Landing a big government contract or subcontract—like those that become available in the aftermath of disasters such as the historic August flood—can be a tall order for small contractors. On top of struggling to navigate the complicated bid process and secure required bonds, small firms often have no track record with government agencies on which their work can be evaluated.
Those in the Capital Region that have managed to get a foot in the door, like Civil Solutions Consulting Group, recommend building up a set of skills and resources—a toolkit, if you will—to begin building a resume and the relationships that eventually lead to signed contracts. One of the first tools fledgling firms should acquire is certification as a Small Disadvantaged Business or Disadvantaged Business Enterprise, which is required for small or minority-owned firms seeking federal contracts.
The SBE and DBE certification programs aim to level the playing field for small and minority-owned businesses. Federal regulations require that public projects assisted by the U.S. Department of Transportation have SBE and DBE participation goals, meaning the general contractor must attempt to subcontract out a percentage of the work to small and disadvantaged companies. The calculated percentage is based in part on availability of willing and able certified firms.
On the state and local level, projects with the state Department of Transportation and Development, the Baton Rouge Metropolitan Airport and other organizations often involve federal dollars and include SBE and DBE goals.
“You need it,” says Kahli Cohran, who obtained certification shortly after founding Civil Solutions in 2013. “But DBE certification is just one tool in the toolkit for success.”
Part of the reason why certification is just the start is because the SBE and DBE participation goals are just that—goals, not mandates—and general contractors do not have to meet them as long as they’ve made and documented “good faith efforts” to award subcontracts to small and disadvantaged firms.
After obtaining certification for his firm, Cohran participated in a city-parish mentor program with established engineering firm CSRS and took part in local projects. With some experience and a bit of forward thinking, his next step was to hire Eric Dexter as business development director.
“Just being DBE certified is not even half the work. It’s maybe one-fourth,” says Dexter, who joined Civil Solutions in 2014. “You have to get out there and show that you’re valuable. Establish relationships. Go to meetings. Shake hands.”
Cohran, 40, and Dexter, 33, are newcomers in an industry dominated by an older generation that likes to do business with familiar people and firms.
“People do business with people they trust, and that takes time,” Dexter says. “You can’t rush experience. These are the unwritten rules of the game.”
Civil Solutions offers professional consulting services on project planning, management and delivery. The firm has grown from three employees to six in recent years. And while it’s working on a few existing contracts that are sustaining the business, Cohran says 2015 was a slow year with a steep learning curve. The firm is just now beginning to see the fruits of the work it has done to establish itself in the market, he says, and it’s increasingly being awarded contracts. Civil Solutions is currently working on BREC’s disaster recovery program, the city-parish SSO Program and the Green Light Plan for roadway improvements.
Civil Solutions is among about 150 SBE and DBE certified firms in East Baton Rouge Parish, compared to about 400 in Orleans Parish, according to DOTD. The Federal Highway Administration recently approved DOTD’s overall SBE and DBE participation goal at about 13% for the next three years, says Anastasia Semien, DOTD public information officer. Highway construction projects bid through DOTD can have a DBE or SBE goal, but not both, Semien says. Projects with an estimated cost between $150,000 and $500,000 may have an SBE goal. If the project costs more than $500,000, it may have a DBE project goal. Contractors may be both SBE and DBE certified.
For small contractors who have acquired certification but are still struggling to meet bonding requirements for large contracts, there are several assistance programs, one being Louisiana Economic Development’s recently restored Bonding Assistance Program.
If a contractor lacks the bonding capacity to secure a public or private job, the LED program helps provide access to bonds at reasonable rates from surety companies. The program will offer 25% or $100,000—whichever is less—in bond guarantees to the surety company, which will then provide all underwriting. To qualify, the contractor must be certified by LED’s Small and Emerging Business Development Program.
“When you look at subcontractors, many can do the work. They just can’t get the bond,” says John Matthews, LED director of small business services. “This becomes a problem for prime contractors because they can’t fill DBE goals if firms can’t get the bonds.”
The surety industry is built on relationships and trust, like credit at a bank, Matthews says. The problem for young, small firms is they don’t have much experience with sureties, so they present a risk. The state is stepping in to provide bonding assistance to reduce risk to the surety company, without getting involved in the underwriting process.
In addition, LED is now looking at ways to address access to capital, Matthews says. These efforts are part of Gov. John Bel Edwards and LED Secretary Don Pierson’s commitment to small business and ensuring diversity.
“With all the opportunities available right now,” Matthews says, “we need to make sure our small Louisiana businesses, women and minorities are at the table.”
A DBE CERTIFICATION HOW-TO GUIDE
Qualifications for a firm to be eligible for the DBE program:
• Must be a for-profit business that performs transportation related-work.
• Must be at least 51% owned and controlled by a socially and economically disadvantaged individual or individuals. Disadvantaged owners must be U.S. citizens or lawfully admitted permanent U.S. residents.
• Must meet the Small Business Administration’s size standard and cannot exceed $23.98 million in gross annual receipts.
How to apply:
First-time applicants must complete and submit a certification application and related documents to a certifying agency in their state and participate in an on-site interview conducted by that agency. If an applicant fails to submit all required documents, the application may be delayed or denied. If it is not delayed, certification takes about two months.
Where to apply:
The DBE program requires all projects receiving U.S. Department of Transportation funds to participate in a statewide Unified Certification Program. The UCP is a one-stop DBE certification program.
Basic outline of the DBE certification application:
Section 1: CERTIFICATION INFORMATION
• Basic contact information.
• Prior/other certifications and applications.
Section 2: GENERAL INFORMATION
• Business profile.
• Relationships and dealings with other businesses.
Section 3: MAJORITY OWNER INFO
• Identify the majority owner of the firm holding 51% or more of the ownership interest.
• Additional owner information.
Section 4: CONTROL
• Identify the firm’s officers and board of directors.
• Duties of owners, officers, directors, managers and key personnel.
• Inventory of equipment and vehicles, office space, and storage space.
• Financial/banking information.
• Sources, amounts and purposes of money loaned to your firm, including names of persons or firms guaranteeing the loan.
• Contributions or transfers of assets to/from your firm and to/from any of its owners or another individual over the past two years.
• Current licenses/permits held by any owner or employee of your firm.
• Largest contracts completed by your firm in the past three years, if any.
• Largest active jobs on which your firm is currently working.
Qualifications for a firm to be eligible for the SBE program:
• Must be a for-profit business that performs transportation related-work.
• Must be at least 51% owned and controlled by an economically disadvantaged individual or individuals, whose personal net worth is less than $1.32 million. Owners must be U.S. citizens or lawfully admitted permanent U.S. residents.
• Must meet the Small Business Administration’s size standard and does not exceed $23.98 million in gross annual receipts.
SBE applications follow guidelines similar to DBE. Firms can apply through DOTD.