FHWA Office of Civil Rights DBE Program Administration and Oversight on Projects with Alternative Contracting Methods Handbook

Presentation Team Martha Kenley FHWA DBE Program Team Leader Christine Thorkildsen FHWA Civil Rights Program Manager New York Division

Background Many questions from the field How to apply DBE regs in ACM?? HCR/HCC was addressing one by one We needed a Handbook Compilation of best practices/lessons learned Not guidance or requirements – Just some good ideas! To address the many questions HCR was receiving on how to administer and provide oversight of the DBE program in alternative contacting and procurement, FHWA created a handbook entitled: “Disadvantaged Business Enterprise (DBE) Program Administration and Oversight on Projects with Alternative Contracting and Procurement Methods”. The handbook was written to assist FHWA Division Offices in their oversight of the DBE program when sponsor agencies deliver projects through the design-build, or other alternative project delivery and procurement methods. The handbook is not guidance, but a compilation of best practices and lessons learned from staff who have implemented the DBE program in the alternative contracting and procurement context.

Background Workgroup: Offices of Civil Rights, Chief Counsel, Resource Center, Divisions, Infrastructure ACM DBE oversight from pre-award to completion Best practices/Lessons learned 19 projects – large and small RC and RN DBE programs Interviews/review of contract documents Fully reviewed by appropriate program areas, Chief Counsel and USDOT Workgroup: FHWA Offices of Civil Rights, Chief Counsel, Resource Center, Divisions, Infrastructure Chose 19 alternative contracting projects nationwide that were complete or near completion and had DBE participation Interviewed Project Staff to learn best practices and lessons learned in administering DBE in the alternative contracting context Handbook is tool for practitioners; not guidance

Status of the Handbook Content is complete Needs “cosmetic improvements” Issued summer 2018 Will provide: learning development opportunities Practical application (peer exchanges/technical assistance)

Outline of Handbook Background, summary tables and links to key terms and the projects Pre-Award Goal setting Contract documents Outreach/Education Post Award Monitoring CUF/GFE/Prompt Pay/Reporting Outreach Final Acceptance Documentation

What is Alternative Contracting?? How the project is procured, designed and built Anything other than design-bid-build New contracting methods as we speak No matter what method, keep with the intention of DBE regs Refers to how the construction project is procured, designed and built. On the most basic level, alternative contracting is another way of referring to highway construction contracting that is anything other than awarding a construction contract to a prime contractor based on low bid

Design-Build One entity Single contract Design & construction Best value Award at minimal design Design Build: Construction contract procurement where the owner/recipient/agency considers bids from design build teams and may award the contract based on the best value. The team both designs and builds the project

Construction Manager General Contractor (CM/GC) Also known as CMAR (Construction Manager at risk) Construction Manager hired at design phase Constructability input Helps owner design a constructible project ~75% design owner & CM negotiate GMP If acceptable CM →General Contractor Similar procurement and contracting as D-B-B allows an owner to engage a construction manager during the design process to provide constructability input During the design phase, the construction manager provides input regarding scheduling, pricing, phasing and other input that helps the owner design a more constructible project. At approximately an average of 60% to 90% design completion, the owner and the construction manager negotiate a 'guaranteed maximum price' for the construction of the project based on the defined scope and schedule. If this price is acceptable to both parties, they execute a contract for construction services, and the construction manager becomes the general contractor. The CM/GC delivery method is also called the Construction Manager at-Risk (CMR) method by state law in some states.

Private Public Partnerships (P3) Contractual agreement between public and private entity Brings in creativity, efficiency and capital Transfer responsibility to the Developer or Concessionaire to: design/build/finance/operate/maintain P3 could be a 40 yr+ project Non-traditional partners

Alternative Financing Transportation Investment Generating Economic Recovery (TIGER) Transportation Infrastructure Finance and Innovation Act (TIFIA) Private Public Partnerships (PPP) Innovative Project Delivery Project implementation that encompasses design, build, finance, operate, and maintain Typically involves multiple stakeholders beyond owner agency and the design-builder or prime contractor Can be public private partnerships

Discussion on Transfer of Risk Benefit of ACM for recipient is transfer of risk for design/construction This is not true for civil rights compliance responsibilities Recipient bears responsibility to ensure DBE program receives effective oversight

DBE and Alternative Contracting Alternative Contracting challenges: Ensuring intent of regulatory requirements are met DBEs have meaningful opportunities to compete New scenarios at time of award New partners Regulations and guidance structured around Design Bid Build (DBB) model Methods of project delivery have DBB model DBE in some Alternative Contracting poses challenges to Ensuring regulatory requirements are met DBEs have meaningful opportunities to compete

DBE Goal Setting Involve Consider Civil rights practitioners All stakeholders Consider Subcontracting opportunities Market area Available pool of DBEs Public input (same considerations as setting any goal!) Involving civil rights practitioners early and throughout the life of the project is key Goal on Design and another for construction assures opportunities in design will be considered up front. If one goal proposer might miss design opportunities and wait for construction due to startup “busyness” Goal Setting Involve civil rights practitioners Consider separate goals for design and construction Is goal based on sound principles: probable work items, market area, available pool of DBEs? Does the goal take into account all reasonably foreseeable subcontracting opportunities?

Goal Setting Design-Build Must consider the opportunities in design as well as construction Consider separate goals – one for design and one for build If D/B is not focusing on the DBE program at start of project, DBE opportunities in design could be missed

Considerations in Goal Setting

Goal Setting CM/GC Similar to D-B-B Goal could be set on design work if design has its own contract Separate goal for construction Selected proposer must submit utilization plan which meets DBE goal or show GFE why they could not

Goal Setting P3 D-B-F-O-M Projects with federal funding in operations and maintenance can set goals on that portion of the contract Most p3 do not Goal is set on D-B

Goal Setting TIGER Project Recipients of TIGER are sometimes “non-traditional” If awarded to STA – DBE goal If awarded to sub-recipient thru STA – DBE goal If awarded to directly to non-STA – NO DBE program requirements

Goal Setting Lessons Learned Understand where the funding is coming from and how it is being used Document your process to determine the goal Use credible data Beware of political pressure One goal or two in D-B Include input from stakeholders Document goal setting process Base goal setting on data not political or stakeholder pressure Consider setting goals on professional services portion or may only get DBE participation in construction—lost opportunities Input from stakeholders

Pre-Award Documents RFQ – Request for Qualifications ITP – Instructions to Proposers RFP - Request for Proposals PMP – Project Management Plan DBEPP – DBE Program Plan

RFQ Filters to a “short list” of qualified proposers Possible factors of evaluation: Past DBE program compliance May notify bidders Project will include DBE goal DBE Plan will be required Link to DBE directory to begin utilization plan Recipients use responses to RFQs to “short list” proposals by evaluating factors such as innovation, previous work history, bonding capacity, and DBE program compliance. Typically RFQs: Notify bidders to submit their professional qualifications May notify bidders that DBE will apply; plan will be required with proposal; include link to DBE directory As the project sponsor and/or Civil Rights practitioner you should advocate for language in the RFQ that supports future success of DBE program.

RFP Project requirements and details – Including all DBE program requirements Include civil rights staff in review of RFP Most successful projects Details of DBE requirements Requires DBEPP at time of proposal DBE portion of proposal is given score Outreach events by proposer Encourage local businesses and state’s MWBE programs

ITP Projects that gave DBE portion a score Proposer had to certify they were aware of the goal and will comply with DBE requirements Commitment at time of award or must show GFE Separate goals (D/B) – DBE Plan for design and 50% plan for build (or GFE)

DBEPP Contractor’s Plan Required as part of proposals or after award Maintaining DBEPP continues thru life of project – details in RFP Successful projects Anticipated commitments →actual commitment Requires types of work and dollar value expected D-B has CR team Monthly progress meetings If anticipated is not achieved GFE finds another opportunite

PMP Project Sponsor’s plan Successful projects Details of how oversight will be achieved Data collection system Sanctions

Pre-Award Findings Not involving Civil Rights Specialists early in the contract DBE oversight and compliance is complicated – details in contract language is essential Projects move fast and accumulate enormous amount of data – be ready! Watchout for tiering of subcontracting

Outreach Early involvement Partnership Visible leadership Transparent goal setting Targeted outreach to meet objective Leverage resources - DBESS

Post Award Monitoring Commercially Useful Function reviews Prompt Payment Good Faith Efforts Enforcement

Monitoring Goal Achievement Continual running tally Well documented process of oversight Utilization of sanctions when warranted Regular meetings Elevate importance of compliance in beginning of project

Innovative Program Compliance If additional resources are necessary by the owner Paid for by the contractor/developer Elevates the importance of accurate, timely, complete information/documentation/data by the contractor/developer

CUF Know when DBEs are working Request “Look Ahead Schedule” in RFP CUF final approval from public agency Don’t make overly burdensome May need additional resources PE firms – same process Use skype, internet, other resources

Prompt Payment Multiple layers of subcontract tiering Make sure electronic data system can monitor tiering Contract structure may not pay prime regularly Address in RFP when payments will be due to lower tiers, even when prime is not paid

Embracing Technology Electronic data collections systems RFP must require Training Overreliance without accessing Specify reasonable access – prime/sponsor/subcontractors

Enforcement Documentation Lack of prompt follow-up Timely, solid, accurate and complete monitoring→ Effective enforcement Motivation to fulfill DBE obligations

Final Acceptance & Beyond Federal funds in operations and maintenance? Maintain a list of lessons learned Applying risk based approach on future projects Serves to justify rationale for making implementing new requirements Shared responsibility and teamwork results in an overall better project

DBE in Final Acceptance Keep running tally by comparing ongoing payments to commitments Use software if possible; require prime to use owner’s online reporting tool Create a documented process for certifying project-level compliance

DBE Challenges in ACM Goal setting Identifying DBEs with minimal design plans Monitoring commitments Determining GFE Providing effective oversight Working with non-traditional partners In some alternative contracting methods, it can be challenging to: Identify specific DBEs prior to award when design is 30% complete Determine when Good Faith Effort determinations should be made Provide effective oversight and ensure compliance with multiple and non-traditional partners

DBE in Alternative Contracting Questions?