T2976 Appendix B Barriers to Utilization of DBEs 6.9.21.pdf

BARRIERS TO UTILIZATION OF DBES BY PRIME

CONTRACTORS IN NEW JERSEY DEPARTMENT OF

TRANSPORTATION CONTRACTS

Qualitative and Quantitative Results

Submitted to:

New Jersey Department of Transportation

1035 Parkway Avenue

P.O. Box 600

Trenton, NJ 08625-0600

Submitted by:

Macro International Inc.

116 John Street, Suite 800

New York, NY 10038

Subcontractor for:

Taurus Market Research

1810 Englishtown Road

Old Bridge, NJ 08857

Appendix B

21DPP00642

Disadvantaged Business Enterprise Supportive Services Consultant

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts

TABLE OF CONTENTS

Introduction Purpose Objectives

Methodology Quantitative Methodology Qualitative Methodology

Executive Summary

Conclusions and Recommendations

Quantitative Findings Prime Contractors and Consultants Disadvantaged Business Enterprises (DBEs)

Qualitative Findings DBE Experiences with Contracting/Subcontracting DBE Experiences of Prime Contractors Recommendations for Improvement

Appendix: Survey Instruments NJDOT Survey of Prime Contractors & Consultants – 2007 NJDOT Disadvantaged Business Enterprise Supportive Services Survey - 2007 .. 41

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 1

INTRODUCTION

The New Jersey Department of Transportation (NJDOT) receives Federal funding via the United

States Department of Transportation (USDOT) for various transportation projects throughout the

State. Federal regulations stipulate that at least 10 percent of these Federal funds must be expended with Disadvantaged Business Enterprises (DBEs). DBEs are for profit small businesses in which socially and/or economically disadvantaged individuals 1) own at least a 51 percent interest and 2) control management and daily business operations. Socially and economically disadvantaged individuals are members of racial and ethnic minority groups, women, and other individuals on a case-by-case basis. A firm must also meet certain minimum size standards in order to be considered a small business. The goal of the DBE program is to support these firms enough so that they can eventually enter the mainstream construction and consulting industries.

State and local transportation agencies must establish annual goals for the participation of DBEs, as well as continually review individual contracts to establish project specific DBE subcontracting goals. In the State of New Jersey, the NJDOT annually submits a numerical DBE goal to the USDOT, Federal Highway Administration (FHWA) for the upcoming fiscal year.

Individual project goals are set based on identified DBE subcontracting opportunities. The

Division of Civil Rights/Affirmative Action (DCR/AA) is the NJDOT division responsible for administering the DBE Program.

In addition to establishing goals, transportation agencies who receive USDOT funds must also certify firms as eligible to participate in the DBE program. In order to streamline the certification process and as required by Federal regulations, in 2005 the NJDOT entered into a reciprocal arrangement with New Jersey Transit (NJT) and the Port Authority of New York and New Jersey

(PANY&NJ) and formed the New Jersey Unified Certification Program (NJUCP). The NJUCP is a reciprocity agreement between the three certifying agencies—NJT, NJDOT and the PANY&NJ.

Under the initiative, a DBE may submit a single application to any one of these agencies and be certified as an eligible DBE for all of them. Firms that are certified as DBEs by any of these agencies are automatically included in the NJUCP database, which contractors can use to find eligible DBEs to work with to meet their contracting goals.

Currently, there are about 200 DBE firms participating in the NJUCP that can potentially perform services for the NJDOT. These firms are typically small, generally have limited resources and often have limited experience with the requirements for administering, documenting, and/or fulfilling contractual requirements on consultant and construction projects. Of DBE firms participating in the NJUCP, 70 percent have never received a contract with a primary NJDOT contractor, and 80 percent have never received one with the NJDOT directly. At present, there are approximately 200 Prime Contractors who perform various professional and construction services for the NJDOT. Generally, these contracts are large enough to present opportunities for subcontracting to DBE firms.

PURPOSE

Given that the majority of DBE firms have not received contacts with either the NJDOT directly or through a NJDOT Prime Contractor, the NJDOT required a needs assessment research to identify why more DBEs are not receiving contracts. NJDOT contracted with Taurus Market

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 2

Research (Taurus) and Macro International, Inc. (Macro) to conduct this research. The

Taurus/Macro team was retained by the NJDOT to conduct a qualitative and quantitative analysis of barriers to utilizing new Disadvantaged Business Enterprises (DBEs) in NJ DOT contracts.

OBJECTIVES

The objective of this research is to perform a needs assessment among both DBEs and Prime

Contractors to identify barriers:

Faced by DBEs in obtaining NJDOT contracts and recommendations for how to overcome these impediments;

Encountered by DBEs in securing subcontracts from Prime Contractors and recommendations as to how to overcome these obstacles;

Encountered by Prime Contractors in utilizing the services of DBEs and recommendations as to how to overcome them.

The quantitative approach used survey data to identify the barriers faced by DBE firms and Prime

Contractors. The qualitative approach used one-on-one interviews to develop recommendations for how to overcome the barriers identified in the surveys.

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 3

METHODOLOGY

QUANTITATIVE METHODOLOGY

In March of 2008, Macro conducted the mail survey of DBEs and Prime Contractors/Consultants.

Macro selected a sample of Prime Contractors (contractors), Prime Consultants (consultants), and

DBE firms (DBEs) from a database provided by the NJDOT. The sample for the three groups combined resulted in a total of 682 firms.

Three mailings were completed over the course of four months, each with a one week telephone follow-up. A maximum of four contact attempts were made to each firm. Of 682 surveys, 309 were returned, for an overall response rate of 45 percent. The highest response rate was among

DBEs, at 53 percent, followed by Consultants at 44 percent, and Contractors at 38 percent. The returned surveys were data entered and tabulations were developed based on groups of interest to the NJDOT.

Table 1. Response Rate by Sample Group

Sample Size Returns Response Rate

Contractors 274 105 38%

Consultants 135 60 44%

DBEs 273 144 53%

Total 682 309 45%

QUALITATIVE METHODOLOGY

The State selected the DBEs and Prime Contractors from the database of completed surveys to be interviewed. Taurus/ Macro worked with the State to determine screening criteria (i.e. number of years certified, number of contracts awarded, size of firm, location, etc.) to participate in one-on-one interviews. A random sample of DBEs and Prime Contractors were screened from the list provided by the State. In order to yield a total of 40 completed face to face interviews (20 DBEs and 20 Prime Contractors) we screened from a pool of approximately 80 potential respondents.

Members of Taurus‘s recruitment unit recruited the DBEs and Prime Contractors. To ensure attendance, respondents were each given a $50 honorarium. After agreeing to participate in the interview, the respondents were sent an information packet that confirmed the time and date of the interview, the location, and directions to the location. Prior to the interview, the respondents were called to verify that they would be attending.

The interviews were conducted during June, July, and August 2008. The primary purpose of the interviews was to gather information to be used in making recommendations for 1) helping DBEs overcome barriers to bidding or participating as subcontractors; and 2) helping Prime Contractors increase their utilization of DBEs.

A total of 40 one-on-one interviews were conducted with Prime Contractors and representatives of DBE firms. The objective was to speak with companies that had served as Prime Contractors on NJ DOT contracts, including those who had and had not used a new DBE company within the past three years; and to speak with representatives of DBE firms that had been used as

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 4 subcontractors on NJ DOT contracts, as well as DBE firms that had not been used as subcontractors. All interviews were audio-taped, and the interviewers also took notes during each interview.

Separate interview guides were developed for each of the four respondent categories seen in the table below:

Table 1: Respondent Groups

Prime Contractors who had used a new DBE within the past 3 years 5

Prime Contractors who had not used a new DBE within the past 3 years 12

DBEs who had been used by a Prime Contractor 16

DBEs who had not been used by a Prime Contractor 7

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 5

EXECUTIVE SUMMARY

Taken together, the quantitative and qualitative studies revealed several common issues for prime contractors and DBEs. The most salient issue is a lack of relationships between the two. From the perspective of prime contractors, respondents to the interviews indicated that they would not use a subcontractor unless they had a good referral or a proven reputation. Similarly, two factors emerged during the survey of prime contractors as most important when selecting a subcontractor: 1) experience—33 percent of contractors and 35 percent of consultants said this was the most important thing; and 2) reputation—the most important among 33 percent of consultants and 24 percent of contractors.

From the perspective of DBEs, interview respondents felt that having a track record with specific

Prime Contractors was the most important factor to getting subcontracts. When asked why they had not performed any work for Primes on NJ DOT contracts, several respondents in this group mentioned the lack of prior relationships with Primes. The survey of Prime Contractors found that three-quarters of Prime Contractors who had been satisfied with the work of a first time DBE maintained a business relationship with the firm. However, DBEs that have subcontracts may not rely only on prior business with Prime Contractors. The interviews revealed that the most striking difference between DBEs who had gotten subcontracts in the past three years and those who had not was the level of marketing activities: DBEs that did more marketing got more contracts.

In the interviews, another barrier expressed by both Prime contractors and DBEs was staffing.

From the perspective of Prime Contractors, many DBEs do not have enough staff to accommodate the needs of the subcontract or to respond to requests in a timely manner. Indeed, the survey results showed that most DBEs are very small—only one-third of respondents had more than 16 employees. From the perspective of DBEs, the paperwork associated with NJ DOT or any government contract was a large responsibility.

Both Prime Contractors and DBEs expressed concerns about risk and considered it a barrier to entering into contracting relationships. From the perspective of Prime contractors, using a DBE

(particularly a new DBE) comes with a great amount of risk. Interviewees said that the risks in using a new DBE—in terms of the reputation of the firm, and the impact on costs and profitability if there are errors—are just too great. Ultimately, they are responsible for making sure that the job gets done, and they need to ensure that their subcontractors are reliable and accurate. From the perspective of DBE interview respondents, their risks come from not being paid by the Prime contractor in a timely manner for work they have done.

Finally, both Prime Contractors and DBE respondents felt that more monitoring and certification should take place to ensure that 1) all DBEs are qualified to do the work; and 2) all DBEs are actually minority owned businesses instead of ―pass through‖ operations. Prime contractors in both the survey and the interviews felt they would be more willing to use a DBE, particularly a new DBE, if there was some rating or vetting process by which they could be assured of quality work. DBEs felt that they often have to compete with firms that are DBEs in name but are not actually owned by members of disadvantaged groups.

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 6

CONCLUSIONS AND RECOMMENDATIONS

1) Hold a workshop for Prime Contractors and DBEs

The majority of respondents to both the survey and the interviews expressed interest in a DOT-sponsored workshop to bring together DBEs and Prime Contractors. Prime contractors felt it would allow them to explain the administrative, logistical, and financial aspects of working on these contracts and DBEs welcomed the opportunity to have a venue where they could introduce themselves to potential Primes. Workshops such as these may address the barrier of lack of relationships between Prime Contractors and DBEs.

For new DBEs, Prime contractors specifically requested that NJ DOT provide some outreach training regarding basic knowledge about the contracting business—how Primes like to be approached, what information they need to make smart business decisions, what NJ DOT‘s expectations are, and what the Prime Contractor needs and expects from subcontractors. Ideally, this training should occur before they actually are used as a subcontractor on a NJ DOT contract, and should include assistance with setting up pricing and systems and processes for contract management and performance monitoring. Not surprisingly, DBE survey respondents requested workshops with the same kinds of information. The topics of most interest to them include contract-related information, accounting and tax information, marketing information, and doing business with the government. This training may also address difficulties with administrative functions that DBEs expressed in interviews.

2) Provide new incentives and publicize existing incentives to use DBEs

Half of the prime contractors who participated in the interviews were not aware of the new NJ

DOT DBE Incentive Program. Clearly, this program needs increased publicity in order to be effective. Further, respondents to both the interviews and the surveys had suggestions for additional incentives: 1) financial incentives; 2) relaxing certain requirements relative to the

Prime Contractor‘s performance rating and the risk assumed by the Prime; and 3) devoting a smaller percentage of the contract to subcontracts if first-time DBEs were used as subcontractors.

Implementing this recommendation would address the barrier of perceived risk on the part of the

Prime Contractor.

3) Better publicize bid express and other modules by which Prime Contractors and DBEs can find each other

One of the common difficulties that both Prime Contractors and DBEs expressed was difficulty finding opportunities to work together. DBEs expressed trouble finding opportunities in a timely manner and Prime Contractors expressed trouble finding DBEs that provide the specialty services that they require subcontractors for (e.g. inspections, geotechnical/surveying, electrical work).

Almost half of all Prime Contractors surveyed used Bid Express, although fewer were aware of the small business section. Bid express was only used by 1 in 10 DBE survey respondents and few were aware of the small business section of this enterprise. However, 75 percent of DBEs expressed an interest in it. Publicizing this channel of communication may benefit both Prime

Contractors and DBEs in finding opportunities to work together.

4) Set aside small contracts that DBEs can compete for as Prime Contractors

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 7

Both Prime Contractors and DBEs suggested that NJ DOT unbundle some of the current larger contracts to set aside smaller contracts that can be awarded directly to DBEs. They said that this would give the DBE an opportunity to comply with DOT‘s contract requirements without putting the reputation and record of an existing Prime Contractor at risk. From the perspective of DBEs, this would allow them more experience with NJDOT projects, making them more attractive to

Prime Contractors on larger contracts. Further, smaller contracts would demand less staff and be better suited to smaller entities as most DBEs are, addressing the staffing barrier.

5) Increase oversight of DBE requirements and qualifications

Both Prime Contractors and DBEs felt that ownership and management of DBE companies be scrutinized more closely to ensure that the companies delivered quality work, and really were

―disadvantaged.‖ Further, some DBE interview respondents urged the NJ DOT to enforce its

DBE requirements more closely so that Prime Contractors adhered to the spirit of the DBE subcontracting requirements.

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 8

QUANTITATIVE FINDINGS

PRIME CONTRACTORS AND CONSULTANTS

COMPANY SPECIALTY

Among contractors responding to the survey, general contracting (37%) and excavation (29%) were the two most frequently reported businesses. For consultants, the main businesses reported by respondents were civil engineering (77%) and environmental engineering (28%).

Industry

Contractors Consultants

Base: Total (105) (60)

Architecture - 13

Civil Engineering 2 77

Demolition 9 -

Electrical Engineering - 12

Electrical Contracting 6 -

Environmental Engineering - 28

Excavation 29 -

General Contracting 37 -

HVAC - 7

Landscaping 6 5

Painting 9 -

Plumbing 21 -

Sewer Services 13 3

Traffic Control 8 3

Trucking 6 -

Underground Construction 22 3

Other 53 40

YEARS IN BUSINESS

The majority of contractors (70%) and consultants (72%) have been in business for 21 or more years. Only about one-in-ten of all firms surveyed have been in business for 10 years or less.

Years in Business

Contractors Consultants

Base: Total (105) (60)

10 years or less 10 8

11 – 20 years 20 20

21+ years 70 72

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 9

INVOLVEMENT IN PUBLIC CONTRACTING

Among contractors, about six-in-ten (61%) say their business is predominantly public contracting

(contracting with public agencies such as local, state and Federal governments). Contractors who are not primarily involved in public contracting said they are involved in the commercial, industrial, and residential sectors. For consultants, two-thirds (68%) reported that their business was predominantly public contracts. Consultants not primarily involved in public contracting said they were primarily involved in private and commercial sector contracts.

Public Contracting

Contractors Consultants

Base: Total (105) (60)

Mainly in Public Contracting 61 68

Not mainly in Public Contracting 39 32

Base: Not Mainly in Public Contracting (41)* (19)*

Other Sectors

Commercial 34 26

Residential 19 21

Industrial 22 11

Private 17 37

Utility 7 16

Construction 7 5

Engineering -- 21

Hospitals 7 --

*Caution: Small base

USE OF SUBCONTRACTORS

Few contractors and consultants regularly use subcontractors. The majority of contractors and consultants have had less than five NJDOT contracts that used subcontractors in the past ten years

(68% and 55%, respectively). Only about one-in-seven contractors or consultants have over 20 projects that involve a subcontractor (13% and 15%) in the past ten years. Among contractors, one-in-five do not subcontract out any of their work (18%). About one-third subcontract one to 10 percent of their projects (32%). For consultants, they are most likely to subcontract between 11 and 30 percent of their contacts (70%).

Use of Subcontractors

Contractors Consultants

Base: Total (105) (60)

Number of Contracts % %

Less than 5 68 55

5 – 9 11 12

10 – 20 6 15

Over 20 13 15

Number of Contracts

None 18 -

1 – 10% 32 25

11 – 20% 23 43

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 10

Use of Subcontractors

Contractors Consultants

21 – 30% 11 27

31 – 100% 17 5

Types of Work Subcontracted Most contractors and consultants that do use subcontractors use them for specialty services.

Among contractors, the most often subcontracted work is electrical (48%), followed by landscaping (22%) and paving (20%). Among consultants, just over one-half (55%) subcontract for surveying, followed by environmental (23%) and geotechnical inspections (22%).

Types of Work Subcontracted

Contractors Consultants

Base: Total (99) (60)

Concrete 16 --

Electrical 48 7

Inspection -- 5

Landscape 22 2

Plumbing 8 --

Paving 20 --

Surveying -- 55

Guide / Guard Rail 16 --

Construction Inspection -- 17

Environmental -- 23

Geotechnical Inspection -- 22

Traffic -- 12

Air Noise Inspection -- 7

Factors Considered when Selecting a Subcontractor Respondents were asked what factors, other than price, were considered when selecting a subcontractor for the first time. Two factors emerged as of primary importance to both groups.

The primary factor considered when selecting a subcontractor is experience—33 percent among contractors and 35 percent among consultants. The second most important factor for both groups is reputation—33 percent among consultants and 24 percent among contractors. Consultants were nearly equally concerned about quality (32%). Nearly one-in-five contractors listed ability to compete/perform as their next most important consideration.

Factors when Selecting a Subcontractor

Contractors Consultants

Base: Total (94) (60)

Ability to Complete / Perform 18 10

Experience 33 35

Reliability 13 7

Quality 16 32

Reputation 24 33

References 14 20

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 11

Required To Meet A DBE Subcontract Goal The majority of contractors and consultants surveyed have been required to meet a DBE subcontract goal (67% and 77%, respectively). Of those who met a DBE goal, contractors had a more difficult time identifying DBE subcontractors than consultants (30% vs. 17%). The primary issue with identifying a subcontractor is that there is simply a lack of them.

Awareness of NJDOT DBE Incentive Program Exactly four-out-of-ten of both contractors and consultants surveyed are aware of the NJDOT

DBE Incentive program. Of those who are aware, about one-third of both contractors (31%) and consultants (32%) feel this program provides adequate incentive to use a first-time DBE. Of those that provided an answer, the majority felt that that there was a lack of experienced DBEs for the work that was required.

Awareness of NJDOT DBE Incentive Program

Contractors Consultants

Base: Total (105) (60)

Not Aware of Program 60 60

Aware of Program 40 40

Base: Aware of NJDOT DBE (42)* (24)*

Provides Adequate Incentive 31 32

Does Not Provide Adequate Incentive 69 68

Reasons Why Not (9)* (5)*

Need for experienced DBEs 4 4

Unsure of Incentives 1 1

Other 4 --

* Caution: Small Base

REQUIRED TO MEET DBE GOAL

Contractors Consultants

Base: Total (105) (60)

Not required to meet DBE Goal 33 23

Required to meet DBE Goal 67 77

Base: Met DBE Goal (70) (46)

Problem Identifying DBE Subcontractor 30 17

Specific Problems Mentioned (21)* (8)**

Lack of subcontractors 86 4

Can’t achieve DBE goals 19 --

Price 5 1

Other -- 3

*Caution: Small base

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 12

Experience with a First-Time DBE Subcontractor Contractors and consultants had very similar experiences with DBEs in this program. Less than one-third of contractors or consultants had used a first-time DBE subcontractor (31% and 30%, respectively). Two-thirds of both contractors and consultants who had used a first-time DBE found the work to be satisfactory. Across both groups, among those who found the DBE work to be satisfactory, three-quarters reported maintaining a business relationship with the DBE firm.

Experience with a First-Time DBE Subcontractor

Contractors Consultants

Base: Total (105) (60)

Ever Used a First Time DBE Subcontractor 31 30

Base: Used a First Time DBE Subcontractor (32)* (18)*

Work Was Satisfactory 69 67

Work Not Satisfactory 31 33

Specific Problems With Work Performed (9)* (6)*

Inexperience of DBEs 3 3

Quality -- 3

Scheduling 3 --

Other 3 --

Maintain Business Relationship 76 71

Did Not maintain Business Relationship 21 29

Reason relationship Not maintained (6)* (5)*

No longer work in area 3 --

Quality -- 4

Other 3 1

* Caution: Small Base

Type of Incentive Needed To Participate in the NJDOT Incentive Program Respondents that have not participated in the DBE incentive program were asked what type of incentive would cause them to seriously consider using a first time DBE subcontractor. The majority of contractors cited some sort of financial incentive, while consultants were more varied in their answers and more often asked for more information about the DBE.

Incentives to Participate in DBE Program

Contractors Consultants

Base: Total (66) (41)

Ability to be a prime -- 5

Training hours -- 5

Financial incentive 20 5

References 6 5

Selected on more projects 2 7

Better ratings / information 6 12

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 13

Incentives to Participate in DBE Program

Contractors Consultants

DBEs don’t affect rating 5 5

Past performance 10 5

Do not subcontract 4 --

Suggestions on How to Increase Usage of DBEs When asked what suggestions they have on how to increase the usage of DBEs, one-third of prime contractors were unable to make a suggestion. Among contractors, the most common suggestion was pre-qualification or rating of DBE firm quality. For consultants, the most common suggestion was to provide incentives for using new DBE firms.

Suggestions to Increase Use of DBEs

Contractors Consultants

Base: Total (62) (33)

More information 6 --

Incentives for new DBEs -- 15

Pre-qualifications 11 --

None 35 30

Other 50 55

Willingness to Participate in Mentor-Protégé Program Respondents were asked whether they would be willing to participate in a mentor-protégé program with a DBE. Most contractors (68%) said that they would not be willing to participate.

The reasons given by this group included not doing enough work for NJDOT to make this worthwhile, not having enough time to participate, and not having enough information about the program. A little less than half of all consultants (47%) said that they would be unwilling to participate in such a program. Time constraints and being a subcontractor themselves were the main reasons cited by this group.

Willingness to Participate in Mentor-Protégé Program

Contractors Consultants

Base: Total (105) (60)

Willing To Partner 42 53

Not Willing To Partner 68 47

Reasons Not Willing to Partner (33) (17)

Not much work 30 12

Takes too much time 20 18

Affect on company 6 --

Not familiar with program 15 12

Already a subcontractor 6 18

Size -- 6

Other 23 34

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 14

Willingness to Participate in an NJDOT-Sponsored Workshop Respondents were asked if they were willing to participate in a NJDOT-sponsored workshop event designed to partner prime contractors and consultants with DBE contractors and consultants. About one-half of contractors (53%) and 70 percent of consultants surveyed said they would participate. More consultants (47%) would prefer such a workshop took place in central New Jersey, about an equal amount of contractors preferred Northern, Central, and

Southern New Jersey as locations for the workshop. Most respondents from both groups preferred workshops to be held in winter months, presumably when there are fewer contracting opportunities available. As for a preference for a particular day of the week, Tuesdays through

Thursdays are preferred. Both contractors and consultants have a preference for the workshop to be held in the morning. In terms of the length of the meeting, contractors prefer the meeting to be one to two hours, while consultants would prefer a longer meeting (three to four hours). One-quarter of contractors are willing to attend a DBE workshop, while among consultants, it is a bit higher (35%). Of those willing to attend, 19 percent of contractors would be willing to pay up to

$99, and 35 percent of consultants would be willing to pay up to $149. Contact by mail or e-mail is the preferred mode of communication among both contractors and consultants.

NJDOT-SPONSORED WORKSHOP

Contractors Consultants

Base: Total (105) (60)

Would Participate in NJDOT Workshop 53 70

Location of Workshop

Northern New Jersey 23 28

Central New Jersey 27 47

Southern New Jersey 23 22

Month

January 37 32

February 45 40

March 20 30

April 7 20

May 4 13

June 5 13

July 5 12

August 3 10

September 4 13

October 6 18

November 7 13

December 3 13

Day of the Week

Monday 13 22

Tuesday 26 48

Wednesday 34 50

Thursday 27 53

Friday 15 25

Saturday 6 5

Time of Day

Morning 51 65

Afternoon 18 15

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 15

NJDOT-SPONSORED WORKSHOP

Contractors Consultants

Evening 4 10

Length of Meeting

1 – 2 hours 45 30

3 – 4 hours 19 47

5+ hours 2 3

Willingness to Attend 25 35

Willingness to Pay

Up to $49 7 12

$50 – 99 12 10

$100 – 149 3 13

Notification

Mail 49 50

Phone 4 3

Fax 7 5

E-mail 37 65

Bid Express Member Just over one-half of contractors are Bid Express members (55%), as opposed to just 15 percent of consultants. Of those who are not Bid Express members, only 15 percent of contractors and 35 percent of consultants are interested in becoming one. Among Bid Express members, just over a quarter of contractors (26%) purport to be familiar with the Small Business Network Tab.

BID EXPRESS MEMBER

Contractors Consultants

Base: Total (105) (60)

Bid Express Member 55 15

Not a Bid Express Member 45 85

Base: Not a Bid Express member (47) (51)

Interested in Becoming a Member 14 35

Base: Bid Express Member (46) (1)*

Familiar with Small Business Network Tab 26 --

Used of Small Business Network in Bid Express

Base: Used Small Business Network in Bid Express (105) (60)

Experience with Small Business Network (6)* --

Did not receive responses 1 --

Good 2 --

Not good enough 2 --

Not enough people 1 --

*Caution: Small base

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 16

Disadvantaged Business Enterprises (DBEs)

Company Specialty Among DBE firms surveyed, the most frequently mentioned specialty is civil engineering (21%).

About one-in-ten mention general contracting (11%) or environmental engineering (9%). All other specialties are mentioned by six percent or less of respondents.

COMPANY’S SPECIALTY

DBEs

Base: Total (144)

Company’s Specialty

Architecture 4

Civil Engineering 21

Demolition 4

Electrical Engineering 4

Electrical Contracting 4

Environmental Engineering 9

Excavation 6

General Contracting 11

Landscaping 6

Paving 6

Traffic Control 6

Trucking 4

Underground Construction 6

Other 9

License Types The most commonly held license is for a professional engineer (31%). Exactly one-in-ten have a surveying/mapping license. All other types of licenses held are mentioned much less frequently.

Other responses for types of licenses included the following:

Irrigation and pesticide, Traffic control, Roadway construction, United States Coast Guard, and

State-certified real estate appraiser.

LICENSE TYPES

DBEs

Base: Total (144)

License Types

Electrical 4

Professional Engineer 31

General Contractor 6

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 17

LICENSE TYPES

DBEs

Surveying/Mapping 10

Asphalt/Concrete 6

Architect 4

Traffic Control 4

Other 18

Company’s Years In Business The majority of DBE firms have been in business for 11 years or more (76%). Almost one-third have been in business for 21 years or more (30%). Most companies that have not benefited from being a DBE have existed for at least 11 years (73%), one-third of which for 16 to 20 years

(31%).

COMPANY’S Years in Business

DBEs

Base: Total (144)

Company’s Age

0 – 5 years 7

6 – 10 years 17

11 – 15 years 22

16 – 20 24

21+ years 30

Base: Have not Benefited from being a DBE (48)

0 – 5 years 10

6 – 10 years 17

11 – 15 years 21

16 – 20 31

21+ years 21

Public Contracting Involvement About two-thirds of DBE firms are mainly involved in public contracting. Those not primarily involved in public contracting are most likely to be in private sector projects.

Private sector contracts who work for DBEs are as follows:

Goldman Sachs, Private auto insurance and worker‘s comp for the State of NJ, Private distribution and manufacturing industries, Pfizer pharmaceuticals and Johnson and Johnson, and

Private engineering firms.

PUBLIC CONTRACTING INVOLVEMENT

DBEs

Base: Total (144)

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 18

PUBLIC CONTRACTING INVOLVEMENT

DBEs

Mainly in Public Contracting 62

Not mainly in Public Contracting 38

Base: Not mainly in Public Contracting (55)

Other Sectors

Residential 10

Commercial 16

Private 36

Schools 7

Industrial 13

Government / state 29

Consultant firms 5

Engineering 7

Firm’s Size (Dollars) About seven-out-of-ten DBEs surveyed (73%) have revenues of $500,000 or more.

FIRM’S SIZE

DBEs

Base: Total (144)

Under $99,999 8

$100,000 – 299,999 10

$300,000 – 499,999 8

$500,000+ 73

Firm’s Size (Employees) About a third of DBEs have fewer than five employees (34%). Another third have between five and 15 employees (34%), while another third have 16 or more employees (31%).

In terms of seasonal employees, exactly half of the firms have fewer than five. About a quarter of the firms have from five and 15 seasonal employees (24%), while 15 percent have 16 or more.

NUMBER OF EMPLOYEES

DBEs

Base: Total (144)

Number of Regular Employees

Under 5 34

5 – 10 23

11 – 15 11

16 – 20 9

21+ 22

Number of Seasonal Employees

Under 5 50

5 – 10 18

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 19

NUMBER OF EMPLOYEES

DBEs

11 – 15 8

16 – 20 7

21+ 8

Branch Off Another Company The vast majority of DBE firms (94%) have not branched off from another company.

BRANCH OFF ANOTHER COMPANY

DBES

Base: Total (144)

Not Branched off from another company 94

Branched off from another company 6

Length of DBE Certification Almost half of DBEs (49%) have been certified with the NJDOT for more than ten years. Only

15 percent have been certified more recently (within the past three years). Almost eight-of-ten companies that have not benefited from being a DBE have been DBE-certified for over five years. The majority of those companies have been certified for over ten years (42%).

LENGTH OF DBE CERTIFICATION

DBES

Base: Total (144)

Length of DBE Certification

Less than 3 years 15

Over 5 years 33

Over 10 years 49

Base: Have not Benefited from being a DBE (48)

Less than 3 years 23

Over 5 years 35

Over 10 years 42

Whether Benefited from being a DBE Six-out-of-ten DBEs claim to have benefited from being a certified DBE. The way in which it has benefited them is that they get more jobs/contracts (46%). For the one-third (37%) who say they have not benefited, the primary reason mentioned was that they did not get any jobs.

WHETHER BENEFITED FROM BEING A DBE

DBEs

Base: Total (144)

Have Benefited 63

How Benefited? (67)

More Jobs/contracts 62

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 20

WHETHER BENEFITED FROM BEING A DBE

DBEs

DBE Coverage 22

Networking 7

Other 9

Have Not Benefited 37

How Not Benefited? (45)

Not enough work 24

Outside NJ 16

Size 7

Information 4

Prequalification requirements 9

Lack of Opportunities for DBEs / small companies 11

Other 29

NJDOT Pre-qualified (Construction Contractors) Of DBEs that are construction contractors, 26 percent are pre-qualified.

NJDOT PRE-QUALIFIED (CONSTRUCTION CONTRACTORS)

DBEs

Base: Total (144)

Yes, pre-qualified 26

Pre-qualified (37)*

Paving 16

Utilities maintenance 14

Streets / road / sidewalk maintenance 22

Concrete 19

Steel 14

Electric 14

No, not pre-qualified 74

Not pre-qualified (25)*

Not necessary / time 28

Not enough money 12

Distance 8

No work 12

Too much paperwork 8

Other 32

* Caution: Small Base

Problems Trying To Become Pre-Qualified DBEs who have attempted to become pre-qualified said lack of work and lack of time are the main reasons why they are not qualified.

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 21

PROBLEMS TRYING TO BECOME PRE-QUALIFIED

DBEs

Base: Not Pre-Qualified (21)*

No time 48

Do not subcontract 19

Size 43

Lack of Work 48

* Caution: Small Base

Cost-Based Approved or Pre-qualified Of DBEs that are consultant/professional services contractors, about one-third (32%) of them are pre-qualified.

COST-BASED APPROVED OR PRE-QUALIFIED

DBEs

Base: Total (144)

Yes, cost-plus basis approved/pre-qualified 32

No, not cost-plus basis approved/pre-qualified 68

Reasons not cost-plus approved/pre-qualified (34)

Not aware 18

Too much work 12

In the beginning phase 6

No DOT projects 6

Not needed 6

Not Applicable 26

Other 26

NJDOT Contracts Almost half of DBEs (49%) have fewer than five NJDOT contracts. Twenty-one percent claim to have 10 or more projects.

NJDOT CONTRACTS

DBES

Base: Total (144)

Under 5 49

5 – 10 12

10 – 20 8

21+ 13

Reasons for not Working with the NJDOT DBEs that have not worked with the NJDOT cited primarily that they have encountered a lack of opportunities. This question is an open-ended question in the survey instrument with ―lack of opportunities‖ as a code for different types of responses. Some of those include:

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 22

We have not found anything in software development to bid on.

NJDOT does have contract of bids for custom machine parts.

There is not any construction management for small jobs.

There is a problem with amount of contracts. Bigger firms get one big annual contract instead of being broken down into smaller contracts for smaller firms.

There are no DBE goals for bridge painting construction inspection projects.

REASONS FOR NOT WORKING WITH the NJDOT

DBEs

Base: Total (80)

Reasons why DBE has not work with the NJDOT

Location 4

Information 8

Work in another state 3

Lack of opportunities 19

Size 1

Not applicable 34

Competition 1

Other 30

Work with Other Transportation Agencies About three-quarters of DBEs work with other transportation agencies, primarily NJ Transit and

Port Authority.

WORK WITH OTHER TRANSPORTATION AGENCIES

DBEs

Base: Total (144)

Work with other transportation firms

No 24

Yes 72

Other transportation firms (92)

Delaware DOT 8

Delaware River Port Authority 13

NJ Transit 47

NY/NJ Port Authority 41

Maryland DOT 3

MTA 11

NYDOT 24

Penn DOT 24

NJ Turnpike Agency 9

NYC DOT 11

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 23

Needs of Company to Develop Beyond Current Capacity The main reason for working with other transportation agencies is the opportunity for more work

(27%). This open-end response in the survey instrument included some of the following responses:

Need of public work contracts that cover the cost of prevailing wage and union scale.

Need of work in construction, project management, inspection, cost and quality estimation.

Need of more work to develop greater capacity.

More projects that advertise with increased DBE percentage.

WORK WITH OTHER TRANSPORTATION AGENCIES

DBEs

Base: Total (96)

More employees / larger facility 6

Set asides 6

More Work 27

Bid opportunities 4

Money 9

Information 8

Not applicable 3

Workshops / networking / conferences 6

None 7

NJDOT-Sponsored Workshop Three-out-of-ten DBEs have participated in a workshop related to their business (31%). Exactly three-fourths of DBEs are very/somewhat interested in participating in a NJDOT sponsored workshop. The topics of most interest to them include contract-related information, accounting and tax information, marketing information, and doing business with the government. DBEs who responded with ―contracting‖ as a topic of interest in NJDOT-sponsored workshops were coded as such. Examples of their responses are:

Interested in Government contracting along with doing business with proper contacts.

Doing business with government contracting to develop and finance your business.

Looking for contracts that are within my bonding range to grow one‘s business to qualify for larger bonding work.

Help with negotiating contracts and knowledge on contract law.

Need help meeting with prime contacts for professional service contracts.

The response ―Accounting / Tax Issues‖ was an answer DBEs could choose from. There are no reasons under it since DBEs only responded with ‗‖Accounting / Tax Issues.‖

NJDOT-SPONSORED WORKSHOP

DBEs

Participate in Any Workshop 31

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 24

DBEs

Would Participate in NJDOT Transportation Workshop

Very interested 37

Somewhat interested 38

Not very interested 14

Not at all interested 9

Topics of Interest Related to Technical Needs (97)

Accounting 2

All of the above 3

Business plan 12

Contracting 33

Business w/ government 19

Business w/ NJDOT 3

Financing 7

Government contracting 14

Marketing 26

Meetings 4

Not Applicable 7

Topics of Interest in Administrative / General Workshop (73)

Accounting / tax issues 32

All of the above 7

QuickBooks 12

None 18

Finance 7

Not Applicable 16

Other 8

Of those willing to attend an NJDOT-sponsored workshop:

Northern and Central New Jersey are the two locations most favored by DBEs, 35 and 31 percent of the time respectively.

DBEs favor the months of January (43%) and February (47%) for the month of the DBE workshop.

Four-of-ten DBEs prefer the workshop to be held on Wednesday or Thursday.

Almost half prefer the workshop to be held in the morning.

At least 80 percent of DBEs are willing to devote one to four hours on a workshop.

Almost half of DBEs prefer to be notified by e-mail or mail.

About 40 percent are willing to spend up to $99.

NJDOT-SPONSORED WORKSHOP

DBEs

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 25

DBEs

Participate in NJDOT DBE Workshop 72

Location of Workshop

Northern New Jersey 31

Central New Jersey 35

Southern New Jersey 21

Month

January 43

February 47

March 33

April 20

May 21

June 17

July 17

August 18

September 20

October 27

November 22

December 20

Day of the Week

Monday 28

Tuesday 35

Wednesday 40

Thursday 40

Friday 33

Saturday 27

Time of Day

Morning 54

Afternoon 31

Evening 19

Length of Meeting

1 – 2 hours 44

3 – 4 hours 39

5+ hours 8

Willingness to Attend 58

Base: Willingness to Pay (83)

Up to $49 23

$50 – 99 14

$100 – 149 8

$150 – 199 6

$200+ 8

Notification

Mail 49

Phone 6

Fax 22

E-mail 56

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 26

Bid Express Membership One-out-of-ten DBEs are Bid Express members. Of those who are not members, about one-half are interested in becoming a member.

Only 13 percent of DBEs are familiar with the small business network tab, while just 7 percent use the Small Business Network in Bid Express.

BID EXPRESS MEMBER

DBEs

Base: Total (144)

Bid Express Member 10

Base: Not a Bid Express Member (100)

Likelihood to Become a Bid Express Member 49

Base: Total (144)

Familiarity with Small Business Network tab

Yes 13

No 87

Use of Small Business Network in Bid Express

Yes 7

No 93

Bid Express is an online information service for transportation bidding that publishes bid-related information from state transportation agencies to vendors and also allows secure bid submissions from vendors to state transportation agencies.

The Small Business Network of Bid Express facilitates the interaction between prime contractors and subcontractors (including DBEs), allowing them to exchange subquotes and communicate about projects.

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 27

Qualitative Findings

DBE Experiences with Contracting/Subcontracting

Overview of Respondents The interviewers spoke with 23 representatives of DBEs, 16 were from firms that had been used as a subcontractor by a Prime Contractor on a NJ DOT contract. Seven of the respondents had not been used by a Prime. For the most part, those who had been used by Prime Contractors said that they had been in business for quite awhile, and that a fair amount of their business was built upon existing relationships.

―I‘ve been working in the field for 23 years,‖ said one. ―I do a good job, so I get repeat business.‖

―Previous work. Word gets around. We‘ve built a good reputation,‖ said another.

Yet a third DBE representative said, ―I had an established business reputation before the

DBE list.‖

In contrast, most of the respondents who had not been used as a subcontractor indicated that they had not been in business for long periods of time, although one did say that he had been ―in business since 1990.‖ Moreover, the DBE firms that had not gotten any subcontracts on NJ DOT contracts to date tended to be general contractors more than specialists in a particular field.

Because Prime Contractors prefer to subcontract out work that they cannot do, lack of specialization in new DBEs may be one part of the problem. ―We like to sub work that we don’t do ourselves. For geotechnical work, we use ______. We [also] subcontract work like air and noise studies,‖ said one Prime.

The types of work done by the DBEs for these Prime Contractors also varied considerably. While one respondent said that their firm did primarily bridge inspection and traffic assessment management, another one installed signs, did highway striping, and supplied items like traffic cones to the Prime Contractor. One firm did a variety of civil engineering tasks for numerous client firms; another dealt primarily with landscaping, providing seeding services and plantings to larger highway projects. Further, many of the DBE firms that received contracts had worked for some of the same major contractors, so it was clear that Prime Contractors were using a variety of

DBE firms to satisfy their subcontracting requirements. Of the 16 DBE firms that had done subcontracting for Prime Contractors on NJ DOT contracts, one firm was mentioned by five different DBEs; one firm was mentioned by four of the respondents; four were mentioned three times; six were mentioned twice; and 45 additional firms were mentioned at least once. These sixteen DBE firms combined had done work for a minimum of 82 Prime Contractors.

Differences between respondent groups All of the DBE firms we talked to had been approved for subcontracting work by NJ DOT. The most striking difference between DBEs who had gotten subcontracts in the past three years, compared with those who had not, was the level of pro-activity of the companies that had been used as a subcontractor, compared to the ―not used‖ category. Those who were successful in getting subcontracts said that they made contact with potential Primes as a part of their general marketing strategy, as well as in response to specific RFPs. Those who had not been successful to

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 28 date said that they were ―on the lists,‖ but their apparent assumption was that potential Primes should contact them, rather than the other way around.

Virtually every DBE that had been used by a Prime Contractor recently reported active marketing efforts, including:

Cold calls to potential Primes, Sending information (and conducting follow-up calls) to potential primes, Attending professional meetings, and

Actively searching for upcoming funding opportunities in a variety of sources.

―I have salesmen that go out and pound the pavement to get work.‖

―We give seminars in the field at professional conferences.‖

―A lot of cold calling, sending them information, word of mouth…‖

―We check [the DOT website] daily and see if prime contractors are listed on projects. Now we know everyone, so we call them more. But they will call us, too. Seventy-five percent, we call them. Twenty-five percent, they call us.‖

―We‘re on the list as a DBE firm for NJ DOT and NJ Transit. I solicited their business. They usually advertise for these jobs, and we see what we qualify for and put our names in.‖

For the DBE firms who had not been used as a subcontractor by a Prime Contractor, few or none of these proactive marketing efforts were reported. When asked how they found out about potential business opportunities with Prime Contractors, this group tended to respond much more passively:

―Normally, they contact me, those who need a minority firm.‖

―Typically, they solicit us for a quote, or we contact them and offer to give them a price on something.‖

The DBE representatives who had not had subcontracts through DOT were asked about their marketing efforts in general.

―We don‘t have any specific marketing efforts. The owner of our company is known in the industry,‖ said one.

―We approached a few companies. We sent about 50 letters total with our qualifications, but we got no response. We also had a web page which was not providing a response.‖

Only one of the unsuccessful DBEs said that they had done any cold calling. His response was, ―In the beginning, when I started the company [I did cold calling]. But not in the last seven years.‖ None of the others had done cold calling at all. ―I don‘t think I have any need for it,‖ said another.

Barriers to Utilization of DBEs in New Jersey Department of Transportation Contracts 29

Barriers to Subcontracting All of the DBE respondents acknowledged that there were some significant barriers that new

DBE firms encountered while trying to get a subcontract with a Prime on a NJ DOT contract. As might be expected, having a track record with specific Prime Contractors was the most important factor to those who were successful in getting subcontracts, and was seen as the greatest barrier to those who had not.

When asked why they had not performed any work for Primes on NJ DOT contracts, several respondents in this group mentioned the lack of prior relationships with Primes.

―Most Prime Contractors have worked with DBEs who they are comfortable with, so they don‘t give us an opportunity.