DBE Has Discounts

January 26, 2007
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GRAND RAPIDS — Although the name, purpose and requirements of the city's Equal Business Opportunity Construction Policy have been altered, contractors still can receive discounts on the bids they make with the city for publicly funded projects.

Commissioners approved the new policy last week, which switches the city's focus from company ownership by race and gender to businesses that are currently disadvantaged in the construction industry. The change was made necessary because voters ratified Proposal 2 in November, a statewide measure that prohibited race and gender preferences from being used in hiring and in awarding contracts in the public sector.

The new city policy has been welcomed by the local construction industry, a group that gave input into its formation.

"Our next step is to provide the contracting community with the details," said Lauri Parks, a developer in the city's Equal Opportunity Department.

The city's new construction policy, known as the Disadvantaged Business Enterprise program (DBE) emulates the guidelines offered by the Small Business Administration, a federal agency. A qualified DBE is defined as a socially and economically disadvantaged entity, but most often categorized as a small business.

"It's not limited to a minority- or woman-owned business. They are small businesses," said Mayor George Heartwell.

The city's main purpose behind the new program is to help disadvantaged businesses find more work through construction projects managed by the city that involve at least $10,000 of public funds. And general contractors that previously were awarded discounts on their bids for using minority- and woman-owned companies as subcontractors can now collect similar discounts by including city-certified disadvantaged firms in their bids.

The potential discounts range from 1 percent to 5 percent, a figure based on the percentage of DBE participation in the bid. Participation ranges from 1 percent for a discount of 1 percent to 18.01 percent for a discount of 5 percent.

In addition, contractors who can prove to the city that they have made a commitment to equal opportunity employment practices and to using DBE firms in private sector projects will be eligible for discounts ranging from 1 percent to 2 percent in both cases.

Larger general contractors can earn a 1 percent discount by participating in a mentoring programming endorsed by the city.

"That has always been a race-and-gender-neutral program," said Parks.

The city moved from a race-and-gender-driven percentage-of-involvement program it adopted in 1976 to an incentive-laden participation policy in 2004. The newest policy puts an emphasis on income, location and size of a subcontracting firm. And it's likely that many of the minority- and woman-owned businesses that were certified by the city under the 2004 program will also qualify for inclusion in the new DBE program this year.

"We're not doing anyone any favors except ourselves for having diversity," said Rick Tormala, 2nd Ward city commissioner. "By endorsing diversity we're becoming a better community."

First Ward Commissioner Roy Schmidt offered high praise to the local construction industry for joining with the city to create the new policy that meets the standards set by the federal government and doesn't violate the amendment that Proposal 2 added to the state Constitution.

"The contractors could have walked away from the problem," said Schmidt, "and not have pitched in."    

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