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Small Diverse Business Program for Construction

The Small Diverse Business Program for Construction encourages and ensures open and equitable contracting practices are used by prime contractors in soliciting and contracting with Minority Business Enterprises, Women Business Enterprises, Veteran Business Enterprises, Service-Disabled Veteran Business Enterprises, Disability-Owned Business Enterprises, and LGBT Business Enterprises together referred to hereafter as Small Diverse Businesses (SDBs).

The department’s Statement of Policy outlines the specific policies and guidelines for the Small Diverse Business Construction program.

DGS establishes a minimum participation level (MPL) for the participation of SDBs as subcontractors, suppliers, and professional service providers. The established MPL is based on factors such as:

  • Geographic location of the project,
  • Contract size and type, and
  • The availability of SDBs to participate as subcontractors, suppliers, and professional service providers.

Construction projects with a value greater than $50,000, but not subject to the Small Business Contracting Program, are subject to the Small Diverse Business Program for Construction.

PROCEDURES

Bidders are no longer required to address the project MPLs at bid submittal and do not submit any other information addressing the SDB program as part of their bid package. Upon the selected contractor’s Notice of Award and receipt of contract, the contractor must elect to either:

  • "Opt-In" to meet the MPL for SDBs, OR
  • Provide “Good Faith Documentation" of their efforts during the contract periods to include SDBs as subcontractors, suppliers and/or professional service providers for every subcontract or purchase order greater than $10,000.

Opt-In

Contractors selecting "Opt-In" must:

  1. Submit a Small/Small Diverse Business Utilization Report (SDBUR) on SDB utilization along with each Application for Payment, documenting all commitments and payments made to SDBs during the contract term by name of company, description of work and amount paid.
  2. Agree and commit to meet or exceed the project MPL by the project close out inspection date.

Contractors selecting to "Opt-In" are not subject to the specific requirements of Good Faith Documentation, but may be required to provide documentation supporting any commitments and/or payments listed on the SDBUR.

If the prime bidder is a Small Diverse Business firm, DGS will not credit the value of the prime bidder’s contract toward meeting the MPLs. All prime Bidders (including SDB prime bidders) are expected to comply with the Small Diverse Business Participation section in the Instructions to Bidders.

Good Faith Documentation

Contractors selecting to provide "Good Faith Documentation" must:

  1. Submit a Small/Small Diverse Business Utilization Report (SDBUR) on SDB utilization along with each Application for Payment, documenting all commitments and payments made to SDBs during the contract term by name of company, description of work and amount paid.
  2. Agree to utilize reasonable efforts to identify, solicit and secure commitments with SDBs as subcontractors, manufacturers, and/or suppliers throughout the duration of the project in efforts to achieve the project MPL.

The "Good Faith Documentation" measures apply to each subcontract and purchase order executed in excess of $10,000.

Minimum "Good Faith Documentation" includes, but is not limited to:

PARTICIPATION OF SMALL DIVERSE BUSINESSES

A contractor’s SDB participation level is calculated by adding the appropriate dollar value of commitments to Commonwealth verified SDB subcontractors, manufacturers, stocking suppliers and the fee/commission paid to non-stocking suppliers and dividing the total sum by the total contract award amount.

The amount of credit that each of the service categories (subcontractors, manufacturers, stocking suppliers, non-stocking suppliers) yields towards the project SDB MPL are outlined in the department’s Statement of Policy and as further detailed below.

Subcontractors

SDB subcontractors provide labor and may provide materials associated with the labor on the subcontract. SDB subcontractors through their own employees must perform at least 60% of the amount of the subcontract. 100 percent of the subcontract amount is counted towards the SDB MPL.

Manufacturers

SDB manufacturers are firms that operate or maintain a factory or establishment that produces, on the premises, the materials, supplies, articles, or equipment required under the contract and of the general character described by the specifications. 100 percent of the total cost of the materials or supplies purchased from the Small Diverse Business manufacturers is counted towards the SDB MPL.

Stocking Suppliers

SDB stocking suppliers are firms that own, operate, or maintain a store, warehouse, or other establishment, in which the materials, supplies, articles or equipment of the general character described by the specifications and required under the contract are bought, kept in stock, and regularly sold or leased to the public in the usual course of business. 60 percent of the total cost of the materials or supplies purchased from a small diverse business stocking supplier is counted towards the SDB MPL.

Non-Stocking Suppliers

SDB non-stocking suppliers do not carry inventory, but orders materials from a manufacturer, manufacturer’s representative, or stocking supplier. In order for a non-stocking supplier to receive credit, it must perform a useful business function by engaging in meaningful work (i.e., negotiating price; determining quality and quantity; ordering materials; and paying for the materials). Industry practices and other relevant factors are considered. SDB non-stocking suppliers are credited at only the amount of the fee or commission charged by the SDB non-stocking supplier for assistance in the procurement of the materials and supplies provided the fees or commissions are reasonable and not excessive as compared with fees customarily allowed for similar services and with the understanding that under no circumstances shall the credit, for a SDB non-stocking supplier, exceed 10% of the purchase order cost.

The contractor is allowed to use contract amounts at any tier of supply or subcontracting provided that the SDB is the initial SDB firm in the organizational hierarchy. Therefore, if the contractor or any of its non-SDB subcontractors or suppliers makes a commitment to a SDB, the credit for the subcontract/purchase order commitment, regardless of the level or tier, shall be calculated and credited toward the contractor’s MPL.

The dollar value of any commitment to a SDB cannot be double counted. In the event that the SDB whose entire subcontract value is counted towards the contractor’s MPL then subcontracts a portion of the work or supplies associated with this subcontract to another SDB, the dollar value of the subcontract with/to this lower tier SDB is NOT counted in the contractor’s MPL in order to prevent the duplicate counting of SDB commitment dollars. In this case, the dollar value of this subsequent SDB subcontract has already been included within the scope of work and dollar value of the Small Diverse Business commitment already counted as a part of the contractor’s MPL.

For more detailed program information, including sanctions associated with non-compliance, the contractor must follow and adhered to the SDB Program guidelines disclosed within the project contract documents.

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