California Department of General Services’ DVBE Incentives – Is There a Better Way?
By Jim Ryan
AGCSD EVP 

AGC San Diego’s Monday Morning Quarterback has editorialized against, and AGC has lobbied against, a proposed incentive program that the State Department of General Services is considering that is supposed to assist certified Disabled Veterans Business Enterprise (DVBE) Firms in securing construction contracts that are funded with public funds. A law was passed two years ago and signed by the Governor that required Department of General Services (DGS) to come up with incentives to support DVBE in securing state contracts.  The details of the incentive program were left by the Legislature to the DGS.  The concept DGS is now proposing will not work in the construction industry.

A hearing is scheduled by DGS in mid May in Sacramento to allow comments on an incentive program that includes the following provisions:

·         Departments that have not met the DVBE 3% goal on construction contracts 2 out of the last 3 years are required to place an incentive of 1%-5% on each project out for bid.  The way they envision this working……using a $10,000,000 project as an example.

·         The agency awarding the project has not had a great deal of success with attracting DVBE bidders in the past.  The agency’s director decides an incentive of 5% is necessary to help the agency achieve a 3% or more DVBE participation level on the project. 

·         Bids are accepted on the project.  Bidder A bids $10,000,000 but only has 2% DVBE participation.  Bidder B bids $10, 499,000 and has 3% DVBE participation.  The agency will award to Bidder B based at $499,000 over the low bidder’s bid because the low bidder did not secure the 3% DVBE participation!!!!

Those of us that have been around the construction industry are skeptical of this type of incentive.  Basically, versions of it have been tried by public agencies for minorities, women, and others for a few decades.  Our impression is that they have a history of not working.  General Services has gone out of their way to avoid the industry’s input into the incentive.  They seem to want a system in which they can “subcontract” the problem to the construction industry.

Ok…let’s consider this….and I am asking MMQB readers to reply directly to me….at jryan@agcsd.org with their comments in support or in opposition to the following idea.  (At this point, this is just an idea and does not represent AGC San Diego’s position on the issue!)

Why not leave the industry out of the incentive loop?  Why not require the public entities involved to find the DVBE firms that are available to bid on the projects……have the public entities incentivize these firms with a 25% bonus if they are the successful bidder on a project…..so if a DVBE bids $100,000 to a general contractor as a subcontractor on a project and is the listed low bidder…the public agency involved will award a $25,000 bonus to the DVBE ….the DVBE could have used the bonus to make the DVBE’s bid more competitive, or if that was not necessary, to improve the DVBE’s “bottom line.”

The DVBE should be a firm that self performs at least 50% of the proposed subcontract work on the project……this will protect against firms using the incentive inappropriately.  This takes the prime contractor out of the middle of the incentive and the incentive goes directly to the DVBE firms that the legislature intended to incentivize.

…the problem with the incentive concept that DGS is considering…. they want to write the rules and step back and let the construction industry figure out how to finance the incentive.  If it doesn’t work, they want to be in a position to penalize the industry.  Obviously, that makes the entire program very complicated.  DVBE’s probably deserve a program like this….but all of the taxpayers in the state should participate in helping them…not just the contractors.  DGS should have the responsibility to work directly with the DVBE community to help them grow and prosper. 

Social engineering through construction contracts is not a good idea and will not work.

Anyway……we again invite our readers to comment on this concept!             

 

 

Legislature “Kicks Into High Gear”

By Brad Barnum, Vice President Government Relations

 

Dave Ackerman and Paul Gladfelty, AGC’s Legislative Advocates, phoned in to AGC San Diego’s Government Relations Committee last week and reported on the activities in our State’s Capitol.  With the State Legislature taking its “Easter Recess” this week, we thought it would be a good time to summarize their report and review some of the top construction-related issues:

 

Infrastructure Bond Appropriations:  Voters overwhelming supported State Propositions 1A-1E in November; however, the allocation of funds from the $37 billion bond package still needs legislative approval.  The San Diego region is in line to receive $451 million, and AGC will encourage legislators to approve the allocations and will support efforts to expedite the design of projects in preparation for bid.

Air Quality:  Legislators are being pressured from different interest groups to attach conditions or requirements in order to receive bond funds.  As an example, some are pushing to require contractors to use specific “clean” construction equipment if they bid any work funded by the bonds, and they are asking the Legislature to require air quality improvements to be the primary consideration to qualify projects for selection.

Project Delivery Methods:  15 pieces of legislation have been introduced pertaining to project delivery methods associated with the bond funds.  Design-Build authority tops the list; however, there are several bills related to public/private partnerships.  AGC San Diego and AGC San Diego have established a Public Works Procurement Task Force, and AGC San Diego has formed an Alternative Project Delivery Methods Task Force to help develop positions as these and other bills move forward.

Payment Bond Claims:   AGC has sponsored legislation (SB 738) that will require suppliers and sub tier subcontractors in public works projects to give a preliminary notice to be able to file a payment bond claim.  Current law has allowed suppliers/sub tier subcontractors to seek payment from the prime contractor after the prime has paid all the bills (as required by prompt payment laws), and this legislation will eliminate that “second bite of the apple”.

Construction Defect:  AGC continues to oppose attempts by the American Subcontractors Association (ASA) to eliminate Type I Indemnity agreements in commercial construction contracts.  AGC is committed to work with ASA on seeking consensus legislation to address the construction liability issue.

Liquidated Damages:  AGC is co-sponsoring legislation (AB 1076) that will allow liquidated damages to be waived pending the outcome of a challenged citation before the Department of Industrial Relations.
 

We can expect a lot of action on these and the other hundreds of bills that have been introduced when the State Legislature reconvenes on April 9.  We will keep you posted as our legislative advocates continue to “educate” legislators on our issues. 

 

 

Engineering General Contractors’ Council to Meet with SANDAG and Caltrans Leaders – All AGC Members are invited…no charge and a free lunch!

Tomorrow (Tuesday, April 3) at 12:00 Noon, AGC’s Engineering Contractors’ Council will hold its first meeting of 2007. 

Scott Erreca (Erreca’s, Inc.) is the new chair of the Committee, which provides policy recommendations to AGC’s Board of Directors.  This is a timely meeting, as the issues to be addressed relate to transportation funding.  Special Guests will be Gary Gallegos, Executive Director of the SANDAG, and Pedro Orso Delgado, Director of Caltrans District 11.

We will review the recent actions of the California Transportation Commission to allocate $451 million of work on I-5, I-15, & I-805.  The construction timeline for these and other projects (and the potential delivery methods), legislative actions pertaining to Proposition 1B implementation, sizing of projects, future funding needs, and an update on TransNet will be provided.  Of course, we will continue to express our concerns about the proposed diesel emission regulations!

All AGC members are invited to attend this important meeting.  We have attached a reservation form for you to complete and fax back to the AGC.  We hope you can make it tomorrow! 

 

New AGC Employees

We are pleased to announce two new employees are joining the AGC staff effective immediately.  Ryan Famularo, a recent graduate of the University of Colorado in Boulder has been named the AGC San Diego Professional Development Coordinator.  Ryan will be responsible for coordinating all AGCSD Education, Training, and Safety classes, assisting Safety Director Sam Iler in staffing the AGC Safety Committee, and assisting Jim Ryan with labor negotiations.  Welcome Ryan!!!

AGC is also pleased to announce the appointment of Amy Mullen as the new AGC Accounting Manager.  Amy attended Boston College and brings over 15 years of accounting experience to AGC.  She will have complete responsibility for all AGC accounting functions.  Welcome Amy!!! 

 

April AGC Mixer- Tuesday, April 24th

AGC member, RCP Block & Brick will be hosting the April 24 Mixer at Seau’s the Restaurant. As they did last year, RCP Block & Brick is joining together with their special vendors for this sponsorship. AGC attendees must pre-register by completing the attached form and faxing it to 858-558-8444. 

Remember, mixers are great events to bring your estimating, purchasing and project management staff to mingle with others in the industry.  Don’t forget to bring your business cards!

For additional information, contact Rae Krushensky at 858-731-8175 or see attached flyer

 

“AGC Education & Training….Building a solid Foundation”

UPCOMING AGC CLASSES 

Construction Education Classes - April
EM 385-1-1 – Apr 5 & 6- THIS WEEK
Mechanic’s Lien Law April 4 – THIS WEEK
Construction Project Mgmt (Cert Course) – Apr 10
Managing Construction Risks – Apr 10
Supervisory Training Program – Apr 12
Project Engineering – Apr 24

SAVE THE DATE
NAVFAC CQM – May 8 & 9
Construction Estimating Bootcamp – May 9

Safety Training Classes - April
OSHA 10-Hour – Apr 14 SATURDAY
Fall Protection – Apr 18
CPR/First Aid – Apr 25
Spanish OSHA 10 Hour – Apr 27

SAVE THE DATE
Crane Awareness – May 16

 

APRIL
April 3 – General Engineering Contractors’ Council – 12 Noon
April 4- Safety Committee Meeting- 7 AM
April 10- HR Committee- 11 AM
April 17 - Foundation for Success – 12 Noon
April 18 – Public Building Liaison Committee – 7 AM
April 19 – Specialty Contractors’ Council- 11 AM
April 20 – Caltrans – 7:30 AM (@ SANDAG) -- Please note: time and location change
April 24 – Navy Liaison – 11:30 AM
April 26- Meetings & Events Committee- 12 PM

 

UPCOMING AGC EVENTS
April 16- AGC 18^th Annual Spring Golf Tournament- SOLD OUT!
April 24 – AGC Mixer Seau’s Restaurant
May 31- June 3- Spring Conference in Napa
November 1 - Build San Diego Awards