Lessons from L.A.: BUILDING BUSINESSES WHILE BUILDING BETTER SCHOOLS

By Tom Lemmon | San Diego Daily Transcript |  http://bit.ly/rKnwpu

Thursday, December 29, 2011  :: Growing up in San Diego, I always look forward to going to Saska’s in Mission Beach for their baseball cut steak. Both my wife and I have been going there since we were kids and still enjoy going there to this day. Also, back in the day when I had a couple of extra bucks to upgrade my Baja Bug, I always went to the Off Road Warehouse. It’s been a long time since they were located on Othello Avenue, and the move to Balboa Avenue only made the access easier.

These small businesses give San Diego its character. Their products and services are high-quality because the people who run them know San Diego like the back of their hand, and there’s pride in serving people in the town where they live.

Small businesses are a major driver of our economy. Two-thirds of all new jobs are created by businesses with fewer than 20 employees. This makes sense if you think about it. Proportionally, small businesses create more jobs relative to their share of the economy. They also tend to have roots in a local area and therefore circulate their revenues within the local economy.

In the construction industry, public agencies are increasingly setting goals to encourage small-business participation in public works projects. It serves a double bottom line by investing to create both public and private benefits.

  Some data is now coming back about the results of such projects. The California Construction Academy at the UCLA Labor Center recently released a report evaluating construction projects under Los Angeles Unified School District’s project stabilization agreement from 2003 to 2011 [Project Labor Agreements: Pathways to Business Ownership and Workforce Development in Los Angeles] and found that 48 percent of construction project dollars went to small and disadvantaged businesses.

This far surpassed LAUSD’s goal to ensure that 25 percent of construction project dollars went to small business enterprises. Out of a total of $8.68 billion that LAUSD spent on construction projects, $4.15 billion went to small and disadvantaged businesses. Out of 496 total prime contractors, 219 prime contractors were small business enterprises. Out of 4,773 total subcontractors, 1,194 subcontractors were small business enterprises.

LAUSD’s projects also created large numbers of local jobs with family-sustaining wages and benefits. Construction projects under the LAUSD PSA employed a total of 96,000 workers who gained an aggregate of $1.46 billion in wages. Forty-one percent of these workers live in target ZIP codes within LAUSD, and 68 percent of these workers live in Los Angeles County. These workers directly spend their wages into the local economy, thus spurring a ripple effect into food services, tourism, transportation and retail sectors.

These results show the value of a PSA for local and small businesses. They demonstrate that in addition to building better schools, an agency can leverage taxpayer dollars in construction for a high economic impact. Part of the reason for LAUSD’s success was that the leadership embraced the goals of small-business development. They actively put processes into place to help small businesses bid and followed up with prime contractors to help them find small contractors to hire.

In San Diego, we are witnessing the business model generating great success. Whereas LAUSD required more than five years acquiring operational efficiencies, San Diego Unified School District is already making significant strides within two years of adoption of its PSA on Proposition S funds.

A recent SDUSD study, based on a survey of contractors by consultant Rea & Parker Research, found that local hire goals are on track, that there was no change in project cost or quality, and projects were completing faster under the PSA. The SDUSD PSA has an ambitious small-business participation goal, aiming for 40 percent small business enterprise participation. Within this broad target are special provisions for emerging small businesses and businesses owned by the disabled, veterans, women or minorities.

Earlier this month, the board of trustees of SDUSD voted unanimously to extend the PSA to all Proposition S bond and state funded projects. This creates certainty for contractors, administrators and taxpayers, allowing the PSA to stabilize costs and save time. It also allows scheduling and coordination between contractors and apprenticeship programs for multiyear trades curricula. Extending the PSA in the long term creates a level playing field for small businesses by making it cost-effective to invest in work force training and bidding requirements, so that they can increasingly be awarded school construction projects.

Small-business growth will be critical to the recovery of the construction industry in San Diego. It makes good business sense to use our scarce taxpayer dollars to build public facilities, while also building a sustainable base of quality contractors on public works projects in the region. I look forward to the small construction businesses playing a critical role in ushering a happier 2012.

• Lemmon is the business manager of the San Diego County Building and Construction Trades Council AFL-CIO.