The Project Owners Challenge – Meeting Participation and Inclusion Goals

The greatest challenge of any public, private or non-profit organization, committed to ensuring the participation and inclusion of disadvantaged businesses (minority-, women-, disabled-owned businesses – M/W/DSBEs) is the natural propensity for larger business owners to hoard opportunities for their own personal gain. The natural order of business is to maximize one’s profits for its stakeholders.  Federal, state, and local regulations governing participation and inclusion were established to even the playing field for diverse businesses suffering from decades of discrimination.  The ultimate goal is to provide an equitable distribution of wealth throughout the community and an economy that raises the quality of life for local residents.

The forced allocation of wealth promotes numerous challenges and opportunities for the business owners seeking contracts which are tethered to conditions that encourage them to invite smaller businesses to the table to share in the wealth building process.

Perspective of the Prime

Opportunities with associated inclusion require primes to balance risk, compensate for unanticipated scheduling conflicts, share competitive standards, demand more resources for communication, and incur additional project oversight cost.

Option#1

If I want the business, I will have to tolerate the inconvenience of additional parties and share any additional cost with the project owner.

Option #2

If I want the business, it makes sense to develop mutually beneficial relationships with M/W/DSBEs to create a competitive advantage for these inclusion-related and non-inclusion related ventures.  Move beyond the transaction state of “one-off” opportunities to develop a team for multiple projects across sectors and enable the M/W/DSBEs to grow with you.

Lesson Learned

Most M/W/DSBEs are diligent business owners dedicated to providing a quality product/service in a timely manner.  Adjust your communications strategy to include more partners. It is worth it given the level of collaboration you will achieve.  Any initial resistance to inclusion should be offset by the level of compliance and the advancement of a stronger business relationship. Yes, there is an upfront investment of time for relationship building, establishing a synergy that reflects understanding and a commitment to each other’s success. You may also have to work on recalibrating the workflow to synchronize standards. Once you are aligned, the project will flow smoother.  The greatest opportunity for primes and subcontractors is to evaluate each other’s talent, resources, potential, grit, drive to be the best, and ability to mutually maximize profitability.

Reality Check

Authentic engagement of M/W/DSBEs is critical to contract compliance.  In some instances, this means the prime awards work to M/W/DSBEs that they can self-perform.  While it may be tempting to write a check to the M/W/DSBE for the use of their certification number without any additional service, this bogus act does not serve the purpose of building M/W/DSBEs, is illegal, and prosecutable on the part of both parties. Reference the City of Philadelphia’s Inspector General’s website for examples of fraud and the Procurement Department’s website for a list of companies that have been disbarred from contracting with the City.

Perspective of a M/W/DSBE

If I could get the opportunity to demonstrate my capability and willingness to collaborate, recruit and retain the most productive employees, be paid in a timely fashion, have a consistent flow of work with business partners that treat me fairly as it relates to timely communication, payments[i], sharing resources,  etc.,  I know I can add value.

Lesson Learned

Your certification is a competitive advantage that gets your foot in the door.  Your credentials generate the opportunities to build your business on a consistent basis.  Do you sharpen your skills on a regular basis through networks, workshops, and on the job training?  Is your business office team disciplined to ensure bills are paid, invoices are collected, purchases are delivered on time, and employees are trained?  Live your vision and enroll others both in and outside of the company to achieve your goal as a growing, thriving, sustainable business.  Your “can do” attitude sets you head and shoulders above your competition.  The greatest opportunity for primes and subcontractors is to evaluate each other’s talent, resources, potential, grit, drive to be the best, and ability to mutually maximize profitability.

Reality Check

There are primes that are only interested in shopping prices for work amongst M/W/DSBEs.  One must be vigilant in understanding the correct price point for your business – getting the contract by submitting an unprofitable bid is not a prudent business outcome.  Project estimating is a pivotal skill for small businesses, investing in this capability is essential to success.

Perspective of the Project Owner

The project owner is the executive leadership who sets the tone and motivates their team in the authentic pursuit of diversity and inclusion within the organization.  Typically, regional goals set by regulators are based on an annual disparity study that measures the supply of disadvantaged businesses within a geographic market and the demand for the products and services purchased by the City, State or Federal government.

As the project owner evaluates the results of their goal setting process, it is easy to forget the businesses those metrics (percentages and dollars spent with M/W/DSBEs) actually represent.  With time and cost driven deliverables for buildings, facilities, and infrastructure the focus is typically on the timeline and the bottom-line commitments.  What doesn’t appear in the fine print of reports, websites, and presentations is the collaboration required between the project owner’s engineering team with their inevitable change orders, the primes, subcontractors, and workers with boots on the ground who must cooperatively meet expectations.

What takes place behind the scenes of a contract?  Beyond the scope of work and the bids, the relationship between the companies selected to complete the project is most critical.  With participation goals, the number of contractors on a project can increase dramatically. For each prime contractor there is at least two subcontractors (MBE and WBE) required to achieve goals on a major project.  The project owner might also consider unbundling a portion of the project to reduce the size of excessively large projects and give M/W/DSBEs an opportunity to bid as prime.  The challenge: finding M/W/DSBEs with the capacity to handle a discrete component of a large project.  Project owners must have an astute understanding of the market and be deliberate in their participation goals.  Without growing M/W/DSBEs to the level of a prime, project owners continue to struggle with achieving goals of participation in the most efficient manner.  But how do you grow M/W/DSBEs to be stable, profitable, reliable, sustainable businesses?

One answer is for project owners to sponsor a mentor/protégé program that allows primes and subcontractors to self-select each other or be matched based on capacity, capabilities, commitment, and compatibility.  The commitment of the project owner includes a consistent flow of work over a multi-year period. The commitment of the prime contractor would be favorite nations pricing with the project owner to ensure a competitive spirit. The prime negotiates with the unions to ensure the most efficient and diverse personnel is assigned to the project(s). The commitment of the subcontractor would be the reinvestment of profits into the growth of their business.  For example, update assets – equipment, technology, etc.; increase efficiencies; train personnel; maintain if not enhance the prime’s standard of quality, etc.).

The Commonwealth of Pennsylvania’s Department of General Services (DGS) has reportedly developed a mentor-protégé program as a part of its Small Disadvantaged Business Programs.  Kelly Kirkland, Deputy Secretary of Diversity, Inclusion & Small Business Opportunities for the state of Pennsylvania advised, “Now is the time for change because our communities are changing. We want to have one of the best diversity programs in the country, but we all have to work together, we can do it, but we must remain steadfast.”

Relationships

Primes and subcontractors have a unique relationship that requires clarity regarding scope of work, approved standards, sense of urgency, mutual respect, collaboration of schedules, etc. In between the information flow, materials, equipment, and talent exists the personality of the employees required to execute the plan as directed by the project owners, contractors, subcontractors, workforce providers, and suppliers.  While plans can be impeccably designed to yield the perfect outcome, the personalities responsible for the end results are subject to the skills, expectations, limitations, unconscientious bias, and other personality traits projected on the job.  What is the most compelling reason to push through – a strong sense of collaboration, growth, and prosperity!

Reality Check

In spite of the reward of mutual prosperity – the conscience and unconscious bias of some primes prevent the advancement of M/W/DSBEs.  Thus, the need for the project owners to remain vigilant – be consistent and persistent in achieving your participation and inclusion goals.  Economic Opportunity Oversight Committees required on select projects by the City of Philadelphia City Council regulations provide a level of accountability, encouragement, and intervention that ensures the successful participation of M/W/DSBEs on major structures around the City.  The Commerce Department Office of Economic Opportunity, tasked with the oversight across the City, measures, monitors and reports the impact of inclusion on projects.

The City reported M/W/DSBEs received payments of $98 million on public sector capital projects and $887 million in payments on non-profit/private sector projects.  These payments were generated on projects with Economic Opportunity Plans during fiscal year 2019.

Clarity of commitment to diversity and inclusion starts from the top within the project owner’s organization.  Contract language should have the value of diversity and stipulations embedded.  Each party (project owner, prime contractor, subcontractor, supplier) should stand for the other’s success.  All personnel on the job must take ownership for doing their job to the best of their ability. Leaders hold their people accountable for delivering on commitments.

Legacy

The legacy of any project is based on the lesson’s learned by project owners, businesses, employees and the marketplace.  Many projects are completed on time and on budget because of the synchronized ebb and flow of the contractors on site, the administrators that make sure invoices are paid at all levels within a timely fashion, and workers are performing at the peak of performance.

The legacy for project owners willing to invest in the growth and development of M/W/DSBEs is a more competitive marketplace.  Competition makes good things better.  Mentorships that yield working relationships where businesses can periodically partner and expand each other’s capacity is the best that we can do.  Each business owner grows stronger, richer, and wiser.

Building a robust economy that grows our infrastructure and engages and employs the community is the ultimate achievement.  “By explicitly focusing on ensuring that tax dollars are invested in a diverse set of businesses, we ensure greater equity in the way the City of Philadelphia does business…”, says Iola Harper, Deputy Director of Commerce Office of Economic Opportunity for the City of Philadelphia.

The use of all aspects of “Diversity” (Thought, People and Suppliers) optimizes “Project Value”! cites James Haile, Director, Partnerships and Outreach-Goldman Sachs 10,000 Small Businesses.

 

[i] The Pennsylvania procurement code requires DGS and other Commonwealth agencies to pay prime contractors within 45 days of them completing their project work and subcontractors be paid within 14 days of when the prime contractor receives payment. Pennsylvania Procurement Handbook, Part 1, Chapter 18, Chapter 38.