Increasing Historically Disadvantaged Participation in Infrastructure Contracting
October 28, 2022|Robert Puentes
The bi-partisan Infrastructure Investment and Jobs Act (IIJA) is lauded for delivering necessary funding to a range of projects. Specific projects, programs, and priorities have been highlighted that demonstrate the need to upgrade, modernize, and maintain our nation’s infrastructure. Through that spending, the law also has the ability to support historically underserved communities and businesses. Not just through the investments themselves (as laid out in the Administration’s Justice 40 Initiative) but through the contracting opportunities that these investments generate.
A new and important initiative—the Equity in Infrastructure Project—was launched to help firms do just that. The mission of the EIP is to build generational wealth for diverse entrepreneurs and workers, especially in underserved communities. The idea is to partner with a range of entities responsible for directing infrastructure funding—cities, states, regional agencies, ports—to create more opportunities for “Historically Underutilized Businesses (HUBs)” including Disadvantaged Business Enterprises (DBEs), Minority and Women-Owned Business Enterprises (M/WBE), and Small Business Enterprises (SBE), and others.
The EIP is led by Phil Washington, the head of the Denver International Airport (and former Eno Board member) and John Porcari, former Deputy Secretary and Chief Operating Officer of the U.S. Department of Transportation. But the ambitiousness of the EIP is only as good as the partners that commit to its goals, and that’s why a recent meeting in Washington was so noteworthy. The heads of six state departments of transportation—California, Illinois, Kansas, Louisiana, Michigan, and the District of Columbia—each spoke about their commitment to the goals of the EIP and signed a pledge to hold themselves accountable for doing so by measuring their progress through 2025. That timeline mirrors the Biden Administration’s goal of boosting the share of federal contracts that go to disadvantaged businesses.
There is a well-known existing policy at the U.S. DOT that sets a statutory goal that not less than 10 percent of federally-assisted contracts go to DBEs. However, that provision is framed narrowly and intended mainly to ensure minority owned firms were “not disadvantaged by unlawful discrimination” and has the unintended effect of limiting DBEs to subcontracting roles or sectors of work. The narrow DBE goal also means that the firms that are able to be certified tend to remain there for a long time, which has the effect of blocking the entrance for new DBEs. Indeed, one comprehensive study found that DBEs that work with state DOTs rarely grow to the level where they no longer qualify as disadvantaged and “graduate” from the federal program.
The EIP is different because it builds on the existing provisions by focusing on increasing the level of underutilized business participation in contracting as both primes and subcontractors, as well as removing barriers that prevent firms from participating in the first place. A recent report from Drexel University shows that institutional barriers, lack of access to capital, and process delays are the most significant hurdles that hinder growth of DBEs. Further, the federal program is not standardized across the country which means that—although there has been progress in states collaborating on certification—small businesses still must go through seperate processes in each state they wish to work.
A Notice of Proposed Rulemaking to strengthen implementation of the U.S. DOT’s DBE program through better data collection, certification, and process streamlining was issued this past summer. In the meantime, it is up to the recipients of federal infrastructure fund to take advantage of the opportunity to support underserved communities and Historically Underutilized Businesses.
(Ed. Note: While this article was waiting to go to press, AASHTO adopted this REDI resolution at its annual meeting.)