Examining the Relationship of Bid Difference and Disadvantaged Business Enterprise Participation Goals in Highway Construction Projects
Abstract
The Disadvantaged Business Enterprise (DBE) program began in the early 1980s and has been a point of contention for departments of transportation (DOTs) and prime contractors in the heavy-highway sector of the construction market. The program was created to assist those who are at a disadvantage in entering the heavy-highway industry. Controversy related to the administration of the DBE program has been at the forefront of the program. Controversies include fraud, inadequate government oversight, numerous lawsuits, legal rulings at all levels including the Supreme Court, and state legislation to reduce program goals. This research analyzes over 60,000 awarded highway contracts from 18 states throughout the United States. Analysis was performed on the state and aggregate level. The contracts were awarded from the years 2008 through 2018. Statistical analysis utilizing Pearson’s Correlation and Ordinary Least Squares regression model for each state was performed to identify each variable’s relationship between the budget and awarded project dollar amounts. Summary statistics observed Bid Difference at 8.5% below the Engineer’s Estimate. The study observed DBE Participation Goals average 3.74% of the value of contracts, with an observed average number of bidders of nearly 4.5 per contract. The research examined the effects of economic indicators, contract descriptors, and yearly/seasonal adjustments. These variables included the DBE Participation Goal, the Number of Bidders, Project Dollar Value, Project Duration, Unemployment Rate, S&P 500 Index, Volatility Index, quarter, and year of project. The results were examined by using a combination of simple statistical summaries and econometric models called a cost vector. Cost vectors were created to adequately weight the measure of each variables impact. The research determined that 55% of observed states had a positive significant correlation with DBE Participation Goal and Bid Difference. This correlation translated to nearly $80 million in additional cost. In addition, the research found that all 19 groups involved in this study had a negative significant correlation with the Number of Bidders, which translated to a savings of nearly $500 million.
Degree
Ph.D.
Advisors
Rapp, Purdue University.
Subject Area
Statistics|Civil engineering|Economics|Finance|Transportation
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