Barriers Facing Minority- and Women-Owned Businesses in Pennsylvania
Successful Initiatives Using Minority- and Women-Owned Businesses
Because the Committee was interested in identifying initiatives that achieved high M/WBE participation as models for possible emulation, this chapter describes how large firms in Pennsylvania have successfully included M/WBEs as subcontractors by highlighting projects of three organizations: Turner Construction, the University of Pennsylvania, and the Southeastern Pennsylvania Transit Authority. By establishing M/WBE participation goals, including M/WBEs early in a project’s formation stages, and ensuring that M/WBEs remain on the project, common barriers M/WBEs experience such as limited access to information, negative assumptions of M/WBE capability, and untimely payment have been reduced or eliminated. In so doing, the initiatives generated a substantial amount of business for minority- and women-owned firms. This section describes components of each company’s initiatives.
Turner Construction, the largest general construction firm in the country, actively seeks to incorporate M/WBEs into its contracts. In 1997, Turner spent more than $331 million on minority- and women-owned businesses across the United States. Combined with joint ventures, approximately 26 percent of total business went to M/WBEs (over $792 million out of about $3 billion worth of annual business). Turner has achieved this level of M/WBE participation through a variety of measures, including:
All of Turner’s 42 offices (including those in Pittsburgh and Philadelphia) have a community affairs director who oversees M/WBE participation in major subcontracts. Each director is part of a team that reaches out to communities to identify M/WBEs that can either perform work for Turner or become suppliers for Turner in the future. Once major contractors are selected for a job, Turner invites M/WBE owners to pre-bid meetings with prime contractors and monitors M/WBEs that are chosen throughout the life of the project. M/WBE participation levels are reported semiannually to Turner’s board of directors.
Turner arranges payments to firms on a two-week basis, particularly for those that are not well financed, and addresses the issue of contractors not paying small businesses timely. Ben Kaplan, purchasing manager for Turner, explained that normally contractors pay their subcontractors within 35 to 45 days after completion of the job. Arranging periodic payments to M/WBEs eases the cash flow problem many business owners face.
Turner sponsors programs to encourage young people to become interested in construction careers and offers training for M/WBE owners. Turner’s elementary, middle, and high school program, Youth Force 2020, raises interest in construction careers and enhances building expertise.
In some cities, including Pittsburgh and Philadelphia, Turner offers a free eight- to 10-week construction management course for newly formed and established M/WBEs. Taught by experts in the field, M/WBE owners learn construction management techniques such as accounting, project management, negotiation, business planning, marketing, risk analysis, contractor-subcontractor relations, and ways their firms can enter into contracts with Turner. At most sites, an open session is provided for M/WBEs to discuss their experiences and techniques among themselves.
University of Pennsylvania’s Sansom Commons Project
Sansom Commons—a mixed commercial development project featuring large retail space, a bookstore, restaurants, and a hotel—is one of the University of Pennsylvania’s first concerted efforts at building partnerships with M/WBE vendors, community organizations, and minority residents. Ultimately, $19.6 million in construction awards were made to MBEs and WBEs, which represented nearly 45 percent of the contract value of the project. In addition, as of January 1999, minorities and women had worked over 33 percent of all hours worked on the job.
The Sansom Commons project was guided by the university’s early commitment that M/WBEs, local residents, and local businesses would benefit from the construction and employment opportunities the project created. University directors and project leaders sought to maximize M/WBE utilization and ensure that workers from the West Philadelphia area were included in the construction and operation phases. This commitment was manifested in bid documents and solicitations that asked contractors to provide M/WBE and minority worker participation estimates. University staff then evaluated the bids submitted based on three criteria: price, responsiveness to the bid package, and economic opportunities for M/WBEs and West Philadelphia-based businesses and residents. If a contractor submitted a bid that did not include appropriate participation levels, the university, the builder, and developer met with the contractor to develop ways to include M/WBEs in that project phase. This team approach proved effective in negotiating and committing to a set percentage of participation by M/WBEs. The university also developed advisory committees comprising elected officials, local pastors, university officials, Greater Philadelphia Urban Affairs Coalition representatives, and others who reviewed each contractor’s performance by analyzing monthly employment reports.
The university’s pre-apprenticeship program provided on-the-job training for minorities and women in the building trades. Herb Young, a representative of Turner Construction, the primary contractor for the Sansom Commons project, noted that unions supported Turner by identifying workers in the West Philadelphia area along with apprentices who could serve as helpers on the job site. The apprenticeship program allowed Turner to provide training to apprentices whom, if successful on trade exams, were sponsored for membership in the union. As of February 2000, more than half of the 60 apprentices trained had become members of local unions.
The university and the Urban Affairs Coalition monitored contractors’ use of M/WBEs and minority workers by examining certified payrolls and monitoring the actual number of workers at the job site and the number of hours worked.
Recognizing that the inability to obtain bonding prevents some M/WBEs from receiving contracts, the university linked prime contractors with M/WBEs to serve as an information resource on financing and bonding. In some instances, M/WBEs worked on the Sansom Commons project even if they did not have bonding, and ultimately were able to compete for other jobs throughout the city because of the initial opportunity the university provided. Jack Shannon, director of economic development for the University of Pennsylvania, cited an example of a fire protection contractor who came onto the job with no bonding capacity. “As a result of the work that her firm [did], . . . she now has sufficient bonding capacity where she successfully competed on other work, off the University of Pennsylvania campus and has successfully bid . . . on jobs involving the Redevelopment Authority,” he said.
The university has since tried to replicate its program in other projects in the city and has seen M/WBEs return to participate in other university-related projects and former apprentices join local trade unions. Because Sansom Commons was so successful, the university has instituted an economic opportunity program for all construction projects on the UPenn campus with a value of over $5 million. In this program, contractors selected for the job must agree to employ MBEs, WBEs, and local businesses and residents.
Southeastern Pennsylvania Transit Authority
Southeastern Pennsylvania Transit Authority (SEPTA) operates the nation’s fifth largest public transportation system, employing approximately 9,000 workers and purchasing about $1 million per day in goods and services. SEPTA is expected to spend $2 billion over the next five years in construction. Like the Sansom Commons project, SEPTA successfully included M/WBEs in the contracting process. It awarded an average of 44 percent of total prime contracts/procurements to disadvantaged business enterprises between fiscal years 1996 and 1999, representing over $67 million in business. This is over 21 percent of SEPTA’s total contract/procurement dollars spent in this period (see table 2).
SEPTA’s accomplishments can be attributed to the following:
It established a Small and Disadvantaged Business Utilization Department, which certifies firms as M/WBEs and monitors their participation in SEPTA contracts over $50,000. In accordance with U.S. Department of Transportation regulations, SEPTA must set an overall goal for disadvantaged business participation in transportation contracts. SEPTA established a 21 percent participation goal for M/WBEs using statistical information concerning availability of M/WBEs in the marketplace. Short of using set-asides to reach this goal, SEPTA is authorized to use various supportive measures to increase participation. Available options include arranging convenient times for bid meetings for M/WBEs, simplifying the bonding process or reducing bonding amounts, implementing an information program to announce contracting opportunities, offering supportive services to help businesses with record keeping and financial accounting, and distributing an M/WBE directory to potential prime contractors.
SEPTA advertised M/WBE goals in local papers and Transit Association journals and distributed bid documents for free to interested firms and Small Business Development Centers.
It provided bid documents to contract estimation classes held at Temple University to educate students about SEPTA’s contracting needs and procedures.
It recommended M/WBEs to other city agencies with similar requirements as SEPTA so that M/WBEs could increase their business opportunities across the region.
Using a directory compiled by its Small and Disadvantaged Business Utilization Department, SEPTA contacted M/WBEs to participate in pre-bid meetings.
Charles Gillean, a disadvantaged business utilization specialist with SEPTA, observed that pre-bid meetings have been a useful way to link contractors with M/WBEs and a process whereby firms can describe their qualifications and interest in participating in a particular job. He said:
[At each] pre-bid meeting, we make a point of having every DBE [disadvantaged business enterprise] . . . identify themselves and talk about their qualifications and their interest in participating in any particular job. I consider it to be a target-rich environment. Somebody in that room is going to get a multimillion dollar contract. And we make those DBEs stand up and talk about what they can do on [the project]. We don’t let anybody leave at that point either. I found it has been very effective in getting these people together [and] talking about the jobs.
Contrary to allegations by some contractors, Gillean observed that including M/WBEs as subcontractors does not increase the cost of a contract. Gillean confirmed that not only does adding M/WBEs not increase costs, they are sometimes lower than SEPTA’s own estimates. Once a contractor is selected, SEPTA monitors (on a monthly basis) ongoing contracts by tracking payments to M/WBEs and determining whether contractors achieve their promised goals for M/WBE participation. SEPTA requires contractors to provide copies of canceled checks to identify which M/WBEs are being paid. By routinely tracking payments to M/WBEs, the office is able to identify and rectify problems that arise. While the project progresses, SEPTA helps contractors locate additional disadvantaged businesses that could also participate in the project.
SEPTA Disadvantaged Business Enterprise Awards and Goal Attainment Data, FY 1996–99
Contract/Procurement Dollar Amounts
|Total||Awards to DBEs||% to DBEs||Total||Dollars to DBEs||% to DBEs||Goal over/ (under) 21%|
|Total/average in four fiscal years||1,052||459||43.60%||$308,876,913||$67,218,786||21.76%||1.7%|
Source: Southeastern Pennsylvania Transportation Authority, Report of DBE Awards and Commitments—DBE Awards and Goal Attainment Data, Quarterly and Year to Date Comparison Tables.
Emerging from the above descriptions are common elements in all three projects that enhanced M/WBE utilization and development. First, corporate leaders stressed the inclusion of M/WBEs early in the project and incorporated this commitment into the mission of the company. This led project leaders to set goals for M/WBE participation among the ranks and periodically report their results to corporate officials and persons in the field. Second, an adequate number of staff was allocated to work almost exclusively to enhance the company’s outreach to M/WBEs and the community. One outreach method used was frequent meetings among M/WBEs, prime contractors, and vendors. These efforts resulted in high M/WBE utilization, and helped eliminate negative views of M/WBEs and their limited access to business networks—two barriers identified in chapter 3.
 Valerie Ware, Turner
Construction Company, corrections to affected agency review draft, Sept. 28,
2001. See also Herb Young, director of community affairs, Turner
Construction, testimony before the Pennsylvania Advisory Committee to the
U.S. Commission on Civil Rights, forum, Philadelphia, PA, Jan. 14, 1999,
transcript, p. 131 (hereafter cited as Transcript).
 Ibid.; Ben Kaplan,
purchasing manager, Turner Construction, testimony, Transcript, p. 132.
 Kaplan testimony,
Transcript, pp. 116, 127–28; Young testimony, Transcript, p. 114.
 Kaplan testimony,
Transcript, p. 119.
 Hilton Smith, vice
president of community affairs, Turner Construction, telephone interview
with Marc Pentino, Eastern Regional Office, U.S. Commission on Civil Rights
(USCCR), Aug. 22, 2001.
 Jack Shannon, director of
economic development, University of Pennsylvania, fax to Marc Pentino,
Eastern Regional Office, USCCR, July 31, 2001.
 Jack Shannon, director of
economic development, University of Pennsylvania, testimony, Transcript, p.
 John Fry, executive vice
president, University of Pennsylvania, comments referenced in Honors and
Other Things—Almanac, vol. 46, no. 6, Oct. 5, 1999, accessed at
 Shannon testimony,
Transcript, pp. 155–56.
 Ibid., pp. 190–91.
 Charles Soloman, director
of economic development, Greater Philadelphia Urban Affairs Commission,
testimony, Transcript, p. 163.
 Ibid., p. 166. See
also Jack Shannon, telephone interview with Marc Pentino, Eastern
Regional Office, USCCR, Feb. 28, 2000.
 Jack Shannon, telephone
interview with Marc Pentino, Eastern Regional Office, USCCR, Feb. 28, 2000.
 Solomon testimony,
Transcript, p. 164.
 Shannon testimony,
Transcript, p. 157.
 These projects include a
movie theater and supermarket project on 40th Street and development of the
Civic Center site and the Children’s Hospital of Philadelphia. See
ibid., p. 160.
 Jack Shannon, telephone
interview with Marc Pentino, Eastern Regional Office, USCCR, Aug. 6, 2001.
 SEPTA serves the
Philadelphia metropolitan area with multi-modal transit services, including
buses, subways, commuter and light rail, trolleys, and customized services
for people with special needs. See SEPTA, “Message from General
Manager John K. Leary,” accessed at <http://www.septa.org/inside/gm.html>.
 Ibid. See also Charles
Gillean, disadvantaged business utilization specialist, SEPTA, testimony,
Transcript, p. 224.
 Gillean testimony,
Transcript, p. 225. The department has a reciprocal certification process
whereby firms certified by other transportation departments or transit
authorities can be automatically granted their SEPTA certification. See
49 C.F.R. § 26.45 (2001).
 Within each contract,
individual goals are developed depending on the subcontracting elements
described in the contract. Gillean testimony, Transcript, p. 228.
 49 C.F.R. § 26.51
 Gillean testimony,
Transcript, p. 230.
 SEPTA’s Disadvantaged
Business Enterprise Directory lists each firm’s services and contact
information. The directory can be accessed at <http://www.septa.org/business/dbe/ddbe.cgi>.
 Gillean testimony,
Transcript, p. 225.
 Ibid., p. 227.