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Advantages and Disadvantages of a DBE
6

Advantages and Disadvantages of a DBE

Advantages and Disadvantages of a DBE

(OP)
As the title implies, what are the advantages and disadvantages of a DBE?

I'm currently a small structural firm in the U.S. and have entertained the idea of bringing in a partner (a minority) who would have 51% of the business. On some large projects (Federal Government, State DOT, Large Commercial) I often see questions regarding if my firm is a DBE or not. I have not considered this previously because I have wanted owners to hire my firm because of it's abilities and not a quota.

Is it advantageous from a profitability standpoint for a business to be a DBE or not? I am not interested in a debate on the social issues.

Thanks

RE: Advantages and Disadvantages of a DBE

Disgusting way to approach finding a business partner IMO. There should be a thousand things to consider about a person prior to partnering up with them before their ethnicity.

Good luck

RE: Advantages and Disadvantages of a DBE

(OP)
I'm not interested in your feelings/emotions. I asked a straight forward question regarding profitability of a DBE.


I've known my potential business partner for 20+ years and we are good friends. His engineering abilities are outstanding and would have him as a partner regardless of DBE status.


RE: Advantages and Disadvantages of a DBE

It's not about feelings/emotions (much less my own), but more about ethics and upholding the dignity of our profession.

I know in the US, there is FE exams, professional exams, several technical exams you must pass on your way to licensure. In Canada, the only exams are on ethics. I think most grey areas in our profession, you can always approach the question from an ethics standpoint and arrive at a suitable answer.

Not sure if your locale has something similar, but here is the main document governing the profession in my locale. https://www.apeg.bc.ca/getmedia/e8d858f5-e175-4536...

these doc's are pretty similar from board to board, I believe.

RE: Advantages and Disadvantages of a DBE

Ignoring the ethics and optics for the nonce

> If you aren't profitable without the partner, this isn't going to help, as you now have two partners to feed.
> Your ability to charge more is limited by the fact that you are hardly the first person to contemplate this.
> There's bound to be more paperwork involved, so you'd probably need to add a body to deal with that.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
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RE: Advantages and Disadvantages of a DBE

2
its definitely advantageous if you are working in the public sector in the US. you should qualify for both small and minority business enterprise SBE/MBE which most public agencies that receive federal funding are required to contract with. This may give you a significant leg up on public contracts, generally as a subconsultant.

If you are not working in public works, than no particular advantage except for the fact that there will be two of you marketing and completing the work.

RE: Advantages and Disadvantages of a DBE

I cannot comment as to the profitability of individual projects however friends at firms who have gone this route claim that it is often a deciding factor in how state bids are awarded.

RE: Advantages and Disadvantages of a DBE

2
I think some people need to slow down and take a breath here..

Sounds to me like OP knows a guy, is considering taking him on as a partner, and is just wondering if DBE status would be an additional benefit to the partnership. Relax.

WRT profitability... I suspect DBE status will be a benefit to the percentage of bids won vs. RFQs submitted, but that doesn't inherently mean more profitability unless your business practices are tight. More projects means more revenue, but a partner means more overhead. The only one who can accurately estimate which side of that equation is heavier is you.

RE: Advantages and Disadvantages of a DBE

DBE gives you an edge in competition for public work. But I wouldn't want to give up control of my company for that edge. Small business status is much less important than minority or woman owned business in terms of priority to government contracts. You might compete against other companies with lower rate structures, but the professional procurement act also states that your company must be selected on qualifications for publicly funded work. This means that fees are not discussed until after the selection is made which tends to result in higher fees. You won't be able to gouge, but you should be able to get much better than cut-throat rates. A truly qualified DBE can get excellent pay from public projects because so many of them (ahem) suck at the work they do.

Although I would game it if I could, I despise the quota system for public work. It often results in the same old big companies getting projects so long as they fill a quota for percent of work subbed out to "disadvantaged" firms. There are also "mentor-protege" programs which are basically a way for non DBE firms to use DBE firms as a conduit to get the work. In a down economy, you see a lot of weird stuff happening on public projects and usually issues arise from incompetent DBE firms gumming up the works due to the requirement they be there. So, there are ways to get into the DBE game without being a DBE, but usually only the really big companies with proven resources get projects big enough to leverage the system without being DBE. Of course, there is so much procedure and slow pay with public projects, the smaller projects are hardly worth pursuing a lot of times.

RE: Advantages and Disadvantages of a DBE

I wouldn't necessarily count on cost blindness as a given. The government and its various minions flip-flop on the subject routinely. "Cost realism" and "Life Cycle Cost" were two approaches that have littered the procurement landscape over the years in an attempt to rein in technically superior proposals from companies that couldn't manage costs out of a wet paper bag. One aerospace company has had at least two major contract failures where their supposedly superior systems engineering and process crashed and burned against their inability to contain requirements, subcontract(or)s, and costs.

Given the current administration's stated desire to contain costs, I would expect another major push for cost realism or life cycle cost as an evaluation criteria. Most procurements that I've been involved in simply split the proposal and have different people evaluate the technical and cost. However, at the end of that, they still get together and still consider the cost.

If your proposed effort is too expensive, it doesn't matter whether you're the best or the most disadvantaged; large procurements have their budgets cast in concrete well in advance of the RFP.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert! https://www.youtube.com/watch?v=BKorP55Aqvg
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RE: Advantages and Disadvantages of a DBE

I'm not saying high fees are guaranteed, but it is much more likely than cut-throat cost bidding. This is my experience with civil projects. Public officials can flip flop all they want, but they must obey the law. The procurement act is the LAW. Yes, shady stuff happens and yes they can end negotiations after a selection has been made and start over. However, if you fees are reasonable, if even slightly high, they will most likely stay with the initial section vs. starting over. I can't speak at all for aerospace. That landscape may be totally different.

I doubt the current administration has the wherewithal to change the current law. They don't seem to be able to do much of anything other than garner news coverage. But that's fine with me. I don't yearn for more and more laws to be made and changed which is all an active administration would cause to happen.

RE: Advantages and Disadvantages of a DBE

And what, exactly, would be the advantage to the proposed partner to work this way?

RE: Advantages and Disadvantages of a DBE

Quote (Is it advantageous from a profitability standpoint for a business to be a DBE or not? )


I don't want to sound like a cynic but DBE's are a cottage industry of sorts. In the bridge business we have to have them and we rely on certain firms to fulfill the goal. If you're reliable and can get the job done firms will seek you out. Some DBE firms are content to remain so because they're more or less assured of steady revenue. Keep in mind, no one is guaranteed anything and if the markets take a downward turn, everyone is affected by it. I know of one firm that actually graduated from DBE status because that was the owner's intent. Keep in mind you have to stay below the three-year revenue amount or you're out. In some states the principals can wear multiple hats, i.e., the salaries for officers of the company get figured into the overhead rate. You can be fully billable collecting a salary against a project then collect a second (possibly third) salary through overhead, and finally you get a share of the profits.

Back to your question, it's advantageous from a revenue standpoint assuming you're content with say $7.5 million per year in billings.

RE: Advantages and Disadvantages of a DBE

I think it's a great idea as long as you trust the potential partner and have a sound business plan to submit more bids that you would now be eligible for... and to put in my two cents on the idea of a quota system...it's a necessary system. In my experience, many private sector jobs (which may not require small/minority firm inclusion) tend to hire firms based on the "good ol' boy network" and not necessarily the best qualified firm. I find that often, many firms are disillusioned in thinking they win work based solely off their own merits and not because the client feels comfortable with them based on surface preferences i.e. older white males (in America) typically have a leg up as developers tend to be older white males based on America's social history. Human nature subconsciously influences people to feel comfortable and trust those who look like them. Doesn't have to be malicious intent. Women and minorities are on the rise though. I suspect in another 50-100 years a quota system won't be necessary as there will be a more diversified system of decision makers in place. Make no mistake, there will still be favoritism at that point based on superficial preferences due to human nature, but at least it won't be one-sided toward one particular demographic.

RE: Advantages and Disadvantages of a DBE

raspivey,

Perhaps there could be some validity to your statement if it weren't for the fact that most of the DBE firms I know of have old white guys making the contacts and acting as the "face" of the company while the name of the company is some ambiguous three letter acronym. How does that work with your theory of comfort level or "looking like them"? I'm not saying racism is dead, but this isn't the way to fix it.

Minorities in a situation where they own an engineering firm are already "privileged" in terms of social equity.

RE: Advantages and Disadvantages of a DBE

Terratek,

Do you realize you prove my statement and also at the same time come off sounding a bit ignorant (racial tone) i.e. stating old white males are the "face" of these companies and (this part is inferred) the only reason they can operate and get contacts. You do realize white male privilege exists correct? And no... one doesn't have to bathe in racism to enjoy white privilege. It's an underlying effect from centuries of oppression. Most white males are not racists just like most everyone, but due to a system of norms that has been established going back centuries white males benefit more from the "system" currently in place in America. You can act like you don't see it or don't benefit from it (assuming you are a white male) all you want, but it doesn't erase the fact you get a leg up in life in certain situations. And before you jump on a structurally weak soapbox stating your accomplishments you by yourself accomplished, realize there is also Hispanic privilege, female privilege, Asian privilege (especially doing business in China...just ask Uber)...but in America white male privilege is the dominant force underrepresented minorities must deal with in the engineering/construction industry.

RE: Advantages and Disadvantages of a DBE

(OP)
Thanks everyone for your posts! Lot of good information I'll need to consider.

Thanks again!

RE: Advantages and Disadvantages of a DBE

With my employer we are DBE (classified as 8a). Our main clients are government agencies. Being an 8a / DBE does keep us in a smaller pool of candidates for work. Thus, we are not cutting our wrists to get the job.

I would say that if you go this route you should be ready to do perform the work the way the government wants it done (aka Paperwork, paperwork, paperwork). Paperwork is part of the deal and you should just go in knowing that's part of the cost of doing business with them.

As others have mentioned, we have been selling ourselves with the big boys (ch2m, Bechtel, Fluor, etc.) on getting part of the pie. Like anything else you have to sell yourself to others. In this case you are selling yourself so that they can meet the govt's goals / quotas / set-a-sides. As long as you perform well, then you can use this as a steady source of revenue.

--morgwreck243

RE: Advantages and Disadvantages of a DBE

Cons:loads of paper work, receivables 90 plus days out, cook book engineering, waiting forever to start a project, state reviewers red lining everything, primes selecting you only because they have to, endless pre-bid meetings, value engineering is non existent, etc. etc.

Pros: You get to tell your friends you designed the bridge/road around the corner. :)


Sorry never really had good experiences with public work but I'm sure others have. Good luck!

RE: Advantages and Disadvantages of a DBE

Several years ago I considered going this route. When the certifying organizations couldn't get their act together, I decided against it. Some of the organizations didn't return communication and one couldn't get organized enough to help me and stopped communicating. None of them left me with a good impression.

As a woman in engineering, with 28 years of experience, I don't perceive any "privilege" in terms of social equity.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC
NSPE-CO, Central Chapter

RE: Advantages and Disadvantages of a DBE

Raspivy, based on your reply it appears that you agree with the practice of awarding business contracts based on the ethnic background of the company owners, and not their capability. This by itself is a perfect example of racism. In what way does this form of racism differ from the white privilege you described in your previous post?

Maui

RE: Advantages and Disadvantages of a DBE

Maui, incorrect. Companies shall have to measure up to the proper standards no matter their background. The key is all companies should have the SAME ACCESS to be able to be measured. If Bob always hires Jim to do work because that's all he knows how will Bob know Mary can do good work unless Mary is given access to Bob? Understand? The fact that you can't see this is clear evidence of privilege and/or belief in imaginary equality in America.

RE: Advantages and Disadvantages of a DBE

Not too long ago, I called on a manufacturing company. It was very clear I was not going to get anywhere because I was a front for a male owned company that was really going to do the work. He then claimed black owned engineering firms are fronts for white, male owned engineering firms that are really going to do the work. We, women and African Americans, in his mind are not as smart as white men and cannot do engineering. If you cannot get beyond people like that, you cannot sit at the bidding table. And, that is probably the culture of the company, which means even if you can speak with someone higher than an engineer, you will not be sitting at the bidding table.

People dislike political correctness but there are reasons it exists.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC
NSPE-CO, Central Chapter

RE: Advantages and Disadvantages of a DBE

Quote:

The fact that you can't see this is clear evidence of privilege and/or belief in imaginary equality in America

raspivey, I have no illusions about the inequalities that exist in our society. But based on the false assumptions you have made about me as expressed in the quote above you seem to think that people who do not share your perspective on this subject are the "oppressors". I get the impression that your attitude is that if I'm not with you then I must be against you. I understand that bias should not play any role in the awarding of business contracts. But it often does because there are people involved in making those decisions. And people are often biased in their decision making, even if their goal is to be completely objective. Due to the type of tactics used by some people where they try to game the system we end up with people in positions of authority developing a perspective similar to what was expressed to Pamela above. No, it isn't right and shouldn't be the case, but that is the reality.

The way you express yourself in your posts reminds me of this lyric from Billy Joel entitled "The Angry Young Man",

Quote:

...I believe I've passed the age of consciousness and righteous rage
I found that just surviving was a noble fight.
I once believed in causes too. I had my pointless point of view.
And life went on no matter who was wrong or right.
But there's always a place for the angry young man with his fist in the air and his head in the sand.
And he's never been able to learn from mistakes so he can't understand why his heart always breaks.
And his honor is pure and his courage as well and he's fair and he's true and he's boring as hell.
And he'll go the grave as an angry old man.

Maui

RE: Advantages and Disadvantages of a DBE

Quote (Maui)

The way you express yourself in your posts reminds me of this lyric from Billy Joel entitled "The Angry Young Man"

I prefer to think of myself as unapologetic in my opinions. They can be changed of course, but no one will mistake my opinion for a suggestion and look upon me as passive. You are correct "people" with emotions and feelings make the decisions, so bias is inevitable...but last I checked that is why laws were established in societies going back centuries. "People" don't always know what's best for society as a whole therefor laws (just hopefully) are put in place to guide people to treat each other with respect and fairness. In turn it creates a more harmonious society and everyone feels secure in their position and representation. The reason you may not feel as strong about this topic is because you are already secure in your position so it's okay to wait for times to change slowly without direct action. But for those in the minority time is of the essence...food for thought.

Think about this quote and how it relates to the topic:

“White writers can be blunt about race and get all activist because their anger isn’t threatening”
― Chimamanda Ngozi Adichie, Americanah

You see views contrary to yours as threatening because you don't feel the urgency. It's a matter of perspective and I don't necessarily blame you personally for your shortcomings in realizing a minorities struggle as a minority equally wouldn't be able to recognize yours.

RE: Advantages and Disadvantages of a DBE

Quote:

Companies shall have to measure up to the proper standards no matter their background. The key is all companies should have the SAME ACCESS to be able to be measured. If Bob always hires Jim to do work because that's all he knows how will Bob know Mary can do good work unless Mary is given access to Bob? Understand? The fact that you can't see this is clear evidence of privilege and/or belief in imaginary equality in America.

Yet despite highly regulated government bidding requirements providing the SAME ACCESS to EVERYONE in an OPEN environment, we need to create special restrictions on all others solely for the benefit of "minorities?" Thats almost as delusional and backwards as your quote above from Americanah. I've said it many times, but as a society we have been socially regressing for decades by pandering to perpetual victimhood and refusing to treat everyone as equals.

RE: Advantages and Disadvantages of a DBE

Yes, decades ago everyone was treated as equals in the US.

RE: Advantages and Disadvantages of a DBE

clearly, America has never been the land of equals or of equal opportunities and no amount of government intervention is ever going to change that. In fact, intervention always favors some over others. America is "the land of opportunity" which is really the American Dream. Best keep on dreaming, or move to Denmark.

https://en.wikipedia.org/wiki/American_Dream

RE: Advantages and Disadvantages of a DBE

Quote:

Companies shall have to measure up to the proper standards no matter their background. The key is all companies should have the SAME ACCESS to be able to be measured. If Bob always hires Jim to do work because that's all he knows how will Bob know Mary can do good work unless Mary is given access to Bob? Understand? The fact that you can't see this is clear evidence of privilege and/or belief in imaginary equality in America.

Unless Bob has an exclusive contract with Jim, Bob can hire Mary. Of course, what realistically happens is that since Bob knows he can rely on Jim to get the work done reliably and at a cost he feels is acceptable, he has no incentive to look elsewhere (i.e., Mary). If Jim can't do the work, or Bob feels it'll cost too much, he may look elsewhere.

Someone might say this is the ole boys network, but we all do it. Many people will go to the same specialist (e.g., plumber, mechanic, hair dresser/barber) because they've had a positive experience with them for past work. You know what to expect with someone you've seen before versus someone new.

RE: Advantages and Disadvantages of a DBE

Bob better be careful if he's here stateside in a government position, the US has the most stringent anti-corruption, equal-opportunity, and open-government laws in the world and many folks would take a dim view on his actions. Not to suggest good 'ol boy networking doesnt still occur, but at least here Mary has the tools to bring to light Bob's corruption to the general public and effect his removal and/or prosecution.

RE: Advantages and Disadvantages of a DBE

Quote:

many private sector jobs (which may not require small/minority firm inclusion) tend to hire firms based on the "good ol' boy network" and not necessarily the best qualified firm. I find that often, many firms are disillusioned in thinking they win work based solely off their own merits and not because the client feels comfortable with them based on surface preferences i.e. older white males (in America) typically have a leg up as developers tend to be older white males based on America's social history.]

This is ASININE.

Completely.

Money talks. If you run a concrete company, and I need to buy concrete, and your concrete sucks, I'm not going to buy it. Your crappy concrete is going to cost me money. It doesn't matter if I like you or not.

There are certainly examples of people who make hiring or contract decisions based on race- but in my industry, performance is ALL that matters. Margins are tight. A friend or acquaintance only gets a contract from us if they are least likely to cause us to wind up in the red at the end of a project.

I personally deal with something like 100-150 suppliers of various things ranging from steel and concrete and other raw materials, up to finished goods like controls components and bolts and a million other things.

The vase majority of these people I deal with on the phone- I can (usually) tell if they are male or female, but beyond that, I have little idea of their age or race; I care about neither. I call them over and over because they are good at their jobs.

Timelines are tight, budgets are optimistic, and margins are small in pretty much every engineering market. Awarding jobs by the "good 'ol boy network" is a quick path to substandard work- and substandard work is a quick path to reduced RFQs, which means reduced contract awards, which means reduced money in everyone's pockets.

For better or worse, money talks.

RE: Advantages and Disadvantages of a DBE

Money does talk but people also do make silly emotion-based decisions as well. My industry is largely driven by merit, however if I had a nickel for every lousy directional dictation given by management or executives regarding the use of bad suppliers and ass-backward technology I'd be long retired.

Regardless, this thread isn't about private industry except that which involves government contracts and comparing the two is apples and oranges. Love it or hate it, private (non-govt) business transactions are constitutionally protected as are US citizens' rights to be biased, even to the point of bigotry. Business transactions dealing with the govt OTOH are highly regulated, a bureaucrat cannot legally apply his own biases to purchases made and contrary to his counterparts in the private sector, his actions are all a matter of public record.

RE: Advantages and Disadvantages of a DBE

jgKRI, you may be unusual in your practices. I've listened to male managers list all of the problems they have but insist on using the same engineering firms. Sometimes relationships and gender trump money. winky smile You have to chuckle and move on or catch their myopia.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC
NSPE-CO, Central Chapter

RE: Advantages and Disadvantages of a DBE

Quote:

Disgusting way to approach finding a business partner IMO.

And yet, it's what the law incentivizes.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East - http://www.campbellcivil.com

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