Unlike other states, Idaho only has one state agency with a special program aimed at increasing the number of government contracts awarded to firms owned by women, minorities and veterans.
The Idaho Transportation Department’s Disadvantaged Business Enterprise program, which is required by the federal government, sets certain goals for what percentage of each construction project must be awarded to registered businesses owned by groups designated as disadvantaged. This only applies to programs funded with any federal dollars.
According to a BoiseDev analysis of five years of contracting data, only seven companies currently listed as disadvantaged businesses were awarded contracts of their own during this period, and the agency is not currently meeting its goals. The over 600 other contracts awarded to these businesses came in smaller subcontracts, with just four companies raking in half the funds awarded through the disadvantaged business program to subcontractors over five years.
For some, this late-20th-century program is a way to correct centuries of racism, sexism, and other barriers that social science research says have made it more difficult for these groups to accumulate wealth at the same rate as their white male, non-veteran counterparts. But for others, it’s a program that unfairly rewards a small number of business owners with lucrative government contracts and adds extra cost and red tape.
Governor Brad Little’s press secretary Madison Hardy did not respond to an email inquiring about why Idaho doesn’t have a state-run disadvantaged business program of its own outside of federal requirements and Little’s thoughts on these types of programs in general.
BoiseDev took a look into the data behind this in Idaho, how it works, and heard from contractors in the construction industry, both in and out of the program, on how they say it impacts their companies.
How does it work at ITD?
The disadvantaged business program came to ITD from the federal government in 1982.
This program is required in order for ITD to access federal transportation dollars and has goals overall for the agency to meet for awarding contracts and goals for individual projects with federal funds as well. Right now, ITD aims to award 10% of its contracts to disadvantaged businesses.
A regular progress report on the DBE program filed by the department at the end of November said ITD fell short of its goal and awarded only 6.4% of its contract dollars on federal projects to disadvantaged businesses in the latest reporting period. According to the progress report, 82% of the $35 million awarded to disadvantaged businesses went to businesses owned by white people. Latino-owned businesses took in $5.3 million worth of contracts during this time, while Native Americans had the smallest contract amount with $8,569.
Jessika Phillips, ITD’s Office of Civil Rights program manager, said the goals are determined based on a variety of studies and processes that examine the demographics of the state, who is working in construction, what businesses are out there and who is getting jobs to determine an appropriate benchmark. She said the goal of the program is to help groups like women, minorities, and veterans who are underrepresented in the construction industry increase their share of contracts.
“The State of Idaho has a large white population, so that is what we see with the majority of on our construction projects, but we still want to move forward into representing the population demographics in the state as a whole,” she said. “We’re trying to bring those minorities and those females up to be more representative of the state’s population.”
ITD’s goals for contracts for disadvantaged businesses are based on disparity studies conducted every five years. These studies are meant to examine if there’s a difference between contracts women and minority-owned businesses receive and how much work they should be available to do based on population and their availability in a state.
There is currently a disparity study underway, but the last one completed in 2017 estimates women and minority-owned businesses are available to complete 17.9% of ITD’s construction contracts. Native American businesses and white women-owned businesses had the most availability, with 11.6% and 5% availability, respectively.
To qualify as a disadvantaged business, entrepreneurs must submit their tax information, information about their business, and items proving they were socially and economically disadvantaged. Then business owners must go through an in-person interview process showing they have total control of the business, are familiar with all of its operations and the industry itself. Staffers also visit the company’s equipment yard or office to see their operation in person.
Phillips said this helps root out situations where someone is putting a business in their spouse’s name or using some other run around in order to get disadvantaged business status.
By the numbers
Only a fraction of ITD’s roughly 270 disadvantaged businesses earned what are known as “prime” contracts in the past year. This is where the company takes the lead on a project instead of being a sub-contractor completing a small portion of it for another company.
According to an analysis of data on contracting obtained in a public records request, only twelve of the 589 prime contracts awarded in the past five years have gone to currently registered disadvantaged businesses. And of those, Utah-based Coldwater Group bridge rehab company and Coeur D’Alene-based industrial lighting company Thorco Inc had seven of them.
However, the bulk of the disadvantaged businesses registered with ITD work as subcontractors, giving general contractors enough of a boost to hit ITD’s goals of awarding contracts to disadvantaged businesses to satisfy requirements for federal money. Projects will have goals for these minority, women and veteran-owned businesses, which require general contractors to usually get subcontracts from a few disadvantaged businesses to be eligible for the job and not lose out to their competitors.
An analysis of the last five years of DBEs who received subcontracts reveals a similar pattern of a fraction of the department’s disadvantaged businesses taking in the bulk of the money. Of the roughly 270 disadvantaged businesses ITD has registered, only about a fifth of them even received a contract in the past five years.
During this period, disadvantaged businesses were awarded $119 million in subcontracts. Combined, companies Thorco, Idaho Traffic Safety, guard rail company All Rail, and Curtis Clean Sweep were awarded half the contract value. Curtis Clean Sweep alone had 116 contracts.
Dr. Ana-Maria Dimand, a professor of public policy at Boise State University, said data from across the country shows mixed results with agencies meeting their disadvantaged business goals. She said generally, Idaho has not met its benchmarks, but whether or not these programs are successful is more complicated than simply if an agency awards enough contracts to disadvantaged businesses.
“I believe that programs like these are important policy tools,” she said. “Investing in technical resources assistance and in engagement programs towards this business sector as the (Biden) administration intends could be helpful to support DBEs grow and be competitive on the marketplace.”
What’s a ‘good faith effort’?
Not everyone loves the disadvantaged business program.
Some contractors, either general contractors who are trying to meet disadvantaged business goals on their projects to get work or sub-contractors who have to compete with disadvantaged businesses, say the program allows a small number of businesses to dominate the market and charge higher prices for their work.
Jack Snyder, with Western Construction, has been trying to fight the disadvantaged business program for decades. He calls it, and the associated goals for projects with federal money involved, a draconian policy that forces prices up on projects because ITD will select any contractor who has met the goals even if they’re bidding hundreds of thousands higher than someone else.
And for his company, he says the requirement to hire subcontractors from the disadvantaged business list means Western Construction does less work on jobs they were hired to do.
“We’re a general contractor and self-perform this work,” he says, sitting in his Federal Way office on a snowy November day. “The expectation is (ITD doesn’t) care; we still have to get the goal even if we’re giving up work we normally do. We have huge investment in equipment, and their attitude is ‘you have to park the equipment and hire a DBE.’”
Snyder pointed to situations where bidders were deemed “irregular” because instead of hiring disadvantaged businesses for subcontractors to meet the goal the company submitted a form demonstrating they made a “good faith effort” to try and meet the goal but were unable to. He says although the program says the disadvantaged business program is a goal, it effectively operates like a quota where if you don’t hire specific subcontractors your bid will be thrown out by ITD no matter how low it is.
One example he provided was a recent bid from Nampa Paving & Asphalt Company for a job in Payette County, where he says the company was deemed “irregular” due to their good faith effort not being enough. Their bid of $2.2 million for the job was rejected in favor of a $2.7 million bid from Central Paving Company instead.
Phillips said although the companies have been ranked, the contract hasn’t officially been awarded so she can’t speak to the specifics and public records are not yet available to see the company’s paperwork.
But she said generally a good faith effort from contractors entails lots of documentation that they reached out to multiple disadvantaged businesses in multiple ways, assisted them to break up work items and adequately described their process. They have to submit email chains, call logs and other documentation of their efforts.
ITD spokesman John Tomlinson told BoiseDev said if a disadvantaged business bidding on subcontracting work names a price unreasonably high, the contractor can turn them down and use this as part of their justification they made a good faith effort to meet the goal. But just because hiring a disadvantaged business costs more to hire doesn’t mean it’s grounds to say no.
“Under the good faith effort guidance, the regulation states ‘the fact that there may be some additional costs involved in finding and using DBEs is not in itself sufficient reason for a bidder’s failure to meet the contract DBE goal, as long as such costs are reasonable,’” he wrote in an email.
‘It’s not something that’s just handed out’
In seven years, Jordan Winspear’s company went from a 400-square-foot garage to an office space with a new addition and 50 employees.
The service-disabled veteran of the United States Coast Guard launched his business Winspear Construction in Boise and eventually went through a yearlong process to become a disadvantaged business contractor with both ITD and the federal government. He said the process required him to undergo lengthy interviews about his knowledge of the business and provide years of documentation about times his disability held him back.
“With my PTSD and different disabilities, I do have different things that have happened that have held me back,” he said, taking a break between construction site visits. “It was things like not advancing faster or being held back because of having to leave to go to the doctor and the comments that are made when you’re having to leave every other month or every other week to take care of your issues. It’s almost the same discrimination anybody else has as far as people making comments about why you’re always leaving.”
Winspear said disadvantaged businesses often have to deal with larger general contractors trying to make deals with subcontractors so they can meet a disadvantaged business goal to get a job who then turn around and do the work themselves to not pay the disadvantaged business. He said when he first started out it was important that he asserted himself to ensure he was paid for every job his workers completed and stood up to the larger companies.
He said contractors can meet their goals for disadvantaged businesses in a variety of ways, and if a subcontractor isn’t doing solid work or charging too high prices they can go elsewhere. And if competing businesses who aren’t in the program are frustrated, they should try to put up more competitive prices or make other changes because disadvantaged businesses aren’t guaranteed work.
“I think it comes down to how much you put into this program is what you’re going to get out of it,” he said. “It’s not easy, and it’s not something that’s just handed out.”