President's Blog

Sep 01, 2016

 

I need to warn you, this article is about a subject that is hard to explain, especially for an amateur writer. Having warned you I am going make my best effort because it is an important issue.

The city of Port Arthur and other government or quasi-government agencies make a big deal out of wanting to do business with Small, HUB, Minority Owned, Veteran Owned and local businesses. While Federal regulations are a big obstacle to industry in being competitive, maintaining existing jobs and creating new jobs, local rules to qualify to bid on industrial, municipal, port, school or college projects is just as big an obstacle for small businesses.

Golden Pass LNG has recognized this problem and in an effort to help Jefferson County based businesses become pre-screened to bid on its project, Golden Pass LNG launched its Local Business Initiative and paid approximately $200,000.00 to VERIFORCE to approve nearly 200 local firms. This unheard of effort demonstrates that industry recognizes the challenges to becoming a potential vendor for industry and is making an effort to help. I say potential because this pre-screening process is the first step in preparing to bid for the project. Should you be selected to bid, you would be required to complete the qualification process and meet additional company standards in order to compete for selection.

In attempt to better understand what local small firms must do to participate in local projects I spoke with two small local firms.  To avoid embarrassing either of these two firms I will simply call them Firm A and Firm B.

In 2008 Firm A joined ISNetworld (ISN) to become eligible to work for a client. Too complete ISN’s requirements took approximately 7 weeks. In addition to the in-house man hours spent completing the process, Firm A paid a private firm $1,600.00 to bring their Safety Manual into compliance.  To maintain their subscription to ISN they pay $1,500.00 per year.

In 2012 Firm A joined AVETTA to become eligible to work for a different client. After 5 weeks of in-house man hours and another $2,500.00 to update their Safety Manual, they became qualified.  They pay $1,400.00 to maintain the yearly AVETTA subscription.

In 2016 they became a member of VERIFORCE through Golden Pass LNG’s Local Business Initiative.  Now Firm A has been placed on the local pre-screened list for the Golden Pass project and while Golden Pass does not require they remain subscribed or pay the annual fee, if they wish to be eligible for other VERIFORCE projects they must pay an annual subscription fee.

The reason these firms must subscribe to multiple agencies is each company seeking vendors does not use the same screening agencies, do not work collectively or recognize a qualification or subscription for every company listed above. So, if a company does not recognize or use ISN, AVETTA or VERIFORCE the small business must go through the process again and pay more money.

Firm B is able to hire a separate firm to handle all of their qualification applications. They currently belong and pay annual fees to VERIFORCE, DISA, ISN and AVETTA costing them $3,500.00 annually.

Now the fun part. Even though Firm A and Firm B have been pre-screened and paid their fee it may not translate into business. It only gives them the right to bid on industrial projects. If they are selected to bid, they must go through full qualification. That translates to more time and more money.

These screening agencies are just a few of the hurdles small business must clear. If working on a project near the port they must get a TWIC card (national security) and find someone to develop a safety plan and teach it to their employees. For safety training, in this area, most firms use ISTC This, again, cost time and additional money.  

While it is tough to get into industrial projects it is almost as tough to bid on city, school, county or port projects.  It is not the pre-screening that scares away small business, but the bid proposal. Because these government entities are spending tax dollars the legal requirements are complicated and many.

In Pasadena, Texas I worked for a small sign company. The city put out a bid for five LED monument signs at five of their facilities. The bid contract was over an inch thick. We didn’t have a room full of lawyers to review these documents, couldn’t afford a firm to complete the bid for us and the insurance requirements were higher. We could have sold and built five signs for individuals (which we did) while completing the bid packet for the city. We also had to cut our profit margin so we could be competitive.  Because I had worked for the chamber of commerce for 17 years and knew a lot of people I was able to get the help needed to complete the process and we were successful getting the bid. But a company should be able to seek city, school, county or port business without having to know somebody.

I understand that industry must have a system to check a company for safety, background checks, drug testing, financial history and insurance but we must make an effort to make it easier and less costly for the small businesses. Robert Bilnoski with Golden Pass LNG and I have discussed the need for industry and community entities to have a system that simplifies this process. While it is easy to want such a system it will not be easy to design.  It is clear the current system is filtering out some of the very companies the city and industry are trying to help and it is also limiting the choices had by the city and industry. They are doing business with the same people at the same prices.

The chamber is going to begin discussions with industry, government, college and other knowledgeable members to research avenues of help for these HUB, minority owned and small businesses. The Small Business Development Center is a valuable asset for small businesses but the pre-screening process is overwhelming, even for them. The process is scaring away too many businesses from attempting to get part of the $60,000,000.00 in new construction jobs that will be coming to the Port Arthur Area over the next 5 years. That number is conservative and doesn’t include government projects.

It will also be difficult because many small businesses do not have the drive to take advantage of these programs or to follow up on projects. Once exposed to the process they sit back and fail to follow-up on leads, due to confusion, fear of the process, unwillingness to get proper insurance, develop a safety plan, lack of understanding or just plain laziness. This will not stop the Greater Port Arthur Chamber of Commerce from trying.

I told you it was hard to explain. It was also boring. I was bored writing it but it is something that needs to be addressed.  If you got this far and if you want to help or become part of the team call Paige Snyder at 409-963-1107.

 

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