Small Business Enterprise Program (SBE)

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					                                             Small Business Enterprise Program

Summary of Policy                              practices to determine if remedial action is
The Small Business Enterprise Program is       necessary to better utilize DBE resources.
a race and gender-neutral business             To satisfy legal requirements, public
assistance program designed to foster          agencies enacting affirmative action
economic development within the Los            programs must satisfy two requirements:
Angeles County. The SBE Program is
                                               1. there must be compelling government
designed to provide all business owners
                                                  interest underlying the program. This
equal opportunities and accessibility to
                                                  means that an agency like the
contracting and procurement activities
                                                  LACMTA must have a “strong basis in
funded exclusively with local or state
                                                  evidence” for concluding that an
dollars. The program is aimed at
                                                  ongoing substantive problem exists
achieving priorities of inclusiveness,
                                                  with discrimination in contracting.
diversity, and economic development.
                                               2. its affirmative action program must be
The SBE Program has been modeled after
                                                  narrowly tailored to serve that interest.
the Disadvantaged Business Enterprise
(DBE) Program by incorporating                 A Predicate Study gathers and analyzes
applicable federal requirements of the         two types of data/evidence. The first type
DBE program that best fit the SBE              involves an analysis of statistical and other
Program. These requirements include:           evidence, which would identify any
                                               statistically significant disparity between
a. changing the SBE certification period
                                               the number of DBE/MBE/WBE
   from two to three years;
                                               contractors which are available versus the
b. adding annual “notice of change”            number which have been utilized.
   certification affidavits;
                                               The second component involves an
c. prompt payment and retention                analysis of interviews and other anecdotal
   provisions;                                 information, which further describes the
d. and good faith efforts reconsideration.     extent of any discriminatory practices,
                                               which may exist in governmental
At its regular meeting in July 2005, the       contracting practices.
Board approved to extend the current SBE
Program Goal of 15% for Fiscal Years           The Predicate Study conclusion found
2006 and 2007. The Board also approved a       significant disparities (underutilization)
Bi-Annual Small Business Enterprise            for African American, Hispanic, and
Program Goal Review beginning Fiscal           Asian firms in both construction and
Year 2007.                                     professional services. According to the
                                               study, minority owned firms were used 80
Historical Perspective                         percent or less than what would have been
                                               expected in the absence of discrimination.
The United States Supreme Court ruling         Disparity analyses found that African
in Croson vs. City of Richmond (1989)          American, Hispanic, and Asian firms were
requires that government agencies              under represented among new business
conduct a DBE Predicate Study to               starts in both construction and
establish a firm legal foundation for DBE      professional services. Significant
programs. Such studies analyze the             disparities were also found in regard to
agency’s current and past procurement          women owned business in professional
                                                Small Business Enterprise Program

services, and to some degree in                   increase the number of different firms
construction.                                     participating in subcontract opportunities,
The statistical evidence indicates that           increase the number of prime contract
businesses owned by minorities and                opportunities for small and mid-size
women do not do nearly as well as                 firms, increase outreach and technical
businesses owned by white males in the            assistance, and identify the barriers faced
geographic areas and industries which we          by small and mid-sized firms in
procure construction and professional             successfully accessing and competing for
services. Small businesses owned by               contracts.
minorities and women do less well than            In November 1996, the voters of California
small businesses owned by white males,            adopted a state constitutional amendment,
and minority and female business owners           CCRI. A coalition represented by the
earn less than white males with similar           ACLU, immediately sued to block CCRI's
demographic profiles.                             enforcement, arguing that its broad
According to the study, the statistical           mandate of equal treatment violates the
evidence would provide a compelling               Fourteenth Amendment's guarantee of
governmental interest in continuing               equal protection because the end of racial
affirmative efforts to include D/M/WBEs           and gender preferences would distort the
when corroborated with direct evidence of         political process in a racial manner by
marketplace discrimination against                preventing them from lobbying
minority and women business owners in             municipalities and the state legislature for
geographic procurement market areas.              preferences. An injunction was imposed.

On April 3, 1996, the Board adopted the           On April 8, 1997, the United States 9th
findings of the Predicate Study, which            Circuit Court of Appeals ruling, upheld
revealed that disparity in contract awards        the CCRI/Prop 209, prohibits the
exist for all minority groups and for             continued implementation of the State
females in the professional services.             and Local Minority and Women-Owned
                                                  Business Programs. A 21-day stay was put
On April 16, 1996, the Secretary of State         in place at that time.
announced that the California Civil Rights
Initiative (CCRI), Proposition 209,               On April 14, 1997, the Board authorized
qualified for the November 5, 1996                staff to implement the race and gender-
General Election ballot. The CCRI would           neutral SBE program for non-federally
dismantle and prohibit the                        funded negotiated contracts. The SBE
implementation of voluntary affirmative           Program was implemented as an
action programs that have served to               alternative to the state and local M/WBE
remedy issues of under-utilization of             Program.
women and minorities in employment.               In October 1999, the Board adopted a
The CCRI would eliminate affirmative              motion to bolster efforts at identifying and
action programs and policies based on             assisting disadvantaged small businesses
race, color, national origin or sex in public     to become certified as DBE or SBE. The
employment, contracting and education.            motion requires staff to hold seminars
                                                  that help small businesses understand
At its April 1996 meeting, the Board              how to negotiate the pre-qualification
directed staff to make recommendations            process and interpret relevant
to increase subcontract opportunities,            procurement documents. It also requires
                                               Small Business Enterprise Program

us to rotate the DBE and SBE vendor              A. 15% Small Business Enterprise
solicitations to increase the number of             Program Goal for Fiscal Year 2006
businesses that can bid on projects.                and Fiscal Year 2007; and
The Board also adopted a Voluntary               B. Bi-Annual Small Business Enterprise
M/WBE Program for State and locally                 Program Goal Review beginning
funded competitively bid contracts to               Fiscal Year 2007.
comply with state law. This program is
strictly voluntary; M/WBE participation is       See Related
encouraged.                                      Disadvantaged Business Enterprise
In July 2003, staff recommended revisions        Procurement
to the SBE Program modeling DBE
                                                 Small Business Technical Participation
Program requirements and a Small
Business Preference Program that will            Predicate Study
provide for a 5% preference for certified        Proposition 209 (California Civil Rights
SBE firms during the contract award              Initiative)
process for negotiated procurements.
                                                 Public Utilities Code § 130051.19
This revision extends SBE certification
from two years to three years consistent         Public Utilities Code § 130239
with the DBE program and reduces the             California Constitution Article 1 § 31
burden on small business in the
certification process. New certification
requirements also require SBEs to submit
an annual written affidavit that the firm
continues to meet the small business size
standards and the existing $250,000
Personal Net Worth requirement. In
addition, the SBE program offers
proposers the opportunity for
Reconsideration of its Good Faith Efforts
(GFE) documentation when determined
that it is not responsive because it has not
documented sufficient good faith efforts to
meet established contract-specific SBE

Last Board Action
July 28, 2005 – Small Business Enterprise
The Board approved on consent calendar: