Work Statement and Key Components

To receive DBE/SS funds, State Transportation Agencies (STAs) must submit a Work Statement to FHWA Division Office for approval. However, no DBE/SS funds will be allocated until the Associate Administrator for Civil Rights at the FHWA Headquarters has concurred on the work statement. This Work Statement is a contract between FHWA and the STA for the delivery of the STA's DBE/SS. (See Attachment 2- Sample outline of a Work Statement.)

A work statement should address at a minimum the following six key components:

1. Scope of Work
2. Performance Goals and Measures
3. Performance Period
4. Reporting Requirements
5. Budgeting and Financial Requirements
6. Monitoring and Evaluation

Following is a description of each key component as well as suggestions and tools that can be used by FHWA, STAs, and others who have responsibility for implementing and managing a DBE/SS program. Also, this proposed program offers guidance for STAs to consider in augmenting supportive service efforts financed by FHWA.

1) Scope of Work

A fundamental part of any basic DBE/SS program must include a detailed work statement consistent with FHWA guidance in 23 CFR 230.204 (c)(g)(h). The detailed work statement includes the scope of work which is a clear and complete statement of services such as technical assistance, managerial assistance, financial assistance, outreach, training, capacity building or any other relevant activities. The Scope of Work is the most important part of the work statement. It describes in detail all of the services and activities to be performed. However, before a scope of work can be developed, and in order to ensure effective use of DBE/SS funds, first it is necessary to evaluate the needs of the DBE community as they relate to meeting the goals and objectives of the DBE program. The Scope of Work should be tailored to address items identified in the Needs Assessment.

FHWA strongly recommends that each STA conduct a needs assessment prior to developing a Statement of Work. A needs assessment can be accomplished through a variety of ways including conducting surveys, reviewing internal data regarding DBE participation, and obtaining input from DBE service providers, construction company owners, DBEs, and State construction and project engineers who have knowledge about DBE's performance on highway projects. The assessment should include an evaluation of the current barriers to DBE firms participating in the Federal-aid highway program.

A needs assessment can also serve as a useful tool to establish a baseline to target areas where an increase is needed. For example, if only 20% of a STA's certified DBEs are receiving federal-aid contracts, perhaps the STA can target their DBE/SS efforts to increase that number. A needs assessment becomes the basis for developing a DBE/SS program that helps DBEs participate, grow, diversify, and build capacity to successfully compete in the highway industry.

Some STAs send out a questionnaire to DBE's as a survey to identify barriers, determine their needs, provide feedback on their DBE/SS providers, and assess their construction related or general training needs. (See Attachment #3 - Sample surveys).

The Scope of Work will encourage the provision of specific services to meet DBE/SS program goals and objectives consistent with the assessment of needs of the DBE community. The supportive service activities discussed in this section are merely suggestions, and it is not intended to be a mandatory list nor is it intended to be exclusive or exhaustive. The STAs can choose a variety of activities and initiatives and implement what is best suited for the needs of their DBEs. However, services that directly benefit DBEs should receive high priority. The following are general services that are identified in 23 CFR 230; however, STAs are not limited to these services:

• Recruitment
• Business Management Assistance
• Technical Assistance
• Bonding and Financial Assistance
• Training

The Scope of Work should also include other services that contribute to the long-term development of DBEs and that assist DBEs with being in a better position to compete for contracting opportunities, such as the services listed below and included in 49 CFR 26.51. (See Attachment #1)

• Developing business plans is especially encouraged as described in (49 CFR 26, Appendix C (D). (See Attachment #4)

• Providing guidance for DBEs regarding expansion of their work types or improving their ability to complete increasingly significant projects.

• Providing individual review of DBE operations to improve the firm's core business practices and procedures.

• Assisting DBEs in developing their capability to utilize emerging technology and conduct business through electronic media (such as electronic bidding).

• Providing free sample plans and specifications to DBEs by mail.

• Sponsoring Entrepreneurial Development Institute Training.

• Facilitating Program Advocacy/Alliance (develop and maintain alliances with key constituencies or stakeholders sharing similar program interests to increase program awareness and establish referral resources for DBE start-ups.)

• Providing Marketing/Networking Assistance

• Hosting Pre-bid Networking Sessions

• Providing orientation for newly certified DBE Firms to advise them of:
  • Basic terminology
  • STA contracting procedures and requirements
  • Services available from DBE/SS program
  • How to Receive Plans & Specifications
  • Networking with Prime Contractors
  • Preventing Fraud Issues
  • Instruction in certified payrolls and payment affidavits

2) Performance Goals and Measures

A performance-based DBE/SS program will always include performance goals or objectives, activities/strategies, and performance measures. A performance measure should evaluate the results of the activities to meet each goal or objective. While it may be difficult to measure results of specific supportive service activities, accomplishments can be measured that are correlated back to the services provided. A performance-based program is results oriented.

A STA should develop supportive services goals or objectives in activities specific to the needs of their State. For example, a DBE/SS program could measure the accomplishments in the following areas:

• Business reviews or plans

• Marketing to prime contractors and other governmental agencies

• Training on business management and technical skills as reading plans, estimating, scheduling and quality control

• Networking with minority community

• One-on-one training and technical assistance

• Job shadows/mentoring program for DBEs to get assistance from primes or other successful DBE'S.

Establishing specific performance goals helps ensure accountability and enables the program administrator, FHWA Divisions and Headquarters to document and assess the effectiveness of the activity. DBE/SS activities should be tied directly to the needs assessment as included in the Scope of Work. For example, if a STA determines that there is a lack of available DBE firms to perform on DOT assisted contracts, a performance objective could read as follows:

A specific performance goal can be stated to include the performance measure and the timeframe to meet the performance goal, such as:

By 12/2004 increase the number of certified DBE firms by 10% (or a specific number).

Based upon a needs assessment analysis, the STA could determine that many DBE firms lack managerial expertise and this has impeded their growth and development. A key element in the DBE/SS Scope of Work would focus on management assistance, such as helping DBEs develop business plans. Business plans would identify short and long-range goals, a marketing plan, and implementation of other management strategies to develop their firm.

The performance goal could read:

A performance goal could read:

By 12/2004, 50% of active DBE firms will have business plans that identify short and long term goals and management strategies for implementation.

Following are other examples of services, performance objectives, strategies/activities, and performance measures. In keeping with the intent of the DBE/SS program, it is likely that the Needs Assessment had already identified that these services were needed.

NOTE - EACH TRAINING SESSION SHOULD HAVE CLEAR LEARNING OBJECTIVES AND A REQUIRED EVALUATION FORM TO DETERMINE WHETHER THE LEARNING OBJECTIVES WERE ACHIEVED. (See Attachment #5- Sample Evaluation Form)

Measurements of Growth and Self-Sufficiency

The intent of the DBE/SS program is to provide assistance that will help DBEs grow and develop so that they eventually become self-sufficient. Therefore, the success of a DBE/SS program should be based upon whether there is growth and development among DBE firms. Growth and development can also include an increase in the number of DBEs who have expanded their expertise and resources and are capable of performing in other areas.

There are many factors that contribute to a DBE firm's growth and development that the DBE/SS provider has no control over. For example, who a prime contractor chooses to work with, or the DBE owner's past history, approvals from banks, etc. However, STAs are still encouraged to use some general factors to assess the growth and development of their DBE community as a whole. Since it may be difficult to determine progress of every DBE firm involved in a DBE/SS program, the STA already collects some data that can help get a general idea about growth and development of their DBE community. For example, all DBEs are required to submit financial information to STAs to support their annual affidavit of no change. The STAs can use this data to form a comparative analysis of key financial measures, such as an increase in gross revenue, an increase in net assets, etc. This analysis could also help assess the impact of the services provided by the STA's DBE/SS program.

Evaluation of specific DBE/SS must be based upon the actual clients or firms receiving assistance. However, it is not intended for STAs to show that DBE/SS service providers were responsible for increases in any of the areas listed below. These are just some examples of items that can be indicators to measure overall growth and development:

• Increase of net income in the DBE community
• Increase in line of credit
• Increase in cash balance
• Increase of employee workforce
• Increase in bonding capacity
• Increase in Net Worth
• # of DBE firms with an increase in Federal contracts/subcontracts
• # of DBE firms with an increase in dollar value of Federal contracts/subcontracts
• # of DBE firms with an increase in State contracts/subcontracts
• # of DBE firms with an increase in dollar value of State contracts/subcontracts

Qualitative Measurements

In addition to the quantitative measures identified above, STAs must also assess the quality of the services provided to DBEs. Utilizing qualitative measures will be an integral part of a performance-based DBE/SS program. Qualitative measures can be as simple as the following:

• Results of Survey Tools
• Results of Evaluations
• Customer Feedback

Both quantitative and qualitative measures will be used as a key element of administering a performance-based DBE/SS program. Using the data available, the STA can assess the growth and development of individual DBE firms and the DBE community. The STA should also use this data to target its DBE/SS program to fund those services that show results (increase in DBEs who receive State or Federal contracts).

3) Performance Period

A DBE/SS work statement should clearly establish the beginning and ending date (performance period) for delivering specific services. It should also include a schedule estimating when specific services or tasks will be provided or completed. The establishment of a specific performance period and delivery schedule for supportive services helps to determine progress, assess needs, and make necessary adjustments to the program to meet those needs.

This program model encourages the use of 1 year contracts with the option to extend for additional years. Options to extend the performance period for each additional year must be based upon satisfactory performance and available funding. This provision should be included in the work statement for approval by the FHWA Division Office each year. Alternate performance periods, such as 2 year periods, may be considered for approval on a case-by-case basis and if funding is available. Under no circumstances 12 should the performance period and annual extensions extend beyond a total of 5 consecutive years. The following is a suggested general policy that should be adopted by STAs and FHWA Division Offices in the request for funds and approving DBE/SS Work Statements.

The performance period for this DBE Supportive Services contract is for one year with the option to extend for one-year periods after the first year, not to exceed _____ one-year extensions. Options to extend the performance period for each additional year will be on the basis of satisfactory performance and an approved work statement for each year. Under no circumstances will the performance period extend beyond a total of five years from the initial date of a contract.

A contract with a consultant or a STA Contracting Officer must always establish a specific performance period. A provision for an extension can be included and must be based upon satisfactory performance and the receipt of DBE/SS funds. Satisfactory performance must be demonstrated by information contained in progress reports, feedback and input from DBEs, and effective monitoring and evaluation by the STA and or the FHWA.

4) Reporting Requirements

Monthly or quarterly reports are required and must include sufficient data and narrative to help evaluate performance, identify problems, and recommend solutions. At a minimum the monthly/quarterly reports must include accomplishments for each goal or objective. For example, if the goal was to increase the number of DBEs participating in DOT assisted contracts, the progress report could capture the following information.

• # of contracts received
• % increase over previous reporting period (monthly, quarterly, etc.)
• $ value of contracts received
• % increase over previous reporting period

• Additional items impacting the level of assistance by the DBE/SS provider
• Problems encountered and recommendations made and implemented (e.g. changes in staff such as the Director, or other key management personnel with required expertise to deliver services, etc.)

An Annual Report is required 60 calendar days after the end of the fourth quarter. The Annual Report must include (see Attachment 7):

• Comprehensive account of accomplishments
• Concerns identified and resolutions implemented
• Recommendations for improvement
• Other items impacting DBE/SS program

5) Budgeting and Financial Requirements

The budget is a very important element of the Work Statement because it identifies how the funds will be used to implement a DBE/SS program. The budget will forecast anticipated expenses and compare them with actual costs. A cost benefit ratio can support the development or continuation of specific activities. This helps to ensure that funds are used at an optimum level. Therefore, during the approval of the work statement, the FHWA Division must carefully review the budget to ensure that the estimated costs and expenses are prudent and relevant.

The FHWA does not have a checklist of allowable or disallowable expenditures for DBE/SS activities.

Also, there are no specific requirements regarding the level of administrative costs vs. services provided directly to clients. Recognizing that consultant/contractor overhead rates can range from 20% to 120%, and each STA follows its own financial process in awarding contracts, it would be difficult to establish a limit for DBE/SS contracts. However, in approving the budget, the FHWA Division Offices must review costs and determine if the expenses are reasonable. For example, one FHWA Division Office uses a "20%" measure for the level of administrative/overhead costs so that the majority of the expenses cover services directly provided to DBEs. As a rule, when "overhead" is submitted as a cost item, the FHWA Division Office must consider the following:

1. What does their overhead costs include (rent, salaries, etc.), or how did they arrive at their overhead rate (percentage of salaries, etc.)?

2. Who has reviewed or approved the rate they are using, (another agency, etc.)? The budget should not include items that would duplicate those expenses reflected under the overhead rate.

3. If the overhead rate appears unrealistic, (as compared to the services being provided), negotiating a reasonable rate should be encouraged.

While this is not a checklist, generally, DBE/SS funds should not be used for the following:

• Salaries for a STA's staff to administer their DBE program
• Training for STA staff
• Equipment Purchases (computers, faxes, televisions, appliances, furniture, etc.).
• Non-highway related activities

Highway related activities generally include those activities that STAs use in the design and construction of highway projects. With the limited amount of DBE/SS funds and the increased number of DBEs certified by Uniform Certification Programs (UCP) who do not perform highway related work, the DBE/SS funds must target certified DBEs who perform on highway or highway related work. This can include highway construction, Architecture and Engineering contracts, fee appraisers for right-of-way work, or whatever a firm does that is directly tied to something that is eligible for Federal-aid highway reimbursement under 23 USC.

DBE/SS funds should not be used for activities related to certification and verification procedures, which are a required component of a DBE program. Although certification activities such as locating, recruiting, and counseling DBEs on completing and assembling certification application may be eligible 14 for DBE/SS funds, it is discouraged. Since there are limited DBE/SS funds available, and there are a good number of DBE firms already certified, the focus should be on providing the needed services (training, technical assistance, etc.) to help the certified firm grow and be more active.

The following is an outline of a performance-based budget and an operational budget.

Performance-based Budget

A performance-based budget is useful because it identifies specific tasks and the dollar value associated with each. The tasks are specifically related to the Scope of Work, which is based upon a needs assessment. Payments are made based upon the completion of specific tasks. A performance based budget also serves as a good monitoring tool because on monthly or quarterly basis, it can be determined how much of the budget was expended and the cost of providing the most needed services. It is a good idea to include a narrative with billings listing each DBE firm, the service received, and how the service improved the firm's operation. (See Attachment #6 - Sample format for a performance-based budget).

Operational Budget

An operational budget includes line items of all expenses that are not tied to specific tasks. Program funds can be used to support the salary of a full-time or part-time coordinator used exclusively to administer an "in-house" DBE/SS program. An operational budget generally includes items such as the following:

Salaries: Professional Staff, Support Staff

Fringe Benefits: Social Security, Unemployment Insurance, Medical Insurance, etc.

Travel Expenses: Mileage, Lodging, Meals

Office Expenses: Copying, Telephone, Postage & Freight

Marketing: Advertisements, Brochures, Newsletters

Technical Training & Seminars (for DBEs): Meeting Space, Trainers, Equipment

Other Expenses: Registration Fees, Printing, Memberships etc.

Basis for Payment

No payment can be made without a progress report. Documentation must be sufficient to justify the particular expenses incurred and billed to the DBE/SS program. A separate invoice detailing performance or actual expenditures is required. An invoice based on performance-based budgets shall detail the specific elements of payments set out in the budget such as task, activities, the number of work hours used, dollar values, etc. An invoice based on operational budgets shall itemize the specific elements of payment set out in the budget such as salary, fixed/variable costs, marketing and equipment expenses, and shall include supporting documentation for each. Documentation is critical to support expenditures claimed and the authorization of payment.

STAs are responsible for adhering to their State procurement and contracting requirements. Suggested references:

• The Uniform Audit & Accounting Guide, which is prepared by the American Association of State Highway and Transportation Officials (AASHTO) (This may be accessed at www.transportation.org)

• The Federal Acquisition Regulation (FAR) Part 31 (These regulations may be viewed at http://www.arnet.gov/far/authority.html)

• The State Procurement Requirements (You may access this via the Internet or ask your State Highway Department for assistance in locating these guidelines.)

This list is not all-inclusive.

6) Monitoring & Evaluation

Program monitoring and evaluation is necessary to help ensure the quality of the DBE/SS Program through communication, follow-up, and adjustments. The monitoring and evaluation must identify needed improvements, document effectiveness, and assess results of measures.

Examples of monitoring tools include:

• Questionnaires sent to DBE firms
• Progress reports and feedback
• On-site visits to DBE firms
• Surveys to evaluate DBE satisfaction
• Analysis of participant's beginning status vs. ending status
• On-going and routine contacts of DBE/SS consultants
• DBE evaluation of supportive service provider for performance period (at least annually). Evaluations should be sent to the STA. For in-house programs, the evaluation should be sent to FHWA Division Office.

To ensure effectiveness of the DBE/SS program, STAs should maintain a sufficient level of oversight over SS consultants to measure progress and address shortfalls. Likewise, the FHWA Division, through its oversight and stewardship responsibilities, should conduct periodic reviews of the STA's DBE/SS program.

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