Highway Contracting

The Transportation Department's Disadvantaged Business Enterprise Programs seeks to eliminate the effects of historical discrimination by helping small businesses owned by socially and economically disadvantaged individuals. Under the program funded by the Federal Highway Administration (FHwA), the states are required to set goals and award contracts so that not less than 10 percent of their federal-aid highway funds goes to firms in the program. FHwA also funds state-provided technical and business development assistance for Disadvantaged Business Enterprise firms through its supportive services program. This report evaluates (1) whether the states were meeting their Disadvantaged Business Enterprise participation goals and how effective FHwA's efforts were in ensuring that they did, (2) whether FHwA effectively provided technical and business development assistance through its supportive services program, and (3) whether "graduation" from the program equates to business success.

GAO found that: (1) FHwA and states have successfully provided opportunities for disadvantaged businesses to compete for contracts in the federal-aid highway program; (2) between 1989 and 1993, states met or exceeded their goals for DBE participation; (3) although minority business enterprises receive the majority of DBE contract funds, states have increasingly met their DBE goals by contracting with women-owned businesses; (4) FHwA does not timely or effectively respond when states miss their DBE participation goals; (5) although FHwA has succeeded in providing contracting opportunities to DBE firms, its supportive services program is of limited effectiveness and duplicates those services available through the Small Business Administration (SBA); (6) in three of the six states reviewed, FHwA supportive services were often unavailable for lengthy periods and varied widely in scope and content; (7) FHwA efforts would be better served by helping DBE firms obtain SBA assistance because SBA programs are more established and provide assistance in several key areas that FHwA programs do not; (8) between 1988 and 1992, fewer than 1 percent of the DBE firms in the six states reviewed graduated from the program; (9) graduation from DBE programs does not indicate whether a firm will be successful or self-sufficient on the open market; and (10) DOT has not used graduation or any other performance measure to evaluate the success of the DBE program or individual DBE firms.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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