Building Capacity in the Construction Trades

Building Capacity in the Construction Trades: A winning strategy for primary contractors and the communities in which they operate.

The Need – Construction Workforce Capacity

The Problem Defined

While reasons vary, there is a general consensus of a significant underrepresentation of minorities in the construction industry. This fact dovetails a growing need in capacity for construction workers in the Portland region and throughout the country in general.

While much of the narrative around this shortage focuses on issues of structural racism, MBCB contends that the most significant barrier to equity in the construction industry is a clear pathway to increase capacity in an age where most people are directed towards higher education rather than the trades to achieve upward mobility. MBCB believes that innovation in capacity-building can solve the problem concurrently for both the primary contractor who is seeking new ways to build capacity and minorities seeking a proven pathway to prosperity.

MBCB is focused on connecting Primary Contractors with prospective minority workers and subcontractors to address the following Primary Contractor pain points:

• Primary Contractors are looking to showcase their Winning Culture which embraces Diversity, Equity, and Inclusion.
• Government entities have developed an array of unfunded compliance driven programs to encourage minority participation in public works contracts without giving the Primary Contractor a seat at the table to ideate a workable and cost-effective roadmap to attain aspirational DEI goals.
• Primary Contractors are looking to hire minority employees who would benefit from programming assistance to create a cost-effective and mission-driven recruitment funnel and onboarding program.
• Primary Contractors are looking to subcontract to minority owned businesses and would benefit from a cost-effective and mission-driven program to match Minority Subcontractors with Primary Contractors to jointly bid on contracts.

To address the four points above we start with a review of the landscape of minority workers and subcontractors and then begin to outline a strategy that will assist Primary Contractors in developing a capacity building roadmap that is inclusive of minority workers and subcontractors.

The Minority Workforce

Job Vacancies

A point-in-time analysis showed 2021 Construction Laborer jobs in Portland, Oregon through a search conducted on Indeed on 8/24/2021.

Within 25 miles of the search
202 Construction Laborer jobs
172 Construction Superintendents
384 Construction Workers
758 Total from Indeed alone, not counting for listings with multiple vacancies.

From just this single point in time analysis, we identify at least 758 vacancies on a given day. Then consider that this point in time analysis does not account for:

• Multiple jobs available for some of the included postings
• Vacancies that were not reported on Indeed
• Jobs that have not yet been bid due to labor shortages
• Projects delayed due to the ongoing COVID-19 pandemic occurring at the time of this writing

Given these additional factors, it is reasonable to state that the construction industry is in desperate need of skilled and reliable workers.

One source of potential capacity building is in the recruitment of underrepresented nontraditional workers in the construction industry including African Americans, Hispanic, Asian, Native Americans and women. To encourage participation of these groups, the City of Portland has rolled out a plethora of programs to encourage and incentivize Primary Contractors to recruit from these underrepresented groups.

Ironically, these government programs have not included Primary Contractors in their design thus developing a mind-numbing amount of data and programming options with significant compliance requirements causing a chilling effect on Primary Contractors’ participation in these initiatives.

Apprenticeship Program Shortfalls

Although apprenticeship programs for the trades exist, there remains a dearth of minority workers in the construction industry. When we dig into the data on these programs, we can identify the problems with this approach.

1 does not account for single job postings looking to hire multiple laborers.

The data show that the overall gap of diverse construction workers over the next five years for large public capital projects could be nearly 2,500²

When looking at apprenticeship data related to minority representation, workforce goals on most public projects indicate a 20% apprentice utilization rate (and therefore an 80% journey level rate).³

Data also show that the current overall placement rates for the existing pre-apprenticeship programs is 85%, however, the placement into a state-registered Apprenticeship is about 50%.

Additionally, Oregon Bureau of Labor and Industries (BOLI) data on apprenticeship programs shows for the current average completion rate for female and minority apprentices is about 38% and 35%, respectfully.

Using these recruitment and completion rates, the Portland region would need to train 996 pre- apprentice graduates to gain 498 apprentices, plus another 5,435 apprentices to gain 1,992 journey level women and people of color over the next five years. That would equal training a total of 11,868 pre-apprentices.

The total 5-year cost for this investment is about $109 Million, or roughly 1.44% of the total $7.58 Billion cost for all public capital projects included in the study.⁴

These programs have the potential to create a funnel of workers for Primary Contractors but require coordination. MBCB proposes a Coalition of Primary Contractors to share resources to develop an onboarding program which draws from this potential pool.

Minority Subcontractor Gaps

1. Similar to minority worker capacity, there is a shortfall in minority- and women-owned businesses within the construction industry. Specifically, there are few minority and women-owned businesses with the capacity to meet compliance and bonding requirements for multi-million-dollar jobs. Instead, there are businesses with the capacity to work on a piece of a large job as a subcontractor.
2. See Gap Analysis: https://www.oregonmetro.gov/construction-career-pathways-project. The potential workforce gap for women and people of color in construction in the region is actually much larger when factoring in projects that were not included in the study, including all private work, as well as public projects below $15 million. Gap also only looks at 2016 workforce supply.
3. Portland Metro Region Construction Workforce Market Study 2018 https://www.worksystems.org/sites/default/files/Construction%20Workforce%20Market%20Study%2C%202018_0.pdf
4. See Gap Analysis: https://www.oregonmetro.gov/construction-career-pathways-project. Total public capital projects over $15 Million derived from interviews in study equal $7.58 Billion over the next five years.

A pull from the COBID database on 8/20/2021 identified 270 MBE entries for the Portland region. Of those the following had listed capacity to serve on construction projects as follows:

1. Thirty-eight have various skills and capacity to provide professional services as a Minority Subcontractor.
   Professional Services are defined as those traditional “white collar” office services that typically require a higher education degree or professional certification such as:
   • Architect
   • Environmental Analyst
   • Engineer
   • CAD operator
   • Etc.

   These are skills that are often required to build out a job but do not provide skilled trade services at the job site.

2. Sixty-one have various skills and capacity to provide skilled trade services on a job site as a Minority Subcontractor.
   Skilled Trade subcontractor services are those traditional “blue collar” functions that are performed on the job site. These include:
   • Electrician services
   • Painting
   • Roofing
   • Excavation
   • Carting and clean-up
   • Site Security
   • Etc.

   Each of these services are a necessary component to large commercial construction projects but, individually, do not have the capacity of General Contractors to manage the projects at scale.

   Most of the thirty-eight professional services business and sixty-one skilled trades business appear to have the capacity to subcontract on large jobs to fill a specific niche. Relationship development by the Primary Contractor with these small businesses, in addition to any COBID listed WBE and EB, could realistically allow them to cobble together subcontracted services to surpass the 20% aspirational goal. A focus on MBE and WBE would provide the added value of proving strong outcomes in Diversity, Equity and Inclusion (DEI) to significantly enhance their competitiveness when responding to RFPs seeking a strong DEI component.

3. Thirteen have various skills and capacity to serve as the primary contractor on jobs ranging from small residential, electrical, renovation or highway to large commercial construction.
   Primary contractors are defined here as businesses with the capacity and/or certification to operate as the Primary government contractor for very small to large public works jobs including jobs in the areas of:
   • Highway construction and repair
   • Floating structure construction and repair
   • Residential construction and repair (these may include publicly funded low-income housing builds or repair)
   • Electrical infrastructure upgrades and repair
   • General Contractor services on small to large commercial public works projects requiring zero to multiple subcontractors.

As demonstrated about, very few of the entities identified in COBID have the capacity to win the primary contract on a multi-million-dollar multi-faceted Public Works contract. As such, white and male-owned Primary Contractors continue to play a significant role in the development of capacity to complete Public Works projects.

In September 2020, the Portland City Auditor published a report entitled “Equity in Construction Contracting: Some goals achieved despite mismanagement, waste and gamesmanship”. This report demonstrated that despite the attempts to encourage minority participation in the bidding process, there was a significant amount of waste in the implementation of programs to meet the City’s aspirational goals. While the report was eye-opening, most of the recommendations to correct the problems once again defaulted to increased monitoring and compliance requirements without input from the Primary Contractors of which they were targeting to monitor and regulate.

The remainder of this report identifies the opportunities present on Public Works contracts and a means to build minority capacity that will not place and undo burden on the Primary Contractor nor Minority Subcontractor.

The Opportunity – Public Works Opportunities in Millions

The 2018 Portland Metro Region Construction Workforce Market Study laid an expectation of 81 public projects in the construction trades, totaling $7.5 billion over the next 3-5 years. If minority businesses were to be subcontracted at the 20% aspirational goal set by the city, that would mean $1.5 billion dollars being funneled to minority and women-led businesses as well as emerging businesses. Needless to say, the remaining $6 billion would go to the Primary Contractors.

From this 10,000-foot perspective, it is clear that this is an opportunity for Primary Contractors to not only continue to build on their economic success, but also serve as driver to creating a true pathway for women and people of color to participate in the economy and provide them with the opportunity to build intergeneration wealth through business development and home ownership.

Succeeding at this goal is truly capitalism at its finest. The added value of partnership between Primary Contractors and Minority Contractors on these public works projects is that such a business plan is mission-driven, appealing to the next generation of workers that strive to not only provide for themselves but lift others up while doing so.

The Solution – Focus on Primary Contractors

While there has been much work done in Portland on attempting to increase minority representation in the construction industry, most of this work has been done through outside entities attempting to develop compliance driven initiatives for the Primary Contractor. For the remainder of this document, we will focus on the ingredients necessary to develop a culture within the Primary Contractor’s business that will build capacity from the inside out. The ultimate outcome is to create an executable plan, driven by the primary contractors, to successfully onboard Minority Subcontractors as RFP partners to increase opportunity for all.

Definitions

Winning Culture

Throughout this document you will run across the concept of ‘A Winning Culture”. For purposes of clarity, MBCB defines a Winning Culture as:

A demonstrative commitment to job opportunities, education and training, and safe working environment for ALL employees. Through this authentic commitment to providing key opportunities to their own workers, the primary contractor is nurturing employee ambassadors that are already engaged in and with the communities in which they live, including communities of color.

Thus, it is imperative that the primary contractor adopt the mindset that they must first invest further in their existing relationships by adopting this winning culture. Once a winning culture is achieved organically, word-of-mouth capacity will begin to spring from the communities in which minority employees and subcontractors are most engaged and invested. The key metric will be an uptick in Minority Subcontractors seeking to partner with the primary contractor. Conversely, we can measure if a winning culture does not exist based on a dearth of Minority Subcontractors willing to partner with the primary contractor.

Authenticity

Throughout this report we will also reference Authentic Relationships. Authentic Relationships are qualitatively different than the often-discovered Transactional Relationships in business. Authentic relationships are those relationships in which we engage out of a sense of personal desire to raise up an individual worker, generation of workers and/or community of workers in hope for a better future for all. This is a mission-driven focus on employee professional development. Concrete examples of authentic relationships in a business are:

• scholarship programs to assist financially disadvantaged persons in accessing career opportunity or advancement
• apprenticeship programs focused on developing true upward mobility pathways for people in actual or near poverty
• mentorship of Minority Subcontractors to help them partner successfully with primary contractors to raise entire communities from which these minority businesses hail

The goodwill described is the new era of marketing. Governments are seeking to fund businesses that give back and create opportunities. These activities demonstrate the primary contractor’s contribution to underserved communities rendering them more competitive in securing government contracts and contracts from like-minded businesses.

On the other hand, relationships that are not authentic are typically transactional. Transactional relationships do not improve culture or community, they simply create a fee for service mentality with a common theme of “a day’s pay for a day’s work.” This mindset is insidious within many industries, including the construction industry, and a core barrier to success in achieving minority capacity-building goals.

Ironically, it is not just minority workers that do not respond well to the transactional approach. Research is demonstrating that a significant proportion of the Millennial generation (born between 1981 and 1996) as well as Generation Z (born between 1997 and 2012) are seeking mission-driven, authentic relationships in the workplace. Filling this gap would prove a Win-Win for both the primary contractor and scores of potential job candidates and newly emerging beneficial businesses, also known as B-corps if certified by B Lab.

The Pathway There

The pathway to increased capacity via partnering with Minority Subcontractors relies on laser focus of the following three overarching, ultimate outcomes:

• Access to authentic relationships (relationships that are not transaction-based).
• Access to quality education and training in the trades.
• Access to jobs and career opportunities in the trades.

This report demonstrates why these three overarching outcomes are key necessary ingredients to solving this problem, how there is still a lot of work to do in these domains. Most importantly, this report begins to lay out a roadmap for overcoming the barriers to achieving these outcomes through the minority worker and business mentoring onboarding process.
Success in these three domains can be measured by:

• a statistically significant upward tick in partnership development between traditionally white male led primary contractors and Minority Subcontractors as measured by attainment of the 20% MBE aspirational goal being met by primary contractors when bidding and completing public works contracts.
• goodwill between communities of color and primary contractors as evidenced by:
  • a winning culture as defined in the section above
  • The primary contractor’s employees of color serve as champions for the primary contract because they feel valued in this winning culture.
• marketing and branding which shares the authentic stories of minority business owners and trades workers whose success leads to the growth of the middle class in these communities of color, to inspire future generations.

The Primary Contractor Coalition Difference

While needed, most efforts in coalition building to improve diversity, equity and inclusion of minority participants in the construction space to date have been organized with a government, advocate and community focus as the decision makers on necessary policy changes. Examples of such coalition outcomes can be found through the following document links:

• Strategic-plan-advance-racial-equity-diversity-inclusion-16087-20160613.pdf (oregonmetro.gov)
• State of Oregon: Oregon procurement manual – Programs for business inclusion and diversity
• Social Equity in Contracting | Portland.gov
• Equity Training and Education | Equity Initiatives | The City of Portland, Oregon (portlandoregon.gov)
• Social Equity Contracting: Building Portland Businesses | The City of Portland, Oregon (portlandoregon.gov)
• Diversity Action Plan | Metro (oregonmetro.gov)

Throughout these efforts, Primary Contractors have been the outliers in these efforts and the target of change, looking like the following diagram:

Despite the mind-numbing amount of work and resources that has been expending through these government-driven initiatives, outcomes remain poor in building minority workforce capacity in the construction industry. MBCB asserts that this is largely due to both Primary Contractors and Minority Subcontractors being marginalized in the process of identifying outcomes.

Our exploration has identified that both the Primary Contractors and minority contractors are focused on doing a great job while delivering the best product safely and at a competitive rate. Neither party wants to be bogged down with the cost of additional compliance that is required through the government-designed initiatives. Meanwhile, both the Primary Contractor and Minority Contractor have the shared business goal of building capacity through an increase in minority onboarding through direct hire and partnership development.

Our proposal is a coalition of Primary Contractors with outreach to communities of color, key government partners and minority trade advocacy groups focused on creating a capacity funnel through the mentorship and partnering of minority contractors.

We would envision such a coalition as follows:

Stages of Development for the Primary Contractor Capacity Building Initiative

Stage One – Build from Within

The initial phase of capacity building among Primary Contractors must be focused on building from within. Broadly, this is accomplished by the Primary Contractor:

• Focusing on their relationship with their minority employees by leaning in to hearing their goals and aspirations and then developing career ladders.
• Focusing on the experiences of their minority employees and determined how they can be improved.
• Develop new initiatives for all employees, based upon data collected in steps #1 and #2 to turn employees into advocates for the contractor within the communities in which they live.
• Identify existing subcontractors with whom the Primary Contractor has already worked with successfully and do the same work with them through coaching and mentorship.

This last step is key. By strengthening your existing relationships with Minority Subcontractors through mentorship and opportunity, they will become strong advocates for you as a business partner of choice. In this way, Primary Contractors will enjoy meaningful and authentic community engagement that demonstrates true commitment to diversity, equity and inclusion.

Stage Two – Collect Stories

Creating this bridge to building authentic relationships in Stage One will begin to attract minorities to the Primary Contractor’s culture knowing that if they have the drive, they can attain their career and business goals. Once this funnel has been created, Primary Contractors will find that they may mine for winning stories among your minority employees and subcontracting partners. These winning stories should be highlighted through social media and other communications outlets to further message out the winning culture that is thriving within the Primary Contractor’s organization.

Stage Three – Coalition Building

Only after internal capacity building has been completed and pre-existing relationships with Minority Subcontractors has been accomplished should coalition building commence with the Primary Contractors at the hub.

Whereas the Primary Contractors have all of the necessary ingredients to foster new initiatives towards equity through their experience, bonding capacity, RFP awards, etc. It makes more sense to place them as the hub to a coalition that coalesces around the primary contractors to inform innovation in onboarding and building capacity from the large pool of underemployed minority workers.

This is a collaborative, consensus-building approach to addressing all participants’ pain points. Through authentic dialog and hands on planning sessions, these entities work together to develop new means of capacity-building through onboarding that provides:

• increased opportunity for upward mobility for people of color,
• a capacity funnel for the Primary Contractors and,
• an onboarding and training plan to develop winning partnerships with additional Minority Subcontractors.

This final step may be accomplished by the primary contractor curating a set of tools for the minority contractor as part of their “onboarding” process from the vast number of resources made available through the government coalitions to improve diversity, equity and inclusion in the construction industry. The onboarding process of partnering with new subcontractors would include mentoring and coaching which streamlines access to these numerous resources.

It is here that it is important to invite the organizations providing these resources a seat at the table to ensure that Primary Contractors are connected plugged into these minority-focused agencies to align the resources offered by the Primary contractor on onboarding with the training needs of the Minority Subcontractors. Thus, the Primary Contractor may offer a clear path, through partnership, to streamline the Minority Subcontractor’s development and progress in the construction industry.

Conclusion

The City of Portland has made clear that this type of partnering is a desired outcome for successful bids on Public Works jobs. Specifically, the city has identified a 20% aspirational goal of White male-owned Primary Contractor businesses partnering with subcontractors who are either:

• Minority Owned
• Women Owned
• Emerging Small Businesses

Through this partnering the city is seeking the ultimate outcomes of Primary Contractors to:

• Help increase the number of minority workers participating in the Construction Trades and
• Help increase the number of minority-owned business

Government programming expects the Primary Contractors to achieve these overarching outcomes through knowledge transfer to minority business and generation of opportunities for minority workers.

Whereas it is a reasonable and sound expectation to work towards increasing minority participation within the Primary Contractor’s ranks through the direct hiring process, it is anathema to any business to transfer their key knowledge to another business so they may eventually outcompete them.

MBCB present the solution to this dilemma through the creation of a coalition of Primary Contractors working together to identify strategic partnerships with small- to mid-sized Minority Subcontractors. This coalition would have the Primary Contractor and Minority Subcontractors come together at the table to jointly bid on public works contracts while coaching the Minority Subcontractor through a coalition-operated, business-development mentorship program focused on Public Works.

This strategy would accomplish the following:

• Organize a coalition of Primary Contractors focused on giving back to their community via a Diversity, Equity and Inclusion program raising up Minority Subcontractors,
• Pool Primary Contractor resources to develop a program to assist Minority Subcontractors that partner on Public Works projects with the knowledge, skills and tools to successfully meet public works compliance mandates and,
• Provide a vehicle for organic development of authentic relationships between Primary Contractor leadership and Minority Subcontractor leadership

In addition, the coalition would pool its resources to develop a plan to assist in the onboarding of minority workers as full-time employees in their business through partnership development with pre- existing apprenticeship programs.

By focusing on the Primary Contractors, and working within their capacity, there is opportunity to for everyone to win in the construction trades.