Small and very small businesses earned 30.2% of the total the Port of Long Beach spent on contractors and vendors to support its international trade operations during the past fiscal year.
The amount, nearly $37.5 million of $124.2 million the Port spent on construction, consulting and purchasing, represents the highest percentage to date of Small Business Enterprise/Very Small Business Enterprise participation in Port projects. The Port also beat its own goal of 27% SBE/VSBE participation.
The numbers are an important measure of the Port’s success in meeting longtime goals recently reaffirmed in its newest Strategic Plan. These include broadening community access to Port-related opportunities and fostering a diverse, high-performing workforce.
“Building and sustaining an inclusive economy is part of our commitment to operational excellence, equity and community engagement,” said Port Executive Director Mario Cordero.
“Increasing diversity and opening up business opportunities is a high priority for our Board,” said Long Beach Board of Harbor Commissioners President Tracy Egoscue. “Over the past 15 years, we have steadily increased our goal for small business participation in Port contracts, and we’re pleased to see that last year we exceeded that goal.”
The latest results are summarized in the Port’s SBE/VSBE Program Fiscal Year 2018 Annual Report, released in May. The award-winning program is dedicated to ensuring qualified small and very small businesses are aware of opportunities to compete for Port contracts and how to participate in the process.
What constitutes an SBE varies widely depending on the industry. According to current federal rules set by the U.S. Small Business Administration, general contracting construction firms may qualify if their average annual receipts total $36.5 million or less; professional, scientific and technical firms may have a maximum of $7.5 million to $20.5 million in average annual receipts; or manufacturers with 1,000 to 1,500 employees may be eligible. A VSBE is a business with $5 million or less in annual gross sales averaged over the last three fiscal years, or a manufacturer with 25 or fewer employees.
Getting that information out, along with other key elements of the Port’s SBE/VSBE Program, is critical. “Outreach is the lifeblood of our program,” said Port SBE/VSBE Program Administrator Sashi Muralidharan. “Many companies aren’t aware they are eligible until they attend one of our outreach events.”
Port contracts recently awarded to SBEs and VSBEs include a three-year air quality consulting contract to M.S. Hatch Consulting, LLC. Based in Irvine, the woman-owned engineering firm specializes in air quality permitting and compliance, regulatory planning, and sustainability management.
Principal Massie Hatch, a licensed professional engineer, learned about the Port’s SBE/SVBE program through its outreach to the Society of American Military Engineers. This paved the way for Hatch to obtain SBE/VSBE certification for her firm, which in turn led to work with the Port – first as a subcontractor to a larger prime contractor in a previous round of bidding, and now as a prime contractor.
“Initially I was concerned that the level of effort needed to compete for a Port contract would be significant, but I was pleasantly surprised it was streamlined and very manageable for a small business,” said Hatch, whose work with the Port has helped her expand her company’s portfolio of clients and contributed to its growth from three to nine employees. “The Port’s SBE/VSBE program is a great opportunity for companies like mine to get a shot at major projects that are interesting and exciting and build our business.”
Began in 2004
The Port’s SBE/VSBE Program dates back to 2004, when then-Harbor Commissioner Doris Topsy-Elvord led the charge to establish an SBE/VSBE outreach program. At the time, 90 percent of the millions of dollars the Port was investing in construction contracts went to large- and medium-size firms.
To develop its SBE/VSBE program, the Port partnered with the Metropolitan Water District to learn from the water agency’s success and hired Muralidharan as its in-house administrator. The program kicked off in 2005.
“The Port launched the program with an annual goal of 20% participation and raised it to 27% in recent years,” said Muralidharan. “By achieving 30.2%, all our bureaus met and exceeded the Harbor Department’s SBE/VSBE goals for the most recent fiscal year. VSBEs, which are a subset of the larger SBE group, earned 10 percent of the total.”
Muralidharan has worked closely with Port colleagues and other agencies to build up the Port’s database of SBE/VSBE firms, promote SBE/VSBE opportunities at construction and environmental expos, hold workshops explaining the program and how to obtain SBE/VSBE certification, and stay on top of related trends and best practices.
Changes that have strengthened the Port’s program include a standardized internal process for assessing each contract to determine whether SBE/VSBE targets apply and to what extent. Major construction contracts typically have the opportunity for high SBE/VSBE participation.
Also, the Port now has the option of replacing a “good-faith effort” provision with mandatory goals for SBE/VSBE participation in solicitations for construction bids. “The prime contractors who bid regularly welcomed the change because it levels the playing field,” Muralidharan said.
Similarly, the bidding process for professional services and procurement contracts includes an incentive for proposers to meet SBE/VSBE goals in advertised bids. They receive selection points commensurate with their level of commitment to SBE/VSBE goals.
Benefits for the Port
By having the largest possible pool of experts and qualified bidders for its projects, the Port is getting the best return on its investment to ensure it remains a competitive, safe and secure gateway for international trade. “SBE/VSBE is not a social program. It’s an economic program that allows us to tap into a critical resource that makes the Port and our economy stronger,” Muralidharan said.
In California alone, there are 3.9 million small businesses. They make up 99.8% of all businesses in the state and employ 7 million people or 48.8% of the workforce, according to the U.S. SBA. Nationwide, small businesses create two out of three new jobs annually. They include many of the smallest firms that have done business with the Port as SBE/VSBEs.
Under state rules, the Port’s SBE/VSBE program is not permitted to set goals based on gender, ethnicity or location. Nevertheless, the Port’s SBE/VSBE outreach programs have increased the diversity of its contractor network, as well as the number of local companies doing business with the Port.
As a result of the success of Port’s SBE/VSBE program, Muralidharan is often a featured speaker at conferences where government agencies are introducing small business attendees to SBE/VSBE certification and contracting opportunities. Recent events include the City of Long Beach’s “Everyone In” Initiative, a citywide program promoting economic advancement through equity and inclusion. Muralidharan attends similar outreach events throughout the year because they are among the most effective ways to connect with SBEs and VSBEs capital projects.
Upcoming opportunities to learn more about contracting opportunities with the Port, as well as its SBE/VSBE program, include the California Construction Expo, July 18-19, at the Anaheim Convention Center. The Port is one of the major sponsors of the two-day event, which showcases contracting opportunities with government agencies whose current and future public works projects total more than $100 billion.
The Port will have four booths with engineering and construction staff to talk to attendees about upcoming projects and opportunities for prime contractors, subcontractors, SBEs and VSBEs.
This and other efforts to build on the success of the Port’s SBE/VSBE program bode well for increasing small business participation goals in the future, said Harbor Commission President Egoscue. “Leadership is in the Port of Long Beach’s DNA. We always strive to do better.”