Contractors of Color face an uphill battle without a recession. How will they fare with the federal stimulus projects?

Listen to: Contractors and the Federal Stimulus

Listen to: Contractors of Color 

(Update of a story originally published September 3, 2007; recognized in 2008 by the Associated Press of Southern New England for Investigative Reporting)

The nation’s first African-American President ran on the idea of change and Rhode Island will need plenty of it if contractors of color are going to use the Federal Stimulus to expand their share of construction projects.

Rhode Island is set to receive approximately $1 billion in funds from the $787 billion American Recovery and Reinvestment Act (ARRA also known as the Federal Stimulus). $137 million of those funds will go to RIDOT for transportation infrastructure projects.

Federal law requires that 10 percent of projects receiving taxpayer dollars from Washington go to Disadvantaged Business Enterprises. A company can apply to be a DBE if it meets the criteria of a small business and is at least 51 percent owned by a traditionally disadvantaged group. In the Ocean State, racial minorities share the “disadvantaged” tag with women and Portuguese Americans. Since DBEs are by definition small businesses, they usually depend on larger general contractors like Cardi corp. or Dimeo to subcontract work out to them.

A BRU News investigation in 2007 of Rhode Island Department of Transportation records found that, on average women-owned businesses took in seven percent of contracts, Portuguese-Americans earned three percent or more on average while African-American, Hispanic and Native-American DBEs received less than two percent combined and some years less than one.

According to Vanessa Crum, RIDOT’s administrator for Business Community Resources, the ratio of participation for “under-utilized” DBEs i.e. contractors of color has risen from two percent to three or four percent since 2007. Crum credits RIDOT’s efforts to connect general contractors with DBEs in addition to encouraging businesses to expand into related fields where there is high demand instead of “clumping” with other contractors.

“We have had an increase in minority participation,” Crum said, “African-American, Hispanic-American. We’re still working on Native American. But because of our Mission 360 program, which is our DBE-supportive services program we have been able to get more firms participating, firms of color participating.

“So we have had some improvement but it could be better.”

“Unclumping” businesses is particularly essential to expanding participation because RIDOT cannot set a DBE participation goal if there are no certified firms able to perform the work required.

For instance, when presented with an order for crack-sealing that had a DBE participation goal of 0.0 percent Crum responded that since there are no certified DBEs to perform that work, RIDOT cannot set a DBE participation goal.

Likewise, RIDOT cannot pad its participation statistics when entire projects are often done by DBEs alone.

Public works projects like roads, highways and bridges are all the more crucial to general contractors and DBEs alike as the private sector recovers from its economic hangover.

“Public sector is pretty much everything.” said Robert Desperini, President of Desperini Contracting Group. “I’m a union contractor so in the private sector there’s really not a lot going on because everyone’s looking for the public funds.

“Everything that we’ve been looking at for the last four or five months pretty much has been at the public level. And if it wasn’t for that, who knows where we’d be right now to be honest with you.”

Desperini has over thirty employees when his contracting group is running at full capacity. Right now he has eleven.

“Everyone’s in a tough situation,” Desperini said in an interview at his office in Woonsocket. “We’re all trying to make things work to keep the lights on here.”

According to Crum, Rhode Island’s $137 million in ARRA funds are expected to fund ten projects. The work focuses on the Ocean State’s bridges and highways; jobs that require large scale general contractors. As a result, DBEs will have to depend on larger companies to subcontract them.

“I’d say right now, no, the stimulus money is not working for us,” said Henry Hodge President of HCH Enterprises. “It may be out there but we don’t have access.”

Hodge’s Information Technology DBE has little to do with construction projects, but HCH may benefit from school upgrades and surveillance technology.

That is, if HCH can secure a contract or subcontract.

“A lot of the general contractors,” Hodge said, “request our assistance at the last minute, which of course being a small businesses we don’t have the ability to respond quickly enough actually to take advantage.”

DBEs interviewed in 2007 and 2009 often took issue with the fact that general contractors do not give them enough time to decide whether or not to devote resources to a project they have yet to do their due diligence on. Then, the general contractor can say that no DBEs were able to perform the work needed.

There have also been cases of DBEs being signed on to projects in order to meet DBE requirements, who were then not used (or paid).

Perennial budget cut-backs at RIDOT since the 1990s meant that when DBE field compliance officers left or retired they were not replaced. At one point RIDOT had just one compliance officer. (Although Crum added that resident engineers have been helpful eyes and ears.)

“If you go back 15 years ago.,” Crum said, “we were fully staffed (eight to ten compliance officers) and there was better compliance because we could cover more jobs.”

There are currently two compliance officers. ARRA funds will pay for three new compliance officers (ironically, Crum said RIDOT was inundated with incredibly thick resumes thanks to the current economic climate) bringing the compliance force to approximately half strength.

Another issue that is affecting contractors around the country, although it was not brought up by Rhode Island contractors, is how the funds are being distributed. Instead of creating an overarching federal program, the Obama Administration is dispersing the funds through pre-existing state programs.

John Macklin, The National Association for Minority Contractor’s (NAMC) Vice President for the Northeast Region, said in a phone interview that the different layers have created multiple levels of a trickle-down bureaucracy that minority contractors now need to negotiate.

“The money’s coming down from the Feds,” said Macklin, “to the states and then from the states to the local municipalities. So if you don’t have a mayor who’s compassionate and considerate of all businesses getting a piece of this then it’s going to be a select few that’s going to get it all.

“It’s just a select few that are benefitting from this whole process.”

The consensus of those interviewed by WBRU News is that it is too early too tell definitively whether the stimulus will correct previous racial shortcomings of the DBE system or continue business as usual. RIDOT has entered the bidding phase for the ARRA projects and will require general contractors to find DBEs once the low-bidders reach what’s called post-qualification or “post-qual.” Then RIDOT’s new compliance officers will see if those DBEs perform their agreed upon “commercially valuable” functions. When a project is 90 percent complete, RIDOT will assess the level of DBE participation.

In other words, it’s going to be awhile before contractors of color see the benefits or missed opportunities of the federal stimulus. But now is the time when they’ll have to fight for work within a system that has not historically provided enough of the “stimulus” contractors of colors seek to build their businesses’ capacity, comparatively speaking.

“It’s not not just a minority issue,” Desperini said. “It’s everyone’s issue.

“If (the Federal Stimulus) is not being put out the way it’s supposed to, then obviously it’s not helping the economy. Then we’ll all be sitting here in a year in the same situation and I don’t think anyone wants to see that happen.”