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Caltrans Increases DVBE Contract Goals on Highway Projects to 5% Goals increased because Caltrans has failed to meet annual DVBE goals in each of the past 3 years

The California Department of Transportation (Caltrans) has failed to meet the annual 3% Disabled Veteran Business Enterprise (DVBE) participation goal for each of the past three years. In response to this shortfall, the Department has decided to increase the DVBE goal on all contracts and implement new bid award procedures in an effort to ensure that the goal is met. As of February 11, 2008, Caltrans has started to implement the new bid award procedures, as is apparent in its construction contract advertisements.

Contractors will be required to contact more DVBE firms on Caltrans projects to meet the increased goals

In order to meet the 3% annual DVBE goal, Caltrans is initiating a temporary increase in their DVBE contract goals to 5%, which is to remain in effect until July 2008. This is an effort by Caltrans to get ahead of the curve in meeting its DVBE participation obligations for 2008. As a result, firms bidding on Caltrans projects must attempt to subcontract at least 5% of the contract work to DVBE certified firms. This percentage increase also means that contractors will need to contact more DVBE firms on every Caltrans project that they plan on bidding.

When bidders are unable to procure DVBE participation, they are required to provide evidence that they made a good faith effort to obtain the necessary percentage of DVBEs for the project, as is currently the standard procedure. In the past, the lowest bidders who made a good faith effort without including DVBEs in their bid were often awarded the contract; however, the bid award procedures to be employed by Caltrans will make it more difficult for bidders who only use good faith efforts and reward those contractors that utilize DVBEs in their bid.

New Caltrans bid award procedures implemented to increase DVBE participation

The new Caltrans bid award procedures stipulate that bidders who secure over 1% DVBE utilization on a contract will be entitled to bid incentives. In this process, the Department will consider the three lowest bidders if the second and third lowest bids are within 5 percent or $100,000 from the lowest bid. Once this is determined, Caltrans will then apply the DVBE incentive to the three lowest evaluated bid amounts and determine if the bid ranking changes.

For example, the lowest bidders on a contract are businesses A, B, and C, who have bid $100,000, $102,000, and $103,000, respectively, and have obtained DVBE participation of 0%, 3%, and 5%, respectively. Business A, who has not included a DVBE firm, will receive no incentive and have a net bid of $100,000. Business B, who has secured 3% DVBE participation on the same contract, will receive a $3,000 incentive and have a net bid of $99,000. Business C, who has 5% DVBE utilization, receives the maximum 5% incentive which in this case equals $5,000. Subsequently, Business C has the lowest net bid, $98,000, and wins the contract. Even though Business C initially had the highest bid amount of the three contractors, the fact that it met the contract's DVBE goal allowed it to win the project.