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1 2017 Capacity Analysis of Certified M/WBEs in NYC

EXECUTIVE SUMMARY
MINORITY AND
WOMEN-OWNED
BUSINESS CAPACITY
ANALYSIS
M/WBE FIRMS CERTIFIED BY THE CITY
OF NEW YORK

PREPARED BY:
EUQUANT, INC.

DATE:
MAY, 2017

Copyright 2017 Building Trades Employers Association (BTEA) All Rights Reserved.
2 2017 Capacity Analysis of Certified M/WBEs in NYC

ABOUT EUQUANT
ECONOMIC RESEARCH COMPANY
EuQuant (pronounced U-Quant) is located in Atlanta, Georgia. Founded 25 years ago, it is
one of the nations leading economic research companies specializing in performance
evaluations of small, minority and diverse suppliers. EuQuants founder and CEO, Dr.
Thomas Danny Boston, received a Ph.D. in Economics from Cornell University. He is
also a Professor of Economics and International Affairs in the Sam Nunn School of
International Affairs at Georgia Institute of Technology (Georgia Tech). The companys
Vice President, Dr. Catherine Ross, received the Ph.D. in City and Regional Planning and
Civil Engineering from Cornell. She specializes in transportation planning and
regional analysis.

In 2013, the U. S. Senate Committee on Small Business and Entrepreneurship


designated EuQuant as the Committees Primary Research and Data Analytics
Company. In 2012, the Atlanta Tribune designated EuQuant #2 among Black-owned
Business in the State of Georgia, in recognition of the companys innovative research,
community commitment, and financial capacity. The company has performed
pioneering M/WBE research for the Congressional Black Caucus Foundation and the
US Small Business Administrations 8(a) Business Development Program and Small
Disadvantaged Business (SDB) Program. Dr. Boston served as advisor to the Justice
Department and Department of Commerce during the revision of federal minority and
women business programs in response to US Supreme Court decisions. In this capacity,
he developed the benchmarking methodology currently used to set aspirational goals
for Disadvantaged Business Enterprise Programs of the federal government. EuQuant
has conducted multiple studies of minority and diverse supplier performance and
capacity studies for federal, state and local agencies and major corporations. Among
other distinctions, EuQuant recently evaluated the economic impact of 70 US
bilateral trade agreements for the International Trade Administration and is compiling a
database for the African Union to monitor and evaluate the progress of African
countries toward democracy and development.

Some of the noted recognitions of the companys leaders are as follows: In 2016
Dr. Boston was awarded Entrepreneur of the Year by the Atlanta Business League;
he is former President of the National Economic Association; former Senior
Economist to the Joint Economic Committee of Congress; and past
Professor of the Year at Georgia Tech. He was an officer in the US Army and is a
recipient of the Purple Heart. Dr. Ross is former President of the Association of
Collegiate Schools of Planning; former member of the Transportation Research Board
of the National Academy of Sciences; and was the first Executive Director of the
Georgia Regional Transportation Authority. Together, Drs. Ross and Boston have
published eight (8) books and numerous scholarly articles and reports. Linje Boston,
EuQuants Chief Operating Officer, served as the principal researcher on the NYC
M/WBE capacity study. A ten-year company employee, he holds undergraduate and
graduate degrees in Statistics from Carnegie Mellon University and the University
of Michigan respectively.
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PURPOSE
This report measured the capacity of 3,133 M/WBE contractors certified by the NYC
Department of Small Business Services. The contract award data covered the 3 Year
Period of 2012-2015. To our knowledge, this is the first
Capacity is the dollar value study of its kind in the nation.
of work that a contractor
can efficiently performCapacity is the dollar value of work that a contractor
can perform efficiently during a given period. It is
during a given period. It is
different from revenue and may be greater or smaller.
different from revenue and
This
may be greater or smaller. study measured capacity by a complex
procedure which takes into consideration numerous factors.
The report used four categories of information to estimate capacity:

 1. Contracting data on all businesses (including M/WBEs and Non-M/WBEs) that
performed prime contracts and subcontracts with NYC;
2. Data on the size, industry, and characteristics of each contract awarded;
3. Data on the business-related attributes of all contractors that received awards; and
4. Data on all certified M/WBEs.

The study used public data from the Checkbook NYC website as well as NYCs online
directory of certified businesses. Proprietary data sources were used to collect some
information and the research also used EuQuants extensive national small business
database. The Building Trades Employers Association (BTEA) of NYC commissioned the
study. The research team plans to conduct similar capacity studies for other NY
agencies once data are available. Those agencies are as follows: New York State Empire
Development Corporation, Metropolitan Transit Authority, Port Authority of New York and
New Jersey, and the New York State Department of Transportation.

THIS CAPACITY STUDY IS NOT A DISPARITY STUDY


This report is not a Disparity Study and its results are not intended to be used or interpreted
as such.

Disparity Studies derive their name from their primary objective. Specifically, to evaluate
whether or not there are statistically significant differences (or disparities) between the
amount of work that a governmental agency awards to M/WBEs and the amount one
would expect them to receive given their qualifications, capabilities and interest in
working with the agency. The purpose of a Disparity Study is to determine if there are
patterns of race or gender discrimination that help explain any disparities in contracting
that are identified in the statistical data. Both NYC and NYS are currently conducting
disparity studies. In contrast, this study did not measure disparities; instead, it measured
the capacity of M/WBEs.

The research was commissioned by the Building Trades Employers Association (BTEA) of
NYC and was conducted by EuQuant.
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EXECUTIVE SUMMARY
CONCLUSIONS
1. M/WBE construction capacity in New York City is surprisingly low for a city that is
the largest in the country. The relatively low level of M/WBE capacity makes it very
difficult to see how NYCs aspirational goals can be met.

2. 
New York City needs to invest more financial resources into M/WBE business/
capacity building programs in order to create greater opportunities for M/WBE
contractors.

3. The overwhelming majority of NYC and NYS certified M/WBEs did not have the
licenses/registrations required by the NYC Building Code in order to be awarded
contracts for performing work in these trades:

M/WBE CONTRACTOR CAPACITY:


The capacity measures were broken down by industry, race and ethnicity (i.e. Blacks,
Hispanics, Asians) and by gender. Note that non-minority women comprised 72% of
women- owned firms, while women belonging to various minority groups comprised the
remaining 28%. The five construction industries examined in the study are listed below,
followed by the six-digit North American Industry Classification System (NAICS) code. The
codes indicate the sub-industries that are rolled up in the broader industry category.

Heavy, Street, Bridge, Sewer Construction: (237110, 237310)


Commercial and Institutional Building Construction: (236220)
All Other Specialty Trades Contracting: (238990)
Poured Concrete Foundations and Structure Contractors: (238110)
Electrical, Plumbing, and Building Equipment Contractors: (238210 238290)

Heavy Construction, Streets Bridges, and Sewers:

2.5% or 6 of 249 M/WBEs certified in Heavy Construction, Streets Bridges, and


Sewers had the capacity to perform contracts larger than $27.0 million.

13% or 32 of 249 M/WBEs certified in Heavy Construction, Streets Bridges, and


Sewers had the capacity to perform contracts larger than $6.0 million. There were
104 contracts larger than $6.0 million; they totaled $2.5 billion. The total value of
all contracts in this industry (i.e. those greater and less than $6.0 million) was $2.9
billion.
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Of the 32 M/WBEs that had the capacity to perform Heavy Construction, Streets
Bridges, and Sewer contracts larger than $6.0 million, 13 were Asian, 14 WBEs, 6
Hispanic, 1 Black. Also, some firms had operational capacities in more than one
industry. Therefore, the sum (derived by adding each group) may not be equal to
the total for all M/WBEs. Note that $6 million is the breakpoint for the largest 25%
of contracts. The largest 25% of contracts accounted for 86% of total award value,
or $2.5 bill/$2.93 bill.

Commercial and Institutional Building Construction:

3.2%or 17 of 519 M/WBEs certified in Commercial and Institutional Building


Construction had the capacity to perform contracts larger than $30 million.

35% or 184 of 519 M/WBEs certified in Commercial and Institutional Building


Construction had the capacity to perform contracts larger than $1.9 million. There
were 137 contracts larger than $1.9 million; they totaled $2.82 billion. The total
value of all contracts in the industry (i.e. those greater and less than $1.9 million)
was $2.95 billion.

Of the 184 M/WBEs that had capacity to perform Commercial and Institutional
Building Construction contracts larger than $2.0 million, 64 were Asian, 55 WBEs,
41 Hispanic, 37 Black. Note that $2 million is the breakpoint for the largest 25%
of contracts. The largest 25% of contracts accounted for 96% of total award value,
or ($2.83 bill/$2.96 bill).

Electrical, Plumbing, and Building Equipment:

10%or 64 of 624 M/WBEs certified in Electrical, Plumbing, and Building


Equipment had the c
 apacity to perform contracts larger than $5.3 million.

362 M/WBEs in Electrical, Plumbing, and Building Equipment had the capacity
to perform contracts larger than $412,000, this included 112 Asian, 100 WBEs, 78
Hispanic, 91 Black.

Other Specialty Trades Contracting:

622 M/WBEs were certified in Other Specialty Trades Contracting; 159 had the
capacity to perform contracts larger than $1.0 million, this included 34 Asian, 59
WBEs, 34 Hispanic, 21 Black.
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Poured Concrete Foundations and Structural Construction:

343 M/WBEs in Poured Concrete Foundations and Structural Construction, 294 had
capacity to perform contracts larger than $390,000, this included 108 Asian, 86
WBEs, 57 Hispanic, and 64 Black.

The data shows that the capacity of Black contractors is particularly low in comparison
to the capacity of other M/WBEs:

1 of the 66 Black Contractors certified in Heavy construction, Streets Bridges and


Sewers had the capacity to perform contracts larger than $6.0 million.

Less than 28% of 132 Black Contractors certified in Commercial and Institutional
Building Construction had the capacity to perform contracts larger than $1.9 million

4% or 7 of 171 Black Contractors certified in Electrical, Plumbing and Building


Equipment had the capacity to perform contracts that were larger than $5.3
million.
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NEW YORK CITY LICENSES AND REGISTRATIONS


Using the New York City Department of Buildings skilled trade licenses website, each firm
was searched by company name and other identifying information to determine whether
it had an ACTIVE license/registration in a special trade. The results were as follows:

Overall, only 14.3% of New York City M/WBE contractors in five major construction
Industries had required licenses:

ELECTRICAL LICENSE HOLDERS MASTER PLUMBER LICENSE HOLDERS GENERAL CONTRACTORS

18% or 73 5% or 10 21% or 263

82% or 340 95% or 174 79% or 984

Firms With Electric Licenses Firms With Master Plumber Licenses Firms With General Contractor Licenses
Firms Without Electric Licenses Firms Without Master Plumber Licenses Firms Without General Contractor Licenses

POURED CONCRETE LICENSES FIRE SUPPRESSION LICENSES

3% or 14 2% or 5

97% or 494 98% or 226

Firms With Poured Concrete Licenses Firms With Fire Suppression Licenses
Firms Without Poured Concrete Licenses Firms Without Fire Suppression Licenses
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NEW YORK STATE LICENSES AND REGISTRATIONS


New York States Unified Certification Program Business Directory (UCP) combines
the business directories of the NYS Department of Transportation, Metropolitan
Transportation Authority (MTA), Niagara Frontier Transportation Authority and Port
Authority of NY & NJ. The directory was downloaded and each firm individually searched
in the NYC Buildings Department website for license/ registration holders that have an
Active License/Registration.

10% of New York State DBE/ACDBE contractors in five major construction industries
had required licenses:

ELECTRICAL LICENSE HOLDERS MASTER PLUMBER LICENSE HOLDERS GENERAL CONTRACTORS

10% or 24 2% or 2 11% or 18

90% or 208 98% or 88 89% or 143

Firms With Electric Licenses Firms With Master Plumber Licenses Firms With General Contractor Licenses
Firms Without Electric Licenses Firms Without Master Plumber Licenses Firms Without General Contractor Licenses

POURED CONCRETE LICENSES FIRE SUPPRESSION LICENSES

0% or 1 0.20% or 1

100% or 475 99.80% or 458

Firms With Poured Concrete Licenses Firms With Fire Suppression Licenses
Firms Without Poured Concrete Licenses Firms Without Fire Suppression Licenses
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RECOMMENDATIONS
1. 
NYC should invest significant financial resources into M/WBE business development
programs as a way of assisting firms in building capacity and attaining the various
contractor licenses/registrations required to perform work in NYC. The City of New Yorks
M/WBE program has focused primarily on aspirational goals as a way of creating more
opportunities for minority and women-owned businesses. That effort is very important
to leveling the playing field for M/WBEs. However, this report also strongly recommends
that the City put significant resources into M/WBE business development programs
as a way of assisting firms in building capacity and gaining the licenses and permits
required to work on City contracts. NYC requires contractors to have a work permit to
perform construction-related work in virtually all contracting areas. In many industries,
contractors must have certain licenses before they can get permits. Furthermore, to
get a license a contractor must have attained a level of advanced education beyond
high school and have conducted years of journeymen work. NYC also has a unique
institutional and regulatory environment. The regulatory factors have reduced the
number of M/WBEs that have sufficient capacity. It is important to understand how these
complex regulatory and institutional factors operate to affect M/WBEs and what must be
done to assist M/WBEs in overcoming such barriers.

2. 
NYC should make sure that aspirational goals are correctly aligned with M/WBE
capacity.

3. 
Business development and capacity building efforts should be targeted toward
industries and groups that are experiencing significant deficits in capacity.

4. 
NYC should measure the capacity of each M/WBE it certifies and make that
information available to all prime contractors.

5. 
NYS should establish an Executive Office responsible for gathering M/WBE
contract data from all its agencies and independent authorities. It should collect
and centralize M/WBE contract data. NYS would then be in a better position to
determine the capacity of M/WBEs and develop capacity building programs to
supplement its efforts at attaining aspirational goals.

6. 
This research was not intended to determine what the appropriate aspirational
goals should be for NYC or identify how the level of M/WBE capacity compared to
NYCs aspirational goals. That is the job of a Disparity Study, and it is our
understanding that such a study is currently underway. That study should provide
detailed insight into these issues and recommend policies that are effective at
resolving them. The study should also take those factors into consideration when
recommending aspirational goals and other remedial policies.

7. 
Finally, NYC should structure its M/WBE program to achieve business development
goals along with aspirational goals. The future success of M/WBE programs in New
York City and across the country will depend heavily on the extent to which
agencies focus on achieving business development and capacity building, rather
than just aspirational goals. We believe this report provides a unique starting point
for NYC to begin this process.
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Key Data of NYC Certified M/WBE Contractors

INDUSTRY DISTRIBUTION OF M/WBE CERTIFIED FIRMS, CITY OF NEW YORK 2015-2016

RACE AND ETHNIC DISTRIBUTION OF M/WBE CERTIFIED FIRMS, CITY OF NEW YORK, 2015-2016

LOCATION DISTRIBUTION OF M/WBE CERTIFIED FIRMS,


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High-Level Summary of the Capacity of Certified


M/WBEs in NYC

What is capacity and how was it determined? Capacity is the amount of work
(measured in dollars) that a company can perform efficiently during a single year. A five-step
procedure was used to determine M/WBE capacity. First, the research team examined all prime
contracts and subcontracts NYC awarded in 2015 and 2016. Second, the team collected
detailed information on the market characteristics of firms that performed each
contract. Third, a model was used to identify the relationship between companies market
characteristics and the amount of work they performed (i.e. their capacity). Fourth,
information on the market characteristics of M/WBEs was collected. Finally, the research
team used the information and model results to estimate the amount of work each M/WBE
ought to be able to perform, i.e. its capacity.

Tables 1 through 7 below provide a high-level summary of the capacity estimates for M/WBEs.
Those tables are from the full report, where they appear as Tables 10 16. In Table 1, the
average capacity of all M/WBEs is broken down by industry. Tables 2 through 7 provide
detailed information for each M/WBE group; including Asians, Blacks, Hispanic/Latinos,
non-minorities that are certified M/WBEs, and non-minority women-owned businesses that
are certified M/WBEs. Each table has six columns:

Column 1 gives the name of the industry in which the firm operated. The study examined
seven different industries.

Column 2 records the number of firms that operated in the industry.

Column 3 gives the mean capacity of all firms that operated in the industry. The mean
capacity is just a different way of saying the average capacity. Anytime results are derived
from estimates, the mean rather than the average is the correct expression to use.

Column 4 records the median capacity of firms in the industry. The median is simply the
value that separates the top half of capacity values from the bottom half. Specifically, if one
were to arrange the capacities of all firms in order from the smallest amount to the largest
amount, the halfway point between the smallest and the largest values is the median.

Column 5 records the 75th percentile capacity of firms in the industry. Suppose we arranged
all capacity values in the industry in order from the smallest amount to the largest amount.
The amount that separates the top 25% of capacity values from the bottom 75% is the 75th
percentile.

Column 6 records the 95th percentile capacity of firms in the industry. Similar to the example
above, if we arranged all capacity values in order from the smallest amount to the largest
amount, the amount that separates the top 5% of capacity values from the bottom 95% of
capacity values is the 95th percentile.
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The Results
Table 1 shows the mean capacity of M/WBEs across all industries. The mean was $3.5 million.
Firms in Environmental Consulting Services had the highest mean capacity, $6.2 million. That
industry was followed respectively by Commercial and Institutional Building Construction,
$5.1 million; Heavy, Street, Bridge, Sewer Construction, $4.7 million; and Poured Concrete
Foundations and Structure Contractors $4.1 million. The two industries with the smallest
mean capacities were Architectural, Engineering, Geophysical Services ($1.6 Million) and All
Other Specialty Trades Contracting ($1.9 Million).

TABLE 1. MEAN CAPACITY FOR ALL CERTIFIED M/WBES BY INDUSTRY

NAME OF INDUSTRY MEAN CAPACITY

Architectural, Engineering, Geophysical Services $1,559,328

Commercial and Institutional Building Construction $5,114,067

All Other Specialty Trades Contracting $1,942,909

Electrical, Plumbing and Building Equipment Contractors $3,060,772

Environmental Consulting Services $6,179,617

Poured Concrete Foundations and Structure Contractors $4,085,560

Heavy, Street, Bridge, Sewer Construction $4,703,346

Mean Across Industries $3,543,865

Table 2 provides detail capacity estimates for all M/WBEs. It includes the number of firms
in each industry, the mean capacity, the median capacity, the 75th percentile capacity
and the 95th percentile capacity. Across all industries, mean capacity was $3.5 million and
median capacity was $.760 million. The industry with the largest median capacity was Heavy,
Street, Bridge, Sewer Construction ($1.8 million). The 75th percentile capacity was $2.4 million,
and the 95th percentile capacity for all M/WBEs was $12.3 million. M/WBEs in Environmental
Consulting Services had the highest 95th percentile capacity ($17.2 Million).
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TABLE 2. CAPACITY MEASURES FOR ALL CERTIFIED M/WBES BY INDUSTRY, NYC 2015-2016

UPPER CAPACITY BOUNDARY

Table 3 provides capacity estimates for 1010 Asian-owned firms that were certified
M/WBEs. Across all industries, the mean capacity of Asian firms was $3.3 million, the
median capacity was $.895 million, the 75th percentile capacity was $3.3 million, and the 95th
percentile capacity was $12.6 million. Asian firms in Environmental Consulting Services
had the highest mean capacity ($7.1 million), and Asian firms in the same industry had the
highest median capacity ($7.8 million). Similarly, Asian firms in that industry had the highest
75th percentile capacity ($9.7 million) as well as the highest 95th percentile capacity ($17.4
million).

TABLE 3. CAPACITY MEASURED FOR CERTIFIED ASIAN-OWNED M/WBES BY INDUSTRY, NYC 2015-2016

UPPER CAPACITY BOUNDARY


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Table 4 provides capacity estimates for 786 Black-owned firms. Those firms had the
smallest capacity of all M/WBE groups, individually and collectively, see Table 4. For example,
mean capacity of Black-owned firms was $1.4 million, while for all M/WBEs it was $3.5 million.
Median capacity of Black-owned firms was $0.554 million while it was $0.760 million for all
M/WBEs. The 75th percentile capacity of Black-owned firm capacity was $1.3 million while it
was $2.4 million for all M/WBEs. Finally, the 95th percentile capacity of Black-owned firms
was $5.2 million while for all firms it was $12.2 million. The largest mean capacity of Black-
owned firms was in Commercial and Institutional Building Construction ($2.3 Million). For
Blacks, the largest 95th percentile capacity was in Civil Engineering Construction and Envi-
ronmental Consulting ($7.9 million).

TABLE 4. CAPACITY MEASURED FOR CERTIFIED BLACK-OWNED M/WBES BY INDUSTRY, NYC 2015-2016

UPPER CAPACITY BOUNDARY

Table 5 gives capacity results for Hispanic/Latino firms. The total number of Hispanic/
Latino-owned M/WBEs examined in the study was 602. Their mean capacity was $4.9
million, median capacity was $0.718 million, 75th percentile capacity was $2.2 million, and
95th percentile capacity was $15.0 million. Among Hispanic/Latinos, the industry with the
highest median capacity was Heavy, Street, Bridge, Sewer Construction ($1.8 million). The
same industry had the largest 95th percentile capacity ($30.8 million).
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TABLE 5. CAPACITY MEASURED FOR CERTIFIED HISPANIC/LATINO-OWNED M/WBES BY INDUSTRY, NYC


2015-2016
UPPER CAPACITY BOUNDARY

Table 6 provides capacity estimates for 486 women-owned firms that were certified
M/WBEs. WBEs had the highest capacity of all M/WBE groups. Their mean capacity
was $5.2 million, and the median capacity was $1.3 million. The capacity value for the
75th percentile was $5.3 million, and for the 95th percentile, it was $20.6 million. Among
women, the industry with the highest median capacity was Environmental Consulting
Services ($7.4 million). The largest 95th percentile capacity value for women-owned firms was in
Commercial and Institutional Building Construction ($37.3 million).

TABLE 6. CAPACITY MEASURED FOR CERTIFIED WOMEN-OWNED M/WBES BY INDUSTRY, NYC 2015-2016

UPPER CAPACITY BOUNDARY


16 2017 Capacity Analysis of Certified M/WBEs in NYC

Finally, Table 7 provides capacity estimates for 712 non-minority-owned firms that
were certified by the M/WBE program. Presumably, those firms met the criteria required
for establishing social and economic disadvantage. Among firms in this category, the mean
capacity was $5.2 million, and the median capacity was $1.1 million. The capacity value for the
75th percentile was $4.0 million, and for the 95th percentile, it was $18.9 million, see Table 7.

TABLE 7. CAPACITY MEASURED FOR CERTIFIED NON-MINORITY-OWNED M/WBES BY INDUSTRY, NYC


2015-2016
UPPER CAPACITY BOUNDARY