving supportive services. Limitations to Offering One-on-One Supportive Services A number of state DOTs reported low participation in one-on-one supportive services. One state DOT reported that very few DBEs participate in individualized business assistance. Another representative of a state DOT said that a DBE only uses the assistance when it is “headed off a cliff.” The interviewee from the Tennessee DOT reported that participation in any free program is somewhat stunted by a “free, how good can it be?” perception of the pro- gram. He also stated that some DBEs are reluctant to share sensitive information with the state DOT and therefore not willing to engage the services of the Tennessee DOT’s supportive services consultant. Another state DOT indicated that its 18-week individualized business development program is a stretch for some DBEs, as it is difficult for small businesses to allocate the time required to participate. One representative of a state DOT said, “Supportive services have not been successful. The awareness [among DBEs] just isn’t there. We do a poor job of bringing them in.” He added that participation in supportive services is particularly low for architecture and engineering firms. A representative from the Iowa DOT indicated that DBEs were not responsive to the individu- alized assistance offered by the supportive services consultant, saying, “We tried to work with consultants to connect them with DBEs . . . but [DBEs] didn’t see a necessity. . . . [The] Midwest tends to be ‘bootstrappers,’ meaning they do things by themselves.” Some state DOT representatives expressed frustration with what they perceived as the very limited impact of consultant-operated supportive services programs. State DOTs, including California, are considering paying consultants based on tangible outcomes from those pro- grams, such as bids won by the DBEs that are assisted. Another state DOT indicated that all of its consultant-operated supportive services had been dropped. Some state DOTs indicated that they had not offered supportive services because of a lack of funding. The Nebraska DOT, however, indicated that it had recently launched these services. Mentor–Protégé Programs About one-third of state DOTs operate mentor–protégé programs. About one-half of state DOT respondents reported that such programs would continue to be useful to a DBE once it is successful. Twenty percent of state DOTs listed mentor–protégé programs as among the top five types of assistance most important to DBE advancement. Several state DOTs reported having mentor–protégé programs on their “wish lists.” The Alaska DOT, for example, has plans to pair DBEs with primes to secure higher-level business training. The Ohio DOT reported early success assigning a “developmental goal” on certain projects. As part of this initiative, primes must develop a plan for mentoring or otherwise assist- ing subcontractors. In the surveys and interviews, many state DOTs reported difficulty launching mentor– protégé programs, and many of the states that had them reported that they had a relatively

State DOT Initiatives for DBE Success 33 small number of participants. One state DOT reported that successes in relationship building between mentors and protégés occur when those connections are informally established inde- pendent of the state DOT. Additionally, many state DOTs reported lacking the resources to successfully implement mentor–protégé programs. The Hawaii DOT reported that primes would want a stipend or credit toward DBE goals to participate. Low interest among primes, limited resources, and dif- ficulty securing the approval required to incentivize primes to serve as mentors are barriers. Another state DOT reported that mentor–protégé programs are “too difficult to monitor,” and therefore the DOT does not offer one. Another approach is to focus on specific topics rather than a comprehensive, formal mentor– protégé program. For example, 15 successful firms in Delaware wanted to work with smaller DBEs on business plans. “The primes wanted to help the newer, smaller firms get up to speed on the processes,” according to the representative from the Delaware DOT. Networking and Conferences Three-quarters of state DOTs mentioned that they participate in networking events where DBEs can meet prime contractors, and a similar share of state DOTs indicated that they partici- pate in meet-and-greets where DBEs can be introduced to state DOT staff. A majority of state DOT respondents viewed these activities as effective and believed they would continue to be valuable once a DBE was successful. One-third cited events to meet prime contractors as one of the most important activities contributing to the advancement of successful DBEs. However, just 15% of state DOTs put meet-and-greets with agency staff in their top five activities contrib- uting to DBE advancement. Most state DOTs (80%) said they hold DBE conferences and events, thought that they contributed to advancement, and that these activities would continue to be valuable once a DBE was successful. Twenty percent indicated that this was a top five activity for advance- ment of DBEs. State DOTs often partner with other public agencies or trade associations to provide network- ing or just participate in events sponsored by others. State DOT representatives from Missouri, South Dakota, Louisiana, and New Mexico, for example, reported partnering with local chapters of AGC or others for networking events. Several state DOTs faced challenges when attempting to obtain participation from prime contractors in networking events. For instance, a Louisiana DOT staff person said that “the same three or four primes participate,” adding that primes are “hard to come by.” Dissemination of the DBE Directory State DOTs generally disseminate DBE directories, but only 29% of respondents thought that would continue to assist DBEs once they were successful. No state DOT respondent put dissemi- nation of the DBE directory in the top five types of assistance to successful DBEs. A representative from the Arizona DOT reported on an initiative to flag DBEs that had successfully completed the state DOT’s business development program. She also reported that primes may benefit from even more information in the directory, such as each DBE’s types of owned or leased equipment. Although prime contractors are supportive of the idea, the repre- sentative of Arizona DOT indicated that some DBEs do not want a designation in the directory, especially those who have not participated in the training.

34 Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program Notification of Bidding Opportunities and Project-Specific Outreach About three-quarters of state DOTs indicated that they routinely notify DBEs of contract opportunities. More than one-half of state DOTs noted that such efforts contributed to the advancement of successful DBEs and would continue to be valuable once a DBE was successful. Relatively few (17%) placed this activity in their list of top five efforts contributing toward the advancement of successful DBEs. Because DBEs complained about the total volume of emails they receive each day, the Arizona DOT is working on a phone app that will notify DBEs of Arizona DOT prime and subcontract opportunities in their specializations. Similarly, a representative of the Texas DOT reported that Texas DOT offers resources to view contract opportunities and specifications. About 60% of state DOTs responded that they provide project-specific outreach, with most reporting that the assistance contributed to the advancement of successful DBEs and that it would continue to be valuable to DBEs that are successful. Just 15% of state DOTs, however, placed that outreach among the top five activities contributing to the advancement of DBEs. Encouraging Primes to Use DBEs as Subcontractors DBE Contract Goals One of the ways many state DOTs assist DBEs is through DBE contract goals set on certain federally funded contracts. These state DOTs require prime contractors to meet those goals or show good faith efforts to do so. Three-quarters of the state DOTs responding to the survey operated programs with DBE contract goals. A majority of respondents thought that contract goals had contributed to the success of DBEs and would continue to do so once a DBE was successful. Twenty percent of state DOTs put DBE contract goals among the top five activities that most contributed to the advancement of successful DBEs. A few states (17%) indicated that they operated other contract goals programs as well (which could include small business enterprise [SBE] goals). Representatives of some state DOTs reported that prime contractors tend to use the same disciplines when meeting DBE contract goals. For example, the representative from the Georgia DOT sees primes typically using DBEs only for traffic control, erosion control, miscellaneous concrete work, and trucking. She said that she is trying to encourage primes to diversify the work types available to DBEs on Georgia DOT projects. Some interviewees from state DOTs went further, stating that individual prime contractors tend to always use the same DBEs to meet a contract goal. That could be one reason why a rela- tively small number of DBEs are very successful. A representative of one state DOT said that she is exploring a pilot program that would incentivize primes to use DBEs that they had never utilized. Operation of Race-Neutral Programs Some state DOTs operate the federal DBE program using solely race-neutral measures. Some examples are the following: • The representative of the Florida DOT reported that the Florida DOT is race-neutral, with only “aspirational” goals on contracts. Prime contractors do not need to meet a specific con- tract goal. Instead, the Florida DOT grades its primes on their annual utilization of DBEs on FHWA-funded contracts and publicly announces “A, B, or C” grades for each prime

State DOT Initiatives for DBE Success 35 contractor. Each prime contractor receives communication from the Secretary of the Florida Department of Transportation regarding its grade. • The New Hampshire DOT actively encourages primes to utilize DBEs on contracts but does not use DBE contract goals. • Because the New Mexico DOT had used DBE contract goals and exceeded its overall DBE goal for multiple years, it is currently operating its program without DBE contract goals. The representative from the New Mexico DOT said that he had seen new DBE certification appli- cations slow since implementing the program on a neutral basis. • The Montana DOT currently operates a race-neutral program where it sets anticipated levels of DBE participation on contracts but does not require prime contractors to meet or attempt to meet those goals. As of summer 2018, MDT was achieving 4.41% DBE participa- tion, which falls below MDT’s 6.14% overall DBE goal. Other Strategies for Increasing Utilization of DBEs The Arizona DOT has implemented a “just one more” campaign that encourages primes to exceed the required percentage of DBEs to meet the goal. The representative from the Arizona DOT said that some primes are reluctant to participate and indicate that they view an increase in DBEs on a project “as a big risk.” The Georgia DOT has attempted to involve DBEs in non-traditional fields on larger projects with a longer performance period. The representative of the Georgia DOT said that she tries to educate primes on how to use DBEs for certain types of goods and services beyond highway construction and engineering. Absence of DBE Contract Goals Negatively Affects DBE Participation Many of the state DOTs that use DBE contract goals reported that, without those goals, few DBEs would secure work on state DOT projects. Representatives of state DOTs suggested that “most large subcontracts won by DBE firms are a result of DBE goals on large contracts,” and “DBEs only get work when goals are in place.” Opening Prime Contract Opportunities for DBEs The research team asked state DOTs about different ways to try to open bid opportunities to DBEs as prime contractors and consultants. One strategy is unbundling large contracts into smaller ones suitable for bidders that are small businesses. More than one in three state DOTs (37%) indicated that they were attempting to unbundle some of their contracts. They generally thought this was effective, and one-half of respondents said that this type of initiative would help successful DBEs in the future. Seventeen percent of state DOTs listed unbundling as a top five activity. As one example, the Nebraska DOT has a goal for how many of its contracts each year must be below $1 million. The DOT then works with individual DBEs to pursue small contracts. Some state DOTs (39%) have gone further by restricting bidding for certain contracts to small businesses. The state DOTs that had such efforts indicated that this contributed to advancement of successful DBEs in their state. As an example, the Minnesota DOT operates the Equity Select program for its state-funded professional services contracts. This relatively new program allows for direct selection of targeted businesses for professional services procurements under $25,000. DBEs tend to also be certified as targeted businesses. The representative from the Minnesota DOT said that this program helps minority- and women-owned firms get exposure to the Minnesota DOT as a

36 Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program prime consultant and learn how to contract directly with the Minnesota DOT. Some firms that work as subconsultants on FHWA-funded contracts have received prime contracts through this program. Similarly, the Minnesota DOT launched efforts to include small firms as prime contrac- tors in its state-funded construction maintenance contracts. Examples of this work include guardrail repair, fencing, landscaping, and Americans with Disabilities Act improvements. The Minnesota DOT provides training to firms interested in bidding on these maintenance con- tracts. As another example, the Colorado DOT implemented an Emerging Small Business (ESB) program that restricts bidding to ESB firms. Some representatives from other state DOTs said that they would like such programs in their states. Some examples are the following: • The interviewee from the Arizona DOT suggested a program where any state DOT project under a certain dollar threshold would be reserved for bidding by small businesses; • The representative of the Rhode Island DOT commented that increased unbundling of projects would be helpful to DBEs’ ability to bid and perform as primes; • A representative of the Texas DOT said that unbundling large contracts and restricting contract types by NAICS code would add to DBE success in Texas; and • The Arkansas DOT representative reported that “making smaller contracts will help more DBEs bid more as primes [and] increase DBEs being primes.” Prompt Payment and Return of Retainage Two-thirds of state DOTs reported efforts to encourage prompt payment and return of retainage, which was thought by many to be effective in advancing successful DBEs and to be of continued value to those DBEs. Only 5% of respondents from state DOTs placed prompt payment among the top five activities that helped DBEs become successful. Federal DBE program regulations require state DOTs to include contract provisions for primes to pay subcontractors for accepted work within 30 days of being paid by the state DOT; some states have prompt payment requirements that are even shorter. Some state DOTs have put systems in place through which subcontractors can track when a prime has been paid. There are other ways to encourage prompt payment of subcontractors. The New Mexico DOT has a new pilot prequalification program that measures the quality of performance of contractors on its projects. Based on the scoring of performance, a contractor receives an over- all prequalification score that can be used as a price preference when determining low bids on future New Mexico DOT projects. As prompt payment of its subcontractors on its past projects is one of the evaluation factors for each prime, contractors “take it very seriously . . . [as] a hot- button topic,” according to a New Mexico DOT representative. The New Mexico DOT started this program in 2016 after receiving special permission from FHWA to try it. The New Mexico DOT has since suspended a contractor for violating prompt payment requirements. Access to Capital and Bonding Some state DOTs discussed current, planned, or hoped-for programs that would go beyond classes to assist DBEs with access to capital and/or bonding. For example, a representative of the Delaware DOT suggested a loan program to help DBEs with working capital while they invest in equipment and software, noting, “That way they can take the risk on new work.” The Wisconsin DOT works with bankers to help them better understand the realities of con- struction contracting cash flow. The Wisconsin DOT also retains cash balances in a bank that

State DOT Initiatives for DBE Success 37 then extends working capital loans to DBEs. Another state DOT has helped DBEs who need loans connect with banks. The Florida DOT offers a bond guarantee program that covers up to 90% of the bond for proj- ects under $250,000 and 80% for projects between $250,000 and $500,000. A representative of the Colorado DOT reported that it is implementing a partial bond guarantee program for DBEs. Differences in Assistance for Construction and Professional Services Firms Some state DOTs indicated that training and other supportive services are more focused on construction than professional services firms. A representative of one state DOT reported that although the state DOT’s supportive services are open to all businesses, those in highway construction industries are given preference when registration is limited.

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Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program Get This Book
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Firms that have graduated from the federal Disadvantaged Business Enterprise (DBE) program or have successfully competed for state transportation agency contracts are the focus in NCHRP Research Report 913: Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program.

The DBE program provides small businesses owned and controlled by socially and economically disadvantaged persons with opportunities to participate on federally assisted highway contracts. As a requirement of receiving federal highway funds, state departments of transportation (DOTs) must administer the DBE program. FHWA provides oversight of the state DOTs’ operation of the program to ensure that they are in compliance with federal regulations.

The report includes appendices that define success, profile successful DBEs, and describe state DOT initiatives for DBE success. It also explores the types of business assistance that contribute to the success of DBE firms.

The report serves as a resource for staff in state transportation agencies, U.S. DOT, and other groups implementing the DBE program or providing business assistance.

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