Sheltered Market Program Description Background
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1 Sheltered Market Program Description (An Intergovernmental Program Implemented by the City of Portland, Multnomah County and Portland Development Commission) Background The United States Supreme Court determined in the 1989 City of Richmond vs..j.a. Croson Co. decision that public affirmative action programs utilizing racial classifications were subject to strict scrutiny review in the courts. Under this review, the question is not whether racial classifications are benign or remedial, but rather whether the classifications are narrowly tailored and further a compelling state interest in addressing proven discrimination. The statistical and anecdotal analysis involved in examining the predicate for affirmative action programs in public contracting has typically been undertaken in the context of Disparity Studies. As a result of the Croson decision the City of Portland eliminated its minority and women s business goals program in To determine if and how discrimination has occurred in local public procurement processes, Portland Mayor Vera Katz proposed and the Portland City Council approved the funding and execution of the Oregon Regional Consortium Disparity Study. Completed in May 1996, in partnership with other local governments, the Study found that discrimination and bias have impeded opportunities for minorities and women in the regional construction industry and hindered the City s ability to include them in its contracting and procurement processes. The Study also identified inefficiencies in the City s procurement system that limited the ability of all contractors, regardless of race or gender, to successfully bid and perform work for the City. The Fair Contracting and Employment Strategy was crafted in response to the Study s findings and recommendations for the City of Portland. The Strategy establishes as a unified vision the principle of race and gender parity in the amount the City spends to procure goods and services by awarding contracts to a diverse and competitive group of local contractors while providing significant employment opportunities to minorities and women. Its mission is to create a procurement system that is fair, efficient, effective, and accountable to all citizens while embracing the values and achieving the vision, goals, strategic outcomes, and objectives of the Fair Contracting and Employment Strategy. The Disparity Study specifically found that minority and women-owned businesses were underutilized at a prime contracting level and recommended that the City develop a program to enhance opportunities for such firms to do business with the City directly as primes. The Sheltered Market Program was developed as the key tool to address this recommendation. The City of Portland, Multnomah County and Portland Development Commission are all partners in the Sheltered Market Program. Multnomah County and Portland Development Commission contract with the City of Portland to administer the qualification portion of this program, however each agency has its own bidding process which may differ in some ways. Those 1
2 policies and procedures stated in this document that are unique to the City of Portland are identified as such throughout this document. Description The Sheltered Market Program (SMP) is designed to improve opportunities and build capacity of state certified (MBE), woman-owned businesses (WBE), and emerging small businesses (ESB), (collectively M/W/ESB s ) in the regional construction industry to compete in the open market at a prime contracting level. Firms participating in the SMP must have prior contracting experience. This is not a program for start up businesses. Participation in the program is limited to three to five years, with a maximum of five years. The SMP allows up to one-half of all new formal construction projects from $100,000 to $200,000 to be bid to program participants. Five city bureaus place projects into the program the Water Bureau, Bureau of Transportation, Bureau of Environmental Services, Bureau of General Services and Parks Bureau. Program participants compete amongst themselves for contracts as the lowest bidder. Construction projects that meet the dollar threshold are directed into the program, if it appears that sufficient SMP contractors will be available to provide competitive bids.in addition, SMP firms are the first source for City informal contracts with a dollar value of $5,000 to $100,000. The first project bid through the SMP occurred in While the SMP is focused on prime contracting opportunities, the program recognizes the importance of sub-contracting opportunities as well. Some firms, by the nature of their trades, will predominately bid on projects only as sub-contractors, and not all SMP firms desire or are able immediately to bid as prime contractors. For these reasons, and in order to maximize the opportunities provided by the program, SMP primes are required to attempt to utilize available SMP firms for sub-contracting on projects bid within the program. On some large City projects SMP firms will also be designated as the first source for subcontracting. Definition A business qualifies as a Sheltered Market firm if it has gone through the SMP application process and has been notified and identified by the City of Portland as a Sheltered Market participant and has agreed to the SMP program standards and requirements in writing. Sheltered Market Review Panel This panel may be comprised of individuals from local jurisdictions, city bureaus and community-based organizations. This panel will serve as the Appeal Panel for the Applicant Selection Team and for all appeals regarding termination or suspension from the program. Applicant Eligibility The application process is open to construction firms certified by the State office of M/W/ESB as a MBE, WBE or ESB firm. A firm s average annual gross receipts must not exceed one million dollars a year, for the prior three years. The firm must agree to an assessment of technical assistance needs by a consultant named by the City of Portland and to participate in training opportunities. 2
3 Firms applying for the SMP must have the ability to perform a commercially useful function typically at least 50% of the construction involved on any contract they are awarded. At the time of application, the firm must have been in business for at least two years and must have experience bidding and performing in their specific areas of work. These areas of work are identified in the firm s Contractor Prequalification Application. The firm must complete the application process. Application Process The Bureau of Purchases will periodically solicit applications for the SMP. Applications may be accepted for specific areas of contracting only and for limited periods of time as determined by the City. All firms must submit a Contractor Prequalification Application or Letter of Prequalification from the City of Portland. Interested applicants must complete and submit all necessary documents required by the SMP application to the Sheltered Market Program Coordinator. Application Review Process The application review process is a three-step process: Step A: The Sheltered Market Program Coordinator will review all applications for completion. All firms with missing information will be informed in writing and given a deadline for completion. Step B: The Sheltered Market Program Coordinator will establish an Applicant Selection Team with appropriate technical and program expertise to review each application. Step C: The Applicant Selection Team will determine which applicants, based on the eligibility criteria, are accepted into the SMP. The Sheltered Market Program Coordinator will contact applicant firms in writing and explain the appeal process. Appeal Process Firms wishing to appeal the denial of entry into the SMP must appeal in writing to the SMP Program Coordinator within seven days after receipt of the denial letter. The SMP Program Coordinator will forward appeals to the Applicant Selection Team for review and potential re-consideration. The Selection Team may request a meeting with the firm. If the firm is not satisfied with the decision, the firm may request a second review by the Sheltered Market Review Panel. The decision of the Sheltered Market Review Panel is final. However, firms are free to apply at any subsequent SMP program reopening. Technical Assistance A needs assessment by the technical assistance provider is required for all new firms entering the Sheltered Market Program. 3
4 The firm must commit to participate in the development and execution of a work plan that addresses the needs of the business as identified by the technical assistance provider. Pre-award and post-award project specific technical assistance will be available as part of the Sheltered Market Program. Business development training opportunities will be provided to SMP contractors throughout the year and throughout program participation. Minimum Standards and Responsibilities for Participation in the Sheltered Market Program The firm must maintain State Certification as a MBE, WBE or ESB firm. Brokering and pass through contracting is not acceptable and will result in immediate removal from the SMP. Firms participating at any tier in SMP opportunities must perform the full percentage of work that would be normal under industry standards and practices, typically at least 50%. Unless otherwise specified in the bid specifications, a bid will be rejected as nonresponsive if the percentage of work to be performed will be less than 50%. The firm must commit to creating a work plan in collaboration with technical assistance providers. In addition, the firm will work with the technical assistance provider if a City, Multnomah County, or PDC project manager raises project specific technical or performance issues and to participate in the training opportunities as appropriate. All firms entering the SMP must attend an introductory orientation session to the program. For all projects exceeding $100,000, firms will be required to provide a performance bond. The firm must comply with all State and local contracting laws and will meet the terms of all City of Portland, PDC and Multnomah County contracts. The City of Portland requires that a firm must commit to solicit bids from SMP contractors for sub-contracting opportunities. The contracting firm will be required to demonstrate and document its efforts to utilize SMP contractors. Early Graduation Standards At the end of three years, firms will be reviewed for early graduation. Early graduation will occur if: A) A firm s gross receipts have exceeded one million dollars during each year for a twoyear period in the SMP, may be considered for early graduation. Early graduation will not occur, if the firm can identify projects and invoices where the purchase of materials and equipment, not contracting, was responsible for exceeding the one million-dollar ceiling. B) A firm has been awarded five formal SMP contracts with the City of Portland. Graduation Standards Participation in the program is limited to a maximum of five years. All firms participating in the program for five years will graduate or leave the program. Criteria for Removal or Suspension A firm may be temporarily suspended or permanently removed from the SMP for the following reasons depending on the severity of non-compliance: 4
5 The firm is no longer State Certified as a DBE, MBE, WBE or ESB firm. My firm did not attend SMP pre-bid meetings for which they had committed to attend on a substantial number of SMP projects within a 12-month period. The firm has been disqualified from receiving City of Portland, PDC or Multnomah County contracts. The firm violated state or local contracting laws (for example, failure to pay subcontractors for work performed on a project after receiving payment). The firm failed to submit required reports. Firms permanently removed or temporarily suspended from the SMP will not be allowed to bid on any SMP contracts that are directed to SMP firms. All firms will be notified in writing of their removal or suspension from the SMP. Firms wishing to appeal the removal or suspension from the SMP must submit a request in writing within seven days after receipt of removal or suspension letter to the SMP Program Coordinator. The Sheltered Market Review Panel will review the appeal and make the final decision. Responsibilities of the Sheltered Market Program Coordinator The Program Coordinator will respond to firms in a timely manner. The Program Coordinator will provide ongoing training opportunities for firms that wish to participate. The Program Coordinator will commit to inform participants of other contracting and training opportunities within the region. The Program Coordinator will act as a liaison between the contracting firm and city bureaus when necessary to facilitate successful relationships between all parties. The Program Coordinator will coordinate with Multnomah County and PDC. The Program Coordinator will receive and process all SMP applications. The Program Coordinator will coordinate the suspension or removal process. Responsibilities of City of Portland Project Managers Project Managers will include all necessary requirements in bid specifications. Project Managers will write bid specifications in a clear and concise manner. Project Managers will refer SMP contractors with project specific performance and technical issues to the SMP Program Coordinator for coordination of technical assistance. Project Managers will be responsive to questions and provide timely feedback on work performance to SMP contractors. Project Managers will be supportive to the goals of the SMP in growing the skills and capacities of SMP firms. 5
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