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Good Faith Effort: What is its purpose? There has been a lot of argument and confusion over the purpose of the good faith effort. Some of the DBE (Disadvantaged Business Enterprise) and DVBE (Disabled Veteran Business Enterprise) firms in California simply believe that it is a way for contractors to get around the state requirements to hire disadvantaged firms for public works projects and just "go through the motions" without actually hiring anyone for the projects they are bidding. Some contractors believe that this is true as well, hoping to just get through the process, get the good faith effort over and done with, filling out the paperwork and moving on. This is one of the misconceptions of the good faith effort; that it is simply paperwork to be filled out so that a contractor can fulfill this requirement in case they win their bid. This is simply not true and is not the intention of these programs.

The truth is that it does happen in many cases the contractors do just go through the motions. Why does this happen? For one reason, a lot of contractors simply don't understand the purpose or the process of the good faith effort. A good faith effort (GFE) is not a set of documents that a contractor simply hands in to the awarding agencies to get a project. The GFE is a process that must be followed in order to give disadvantaged and small businesses a fair shot at some of the work offered on public works projects. The DBE, DVBE and SBE (Small Business Enterprise) programs were created to assist small businesses in participating in contracts that they would not normally have an option to bid. It is a way to give back to the community and back to the taxpayers who work for small businesses in those communities. And in the case of the DVBE program, to give back something to those who paid the ultimate sacrifice for their country and were injured in military service. But many of the people who belong to these Business Enterprises (BE's) feel that the program is not serving their needs and that it is simply a way for the contractors to get around the rules.

What the State of California wants - intent of the good faith effort

The real intent of the GFE that is missed by most contractors is that they must in GOOD FAITH consider all certified and available firms that wish to participate on the projects they are bidding. When a BE calls or faxes back wishing to participate on a project and no one returns his or her call, this is NOT GOOD FAITH. As such, regardless of how much paperwork the bidder fills out, how many invitations to bid are sent by fax or mail, advertisements placed, or other outreach performed, if available BE's are not considered, there is no good faith. Subsequently, the bid should be rejected by the awarding agency. Performing outreach is not good faith, it is only the initial step in the process. Furthermore no third-party firm can perform ALL the good faith steps for you. The services of DBE Goodfaith are designed to assist prime contractors with locating DBE/DVBE/SBE/MBE/WBE firms, help with the outreach process and provide documentation of the outreach performed for those projects that require it.

But this is no replacement for the necessary step of negotiating and considering in GOOD FAITH those bids submitted by certified Business Enterprises. Awarding agencies have every right and obligation to turn down any bid that does not consider available BE's that wish to participate. The bottom line for the state and local governments is that the GOAL must be met to bring these small businesses and contractors together in order to become partners on these projects. Prime contractors must always focus on the goal of the awarding agencies and not the good faith effort. The good faith effort is simply a means to document the effort performed to find available certified subs and meet the goal, and is only acceptable when no available BE subcontractors can be found using a reasonable effort to find and hire them.

Bid preferences can help contractors win their project bids

Of course the bottom line for any prime contractor is winning the bid. Quotes submitted from subcontractors and suppliers are evaluated based on price and any one of them will either make or break any winning bid. Prices from certified BE firms are frequently higher than other larger subs, usually because those larger firms can have a competitive advantage over their smaller counterparts. The reason many prime contractors do not list these BE firms as subcontractors for their projects is because if they do, they will come out with a higher bid price. Higher bid = lost bid. One way that the State of California is attempting to even the score and encourage bidders to utilize certified BE's is to offer bid preferences to prime contractors by allowing them to lower their listed bid amount for evaluation purposes when they list SBE and DVBE subcontractors and suppliers. This can more than offset the higher prices that are quoted from certified BE subcontractors and help the prime win their bid. The maximum bid preference for utilizing SBE firms is 5% of the bid amount, up to $50,000. For DVBE firms this incentive allows this bid preference for up to 10% of the bid amount, or $100,000 maximum.

Do the math. If you are a prime contractor bidding on a project, you can hire some SBE or DVBE firms to subcontract and supply your project and reduce your evaluated bid price by 5% or more percent. What kind advantage would that give you in winning the bid? Since virtually no firms are taking advantage of this program, it will afford a competitive advantage to firms that strive to meet these state goals.