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NCHRP 20-95 [Active]

Identifying Successful Practices in the FHWA Disadvantaged Business Enterprise (DBE) Program

  Project Data
Funds: $249,625
Staff Responsibility: Gwen Chisholm-Smith
Research Agency: Colette Holt & Associates
Principal Investigator: Colette Holt
Effective Date: 6/3/2013
Completion Date: 9/3/2014

The FHWA DBE program provides small, socially and economically disadvantaged companies with opportunities to participate, primarily as subcontractors, on federally-assisted highway contracts. This occurs through a prime contractor’s obligation to meet a DBE contract goal, i.e., subcontract a certain percentage of the contract to certified DBE firms. The program also provides funding to state DOTs to administer business development programs for certified DBEs. These programs provide services to assist DBEs with capacity-building to help them obtain contracts. The DBE program does not anticipate that a firm will remain a DBE indefinitely. Should the disadvantaged owner’s personal net worth reach a certain level or should the firm’s gross receipts exceed small business limitations, the DBE firm will “graduate” and no longer be eligible to participate in the program. After graduates exceed program size standards, they are typically far from the size of the large contractors with which they must now compete for state DOT road and bridge contracts. There is a need to better understand: (1) characteristics of DBEs that graduate from the program, (2) whether graduates of the DBE program are able to survive on their own, without the program benefits, and (3) good practices to promote success and create self-sufficiency in the DBE program. 

The objective of this research is to identify best practices in the DBE program for facilitating: (1) broad participation of DBEs in state DOT highway contracts, (2) successful graduation from the program, and (3) graduates who are able to survive on their own outside the DBE program. Broad participation is defined in terms of both the numbers of DBEs contracted and the diversity of company types they represent. 
1. The research should answer questions such as, but not limited to, the following: 
Concerning graduates of the DBE program:  
  • What are the numbers and percentages of DBE firms that have graduated from the program over the past 5-10 years? 
  • What were the distributions of business types (e.g., professional services, trucking, guardrail, traffic control materials, etc.) among the graduates?
  • How many graduated by exceeding the personal net worth versus the gross revenue criterion? 
  • How many of the graduates appealed their decertification? 
  • What were the key characteristics of the firms that achieved success and graduated from the program? 
  • What has been the experience of the firms since graduation; e.g., have they remained in business, expanded in size or into other areas, or returned to the DBE program? 
  • What aspects of DBE support services were most and least important in achieving success? What additional programs or services would be beneficial to help DBEs?  
Concerning all DBEs: 
  • What are the numbers and distribution of DBEs broken down into various categories; e.g., DBEs certified, DBEs winning DOT contracts by type of business or service; DBEs in various annual gross revenue categories; DBEs certified by minority-ownership versus woman-ownership, etc.? 
  • What are the main challenges, impediments, and disincentives to graduating from the program?
  • What are the characteristics of those DBEs that consider themselves to be successful but have not graduated? What performance measures have they applied to their companies to evaluate success? 
  • What aspects of DBE supportive services were most and least helpful? What additional programs or services would be beneficial to help DBEs?
Concerning Prime Contractors and Consultants:
  • What kinds of products and services are most often subcontracted to DBEs? 
  • Are prime contractors generally aware of the DBE goals in each state DOT? 
  • How many different DBEs do they tend to work with?
  • What criteria do they use for selecting subcontractors?
  • What information, methods, incentives, etc. do they need to subcontract with DBEs that they have not previously worked with? 
  • What variations and trends do we see in the use of DBEs by prime contractors and consultants according to the size of the prime and the type of business they are in? 
  • If current DBEs graduate from the program, would prime contractors still contract with them? If not, why?  
2. Based on an analysis of the above, it is expected that the research team will offer recommendations for optimizing the DBE program’s goals of facilitating success and increasing the number of graduates. These recommendations could include, but not be limited to, the following:
  • What are the best practices in the DBE program to facilitate the objective of expanding the participation of DBE firms in state DOT contracts?  
  • Which programs provided by DOT Supportive Services work well and which do not (and why)?
  • What management structures and approaches are particularly conducive to a successful DBE program in a state DOT? 
  • What performance measures are appropriate for evaluating the success of a DBE? 
  • What data management practices would help DOTs maintain and track information about their DBE contractors and facilitate a successful DBE program? 
  • What further research could be done to facilitate improvements to the DBE program? 
  • How can a greater percentage of DBEs participate in bidding and contracting?  
The research plan should build in appropriate interim deliverables that include, at a minimum at least one interim report that describes work done in early tasks with an updated work plan for the remaining tasks. The research plan should build in appropriate checkpoints and at least one face-to-face interim report review meeting. 
The final deliverables will include: (1) a final report that documents the entire research effort; (2) an executive summary in the final report that outlines the research results; (3) a Microsoft® PowerPoint presentation describing the background, objectives, research method, findings, and conclusions; and (4) presentation of the results at a minimum of two meetings of AASHTO committees or other relevant national organizations to be determined by the NCHRP. 
STATUS: A contract has been executed, and research is underway.  The research team is currently preparing to interview various industry stakeholders.

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