On Tuesday, August 11, 2015, former Houston Mayor Annise Parker proclaimed the day, Small Contractor Rotation Program Day, in the City of Houston.
That was the day the City of Houston Public Works and Engineering (PWE) Department, under the direction of PWE Director Dale Rudick, announced it was launching an innovative small business program, which was the first-of-its-kind in the state of Texas. The PWE’s Small Contractor Rotation Program (SCRP) was approved by Houston City Council in February of 2016, and this month marks the one-year milestone of this exciting program, designed to help small construction contractors better compete for construction contracts in the City of Houston.
The ten (10) participating firms that are a part of the inaugural program are small, minority and women-owned construction contractors: Ally General Solutions; Castec Construction; GCI Solutions; Kenall Inc.; OZ Building Contractors; PMG Project Management Group; Posey Construction & Development, Inc.; Preston Banks; SKE Construction, LLC; and Texas Pride Utilities, LLC.
The Small Contractor Rotation Program (SCRP) is a two-year race and gender neutral initiative designed to provide capacity building and assistance to small, minority and/or women-owned businesses, and assist the participants in their transition from subcontractors into prime contractors by improving their bidding skills, increasing their cash flow and understanding how to increase their bonding capacity, which will enable them to compete for City business.
Tony Henshaw, Manager of the Department of Public Works and Engineering’s Small Business Development Group, stated that they wanted to change the way the city did business, in that prior to the SCRP, small companies only worked with the City as subcontractors with larger firms.
“This is yet another way the Public Works and Engineering Department invests in our small business community,” said Henshaw. “Most small businesses aren’t doing work with us because they can’t get bonded; because they don’t have the banking relationship; and because the size of the projects that we (the City) put out was too large for them to participate.”
These projects with the City of Houston generally have strict financial, contractual and bonding requirements that are out of reach for the average small contractor.
Since approval by Houston City Council, the SCRP has provided and continues to provide training, coaching and education to the contractors with the help of their partners.
Since inception, the six (6) participating financial institutions and non-profit entities that helped get this program off the ground and moving, have been Advantage Business Capital, Houston Business Development, Inc., LiftFund, IberiaBank, PeopleFund and the bonding company, SureTec.
As partners in the City’s SCRP, these entities have been helping small contractors with everything from leveraging business cash flow, establishing healthy credit, bonding capacity and increasing the work performance history required to successfully compete for, and complete, city construction contracts in order to better transition them to prime contractor status. Additionally, the participating entities offer training, business guidance and financial coaching. Joining in the partnership with the Public Works and Engineering Department, which is spearheading the program, are the Office of the City Controller and the Office of Business Opportunity.
One of the anticipated benefits of the SCRP was to help the participants sharpen their bidding skills and increase their ability to compete for larger City of Houston projects. This enhanced skill is evident in the majority of the participating contractors and their ability to successfully compete for, and complete the work orders issued to them.
A total of ninety-five (95) work orders have been awarded since the first Request For Quote (RFQ) was sent out resulting in more than $1.4 million in awards, of which $149,412 was awarded as Council District Service Fund (CDSF) projects. The Program generated four (4) work orders in its first month totaling $40,567. As the Program progressed, the number of jobs generated in one month increased to 18 for a total of $278,442. This is a 450% increase in work orders issued and a 680% increase in dollar value. These improvements are attributed to the enhanced skills of the contractors as well as the earnestness of PWE personnel and their partners.
For continued facilitation of this growth, the contractors have access to internal Public Works and Engineering subject matter experts to assist them with understanding the bidding process. Since the range of internal coaching is limited, the Department has partnered with the Foster CM Group and the Houston Contractors Association (HCA) to offer more extensive coaching. This coaching has increased productivity. The contractors continue to build relationships with the financial partners for assistance with cash flow. As planned, these relationships provide educational opportunities and instruction on how to increase their working capital.
Additionally, meetings with the bonding company have helped them obtain and/or increase their bonding capacity. The one-on-one coaching has afforded the contractors an opportunity to work through those issues that have prevented them from getting bonded in the past. Per the contractors, coaching from the general contractors as well as the financial and bonding partners are a great benefit to their growth. The contractors continue to share their belief that the Program is innovative and provides them with an opportunity to take their business to the next level. They are encouraged to give feedback regarding pertinent aspects of the Program for enhancements.
In order to tackle the issue that these businesses faced, the City of Houston’s PWE Small Business Development Group, led by Henshaw, conducted in-house research to determine the obstacles preventing small construction contractors from transitioning into prime contractor status. The three areas of concern that were identified were 1) limited cash flow, 2) contract sizes being too large to manage and 3) small businesses having no bonding capability.
The research that was conducted led to the following process being developed to address the issues, as well as provide solutions to those areas of concern.
To deal with the issue of creating cash flow, the Department of Public Works & Engineering (PWE) identifies work order; the contractor completes the work; PWE inspects and approves the work; PWE authorizes payment to the contractor for the work order; the financial institution pays the contractor (within 3 days); and then the City Controller pays the financial institution by assignment.
To deal with the issue of assigning smaller work orders, PWE identifies small, manageable work orders for the contractors; PWE then makes a work order available to the contractors in the rotation; the contractors bid on the work order based upon best value bidding; the contractor successfully completes the work order and moves to bottom of rotation; then the contractor continues to perform well on work orders and continues to build reputable performance history.
To deal with the issue of improving bonding capabilities, the bonding company provides training at the onset of the SCRP discussing the requirements for bonding eligibility; the bonding company coaches and monitors the progress of the contractors over the two-year period; the bonding company develops a relationship with and acquires first-hand knowledge of the contractors’ business character and business practices; the bonding company becomes familiar with the contractors’ credit history and performance history; and then upon successful completion of the SCRP, the contractor becomes an attractive, limited risk, bonding candidate.
There are several categories of work available to pursue by the contractors such as Asphalt repair; Concrete panel replacement; Curb and gutter repair; Wheelchair ramps (per Americans with Disabilities Act Standards); Sidewalk repairs; Point repairs; Restorations; and Small diameter waterline repairs (although this list is not all inclusive).
The benefits of the SCRP include the contractors becoming prime contractors that actually do business with the City of Houston; attaining reputable performance and credit history; establishing relationships with surety, which creates increased opportunity for bonding upon successful completion of the SCRP; establishing relationships with the financial institutions, as well as obtaining a credit line for ongoing contracting opportunities; and acquiring partners who contribute to their long term success.
As it relates to advertisement of contract opportunities for the contractors, the City will advertise a Request for Qualifications (RFQ), and any interested contractors will submit their Statement of Qualifications (SOQ).
Once the small business has selected one of the participating entities, the small business is then placed in a queue, whereby they can be selected for city work orders on a specific rotation cycle. The work orders are usually small enough for the business to compete to provide the services, yet large enough to demonstrate its abilities to successfully complete the job per the requirements.
Henshaw and his team are looking forward to the conclusion of this first group of contractors, as well as their continued growth and success. There will be a graduation ceremony next February 2018, which is when a new group will begin as well. The selection process and criteria are:
Concerning the selection process for inclusion in the program, an evaluation committee reviews the statement of qualifications submitted by Respondents and evaluates them based upon the specified criteria. The evaluation committee selects ten (10) most responsible and qualified contractors to participate in the SCRP. The contractors selected are deemed pre-qualified to bid on work orders as they become available, and the contractors’ initial position in the rotation depends upon the ranking by the evaluation committee.
The criteria for being chosen to be a part of the SCRP are the following:
* Applicant must be certified as a Small Business Enterprise and listed in Office of Business Opportunity’s directory of certified companies
* Applicant must already work in the relevant trades
* Applicant must have two years of relevant experience with the public sector or at least five years of experience in private sector work
* Listed experience must be verifiable
The Department of Public Works and Engineering continues to heighten the benefits of this Program and provide the participating contractors with the tools necessary to help them compete as prime contractors. Diligently fulfilling the goal of “Building the City of Houston, One SMALL Contractor at a Time.”
For more information about the Small Contractor Rotation Program (SCRP), please visit the City of Houston Public Works and Engineering Department website at www.publicworks.houstontx.gov/director/sbdg.html.