Responding to trends in increased diversity spend targets in contracts with key customers, including LDCs, EN Engineering recently implemented a focused, nationwide Disadvantaged Business Enterprise (DBE) initiative across our entire portfolio of engineering services. This article discusses how EN Engineering crafted a program that is mutually beneficial for customers, partners, and EN Engineering.
Last year, LDC customers began increasing the targets for second-tier diversity spends in their contracts. These increases were driven, in part, because of 2015 updates to reporting practices by the Public Utilities Commissions in Illinois and California. Utilities in these states are now required to include dollar amounts of contracts in force with diversity contractors in reports.
At the same time, EN Engineering began taking a closer look at our relationships with all contractors, not just diversity firms. We believe that building long-term relationships with qualified partners is a good business practice. Such relationships present opportunities not only for EN Engineering to grow our project portfolio, but also provide new business opportunities for our partners.
“We’re definitely seeing a shift in natural gas and utility industry contracts,” indicated Adam Biggam, vice president, Distribution at EN Engineering. “The target increases also seem to be regionally driven, with utilities in highly urbanized environments and utilities that receive state-supported program funding including stronger language in their contracts,” Biggam added.
Stronger language can vary by client. In some cases, the actual targets have increased. Contracts with diversity spend targets can range from 5-45%. In other cases, the wording of the contract has changed from a target ‘recommendation’ to a target ‘requirement.’ Clients are even increasing the level of details for, and frequency of, documentation substantiating DBE participation levels.
Crafting the Program
At EN Engineering, our DBE program sets out to meet client goals while also developing our DBE partners and ensuring our quality performance on contracts. There are three aspects of our robust DBE program: Mentoring, Embedding, and Tracking. To manage these details we hired a DBE program manager to drive diversity activities and promote the program both internally and externally. Using subcontractors for specialized services is common in many industries, including pipeline engineering. Typical outsourced services include structural engineering, surveying, drafting and design, geotechnical services, construction inspection, and pipeline locating. Our comprehensive DBE program identifies contractors with these and other skills; exceptional knowledge in their field; previous work experience on similar projects; and current DBE, WBE (woman-owned), MBE (minority-owned), or VBE (veteran-owned) status.
One challenge in identifying DBE partners is selecting firms that deliver similar levels of quality. Rubinos & Mesia Engineers, Inc. (RME), a Chicago-based engineering firm with MBE certification, has provided structural engineering services for projects like the O’Hare Airport expansion, Navy Pier renovation, etc.
“We recognize that we are a MBE firm, but we don’t want to be a partner just because of our MBE status. It is important that we are hired because of the level of skills and performance we bring,” explained Farhad Rezai, executive vice president at RME. His firm is working with EN Engineering on main replacement projects in the Chicago area.
Adam Biggam, who first met the RME team at a client seminar on diversity, recalled a similar conversation. “After my presentation at the client seminar, I was approached by Matt Whisler, project manager at RME. Initially we talked about RME’s structural engineering services and our needs in this area. I was confident they could add value in structural engineering. And Matt stressed, ‘yes, we are a diversity business, but you should hire us because we deliver high-quality engineering.’
That’s the kind of partner we look for,” Biggam asserted. The partnership that started nearly a year ago has grown beyond structural engineering services. “RME team members are helping with base line drafting, detailed drafting, DOT analysis, and pipeline design,” noted Tiffany Hopkins, senior project manager for the Distribution team at EN Engineering.
“I consider everything we do at EN Engineering to be at the highest quality,” Hopkins said. “This means our DBE partners have to match our quality level in a way that is transparent to the client,” Hopkins added. Matching quality expectations is a given for the RME team, as Rezai explained, “We have always firmly believed in high-quality performance. At the end of the day, our diversity status only means so much. The quality of our work stands above this.”
Mentoring DBE Partners
Knowledge and relationship-building are critical to successful diversity programs. Developing close relationships with all stakeholders, gaining a strong understanding of DBE skill sets, and integrating the firms into the professional team as a master service agreement provider takes time and patience. We recognize that some DBE firms are small businesses that can benefit from mentoring with a master service provider.
EN Engineering’s mentoring can range from financing tips to reminders about what certifications are up for renewal. Mentoring might also include conversations about project forecasting, which can help DBE partners better plan their finances. Some of our diversity partners also benefit from exposure to new business opportunities outside of their core area of expertise. RME, with extensive experience in structural engineering on projects like roads and buildings serving public enterprises, sees the advantage in working as a DBE partner.
“We see the benefits of diversifying our business beyond the public sector, for example, into the private sector such as gas pipeline companies,” cited Rezai.
To ensure that clients have a seamless experience as it relates to meeting diversity spending targets, our DBE program strives to “embed” DBE employees with the EN Engineering workforce. At EN Engineering, DBE-firm embedded employees are treated like they are staff members. “They operate just like any other team member. They attend team meetings, are assigned the same work, and participate in the same training programs,” said Hopkins. “They also participate in our extra-curricular activities,” she added, referring to company picnics, sports teams, etc. Hopkins is managing an 11-person main replacement team at EN Engineering that includes four embedded employees.
“Our team is being mentored alongside the EN Engineering team in preparing construction documents for Phase I gas line work,” said Whisler.
Collecting the Data
Keeping track of the qualifications and certifications of multiple DBE partners can be a daunting task. In 2015, EN Engineering engaged Salem Managed Services Group (SMSG) as a business solutions partner to integrate and coordinate the subcontracting and vendor services on its behalf.
“SMSG has provided vendor management and consulting services to clients throughout North America for over 20 years,” said Brian Shoemaker, director, Strategic Solutions at SMSG.
We have had a strong relationship with The Salem Group (SMSG’s parent company) for many years. They also happen to be a certified WBE firm. Partnering with SMSG has allowed EN Engineering to focus on our core business while SMSG handles the details.
“The primary objective of this program is to create a centralized management tool and build relationships with EN Engineering’s existing subcontractor partners, thus maximizing diversity subcontracting opportunities, streamlining processes, and managing contractual compliance,” explained Shoemaker.
At EN Engineering, our database of 30-plus DBE partners extends beyond capabilities to include all certifications, timesheets, industry qualifications, and customer qualifications. The database is accessible by clients, DBE partners, and EN Engineering staff including project managers, who access the database when they need a specific skill set for an upcoming project.
Having a robust software program to track DBE activity also makes it easier to provide documentation to clients regarding spend levels on specific contracts – which can, in turn, be shared with regulators, if necessary. “As spending targets and reporting frequency have increased, we have found a need to be even more diligent with our documentation,” commented Biggam.
As client diversity spending targets continue to increase, DBE programs will need to be flexible in the future with an eye toward long-term investment by all parties. “We are looking for long-term partners,” said Hopkins. “We don’t want to train someone and lose them within a year.” But finding partners with complementary skills, consistent quality, and similar customer service philosophies requires a strategic approach. At EN Engineering, for example, we look for partners with experience in highways, water, and sewer engineering. Projects in these areas likely run over long distances and in all types of environments (rural, suburban, urban), all factors in common with our pipeline engineering projects.
But not every DBE firm is a good fit. Beyond finding relevant work experience and common philosophical ground, finding partners with similar structures and work pace are also important. “One of the many services we provide EN Engineering is structural calculations for main replacements,” said Whisler.
“These are critical elements, with a 24-36 hour turnaround because most of the calculations are for projects already under construction. So they need the results right away.” With over 75 people on staff, RME can deliver. “We are a good size firm, so we are able to engage engineers to meet this turnaround,” assured Rezai.
“As a result of the mentoring and embedding process, EN Engineering has come to us with other project opportunities where we can partner with them to secure larger projects. Through our participation in their DBE program, they now understand our capabilities and this is leading to other projects outside Illinois. We look at this as a valuable long-term relationship,” said Rezai.
“Both sides have invested a lot,” Whisler added. Taking the long-term approach bodes well for all parties involved – whether it’s the client, the first-tier contractor, or the DBE partner.
“I expect the trend in increased diversity spend will continue to grow,” predicted Biggam. “I only see these initiatives expanding to new companies or companies with existing programs modifying the language to increased requirements,” he said. With the trend increasing, it is not just a business requirement, but a good business practice to partner with qualified diversity partners. At EN Engineering, we consider such partnerships a win-win for all parties involved.
How to Get the Most for Your Second-Tier Diversity Spend Targets
Developing a successful diversity program takes the thoughtful participation of both clients and Disadvantaged Business Enterprise (DBE) firms. More importantly, a successful program requires a structure and process that meets customer spend targets while ensuring high-quality engineering services, regardless of provider. Here is our advice on what LDCs should look for from their master service agreement partners to get the most out of their second-tier diversity programs:
- a dedicated DBE program;
- a commitment to the highest quality, regardless of diversity status;
- a program with mentoring opportunities for DBE owners and employees;
- a seamless approach to service delivery, regardless of provider; and
- a software system to monitor DBE activity.
By Allison Hassig, DBE Program Manager and Dave Klimas, Senior Vice President and Chief Engineer, EN Engineering, LLC