Item 7d Memo

Item No.        7d 
Date of Meeting   May 12, 2009 

DATE:    May 6, 2009 
TO:      Mr. Tay Yoshitani, Chief Executive Officer 
FROM:    Elaine I. Ko, Director, Office of Social Responsibility 
SUBJECT:  Draft Resolution No. 3618: Briefing on the Port"s Small Business Program 

The Commission is being briefed on draft Resolution No. 3618, which outlines the components
of an enhanced Small Business Program (formerly called the Small Business Initiative). The
Resolution includes updated definitions, data, policies and tools to support this Program. Port
staff will return to Commission in June for First and Second Reading of the Resolution. 
The objective of the Small Business Program is to promote the utilization of small businesses in
the overall economy of the region. The Small Business Program further seeks to support the
Port"s economic interest and social responsibility to encourage competition within the supply
chain and to increase the pool of qualified small businesses through expanding outreach and
opportunity to a broader pool of small firms. The Office of Social Responsibility (OSR) is
engaged in and supporting many efforts to enhance growth and capacity of local small
The Small Business Initiative was established in 2003 with the adoption of Port Resolution 3506,
to provide guidance in the solicitation and use of small, minority, women enterprises, and
emerging small businesses as vendors, suppliers, contractors and consultants across all Port
operations. There was a 10% small business goal on all goods and services and annual targets
were set by the CEO. The Initiative was a race- and gender-neutral small business program in
the aftermath of the passage of Initiative-200.

Tay Yoshitani, Chief Executive Officer 
May 6, 2009 
Page 2 

The purpose of an enhanced Small Business Program is to: 
1.  Fulfill the mission of the newly established Office of Social Responsibility (OSR) in
2008, to engage the community and to assure that all Port business is conducted within a
framework of fairness, inclusion, openness and economic development. 
2.  Establish and update Port policies and procedures. 
3.  Implement recommendations set forth in the 2007 Talbot, Korvola & Warwick (TKW)
performance audit on the Port"s Capital Project Delivery Costs and Small and
Disadvantaged Business Enterprise Opportunities. 
Nationally, inclusive business policies are categorized into eight types: 1) Hortatory Efforts and
Vision-making, 2) Goal Setting, 3) Public Disclosure of Data and Information Tracking,
4) Accountability and Enforcement, 5) Outreach and Increasing Access, 6) Mandatory
Participation, Set-Asides and Incentives, 7) Education and Training, and 8) Financial Assistance
(INSIGHT Center for Community Economic Development). The Port seeks to adopt many of
these policy approaches. 
The following sections are further description and explanation of key sections in the Resolution. 
Definitions (Section 3) 
Small Business Enterprise: C urrently, there is not a revenue size certification for small
businesses either by the Small Business Administration (SBA) or Port. The SBA does certify and
administer the 8a and Small Disadvantaged Business Enterprise Programs (SDB), which are used
exclusively by federal government agencies (mainly Department of Defense). The Port's current
practice is to allow firms to 'self-identify' on the Small Business and Consultant Rosters that
they are Small Businesses using 100% of the SBA's size standards and there is not a cap on the
owner's personal net worth.
Minority Business Enterprise (MBE), Women Business Enterprise (WBE), and Disadvantaged
Business Enterprise (DBE): The definitions for Minority, Women, and Disadvantaged Business
Enterprises in this Resolution complies with RCW 39.19.120, and further states that the
OMWBE (Office of Minority and Women Business Enterprise) shall be the sole authority to
perform certification of minority business enterprises, socially and economically disadvantaged
business enterprises, and women's business enterprises throughout the state of Washington. This
statewide certification process will prevent duplication of effort, achieve efficiency, and permit
local jurisdictions to further develop, implement, and/or enhance comprehensive systems of
monitoring and compliance for contracts issued by their agencies". As noted in the Resolution,
the Port may, in the future, track non-certified MBEs and WBEs such as those who may have
graduated from OMWBE's program because of interest in capturing all minority and womenowned
business participation, and there are other national certification programs that the Port
may wish to recognize for these purposes. Non-certified minority and women-owned businesses

Tay Yoshitani, Chief Executive Officer 
May 6, 2009 
Page 3 

shall not be counted in the Small Business Program, however the Port shall not view 'non-
certified' status as a barrier for those firms seeking opportunities with the Port.
The DBE designation is used for US Department of Transportation federally-funded projects
only. DBEs are for-profit small businesses where socially and economically disadvantaged
individuals own at least a 51% interest and also control management and daily business
operations. African Americans, Hispanics, Native Americans, Asian-Pacific and Subcontinent
Asian Americans, and women are presumed to be socially and economically disadvantaged.
Other individuals can also qualify as socially and economically disadvantaged on a case-by-case
basis. DBEs must receive DBE certification from the state Uniform Certification Program
(UCP) through OMWBE. 
Certification: Currently, the Port allows firms to self-identify their status as a Small Business.
The Port will be exploring coordination with an existing certification program of another
government entity that includes verification of revenues and personal net worth. It is the intent
of the Program to adopt a certification (verification) of small businesses. Small businesses who
are M/WBEs certified through OMWBE will be counted for this Program at this time, however,
if a size standard smaller than 100% of the Small Business Administration revenue size standard 
is adopted, some certified firms will not be included in the Program. In the future, the Port may
also consider recognizing other national certifications primarily for identification purposes (ex:
NW Minority Business Council, National Women Business Enterprise Council, National LGBT
Certification, etc.).
Second-Tier Contractors: Currently the Port"s PeopleSoft database system records only prime
contractor participation while both prime and sub-tier contractors are tracked on major
construction. There is a desire to include all second-tier contractors, as this would more
accurately capture all small business participation in the Port. There will be financial
implications that need to be considered in implementing sub-tier tracking. 
Other Small Business Categories: The Port seeks to promote diver sity and work with other
socio-economically disadvantaged and diverse businesses such as veteran, veteran service
disabled, persons with disabilities, and lesbian, gay, bisexual, transgender (LGBT) owned
businesses. There shall be no voluntary goals for participation or tracking of these categories at
this time although the information may be included on Roster applications for identification
purposes only.
Establishing Small Business Size Standard and Personal Net Worth (Section 4) 
According to the "Small Business Survival: A Joint Report to the Governor," by WA State
Department of Community, Trade and Economic Development; Employment Security
Department; Department of Labor & Industries; and Department of Revenue (2007), about 93%
of businesses that register to pay taxes in Washington meet the definition of a small business,
i.e., these firms employ 20 or fewer workers, are solely operated by the owner and earn $3
million or less in annual gross income. (This study mainly focused on goods and services and
personal and professional services and, they used their own small business definition).

Tay Yoshitani, Chief Executive Officer 
May 6, 2009 
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While the SBA does not certify Small Businesses in non-federal projects, it does set a size
standard per NAICS (North American Industry Classification System) codes. There are over
1,800 NAICS codes, and the Port contracts with many key industries. Most NAICS are
expressed by either millions of dollars or number of employees. Some of the major categories
for the Port include: General & Heavy Construction: $33.5M; Specialty Trade Contractors:
$14M; Truck Transportation: $25.5M; Business and Professional Services: $7M; Architectural,
Engineering, Surveying, and Mapping: $4.5M (2009 figures).
This section would authorize the CEO to establish a maximum average revenue standard for
small business classification based on the NAICS that is smaller than 100% of the SBA size
standards (as set forth in Title 13, Code of Federal Regulations, part 121), and establishment of a
personal net worth cap. The gross annual business revenues would be based on an average over
three years. The national SBA size standard is too large and does not accurately reflect the size
range of local small businesses. Port staff are currently benchmarking similar programs
including one that has adopted a definition as a percentage of the SBA size standard. Adopting a
single revenue size for all small businesses is one option, however, such a "one-size fits all" small
business size standard is not ideal because different industries have different ranges of revenues.
How this could work: For example, a firm that provides translation and interpretation services,
NAICS code 541930, has a maximum gross revenue is $7 million, according to SBA size
standards. If the CEO establishes a 50% SBA size standard, in order to participate and benefit
from the Port"s Small Business Program, the translation and interpretation firm cannot exceed an
average gross annual revenue of $3.5 million over the past three years.
Impact on current Port small business contracting: OMWBE has approximately 2,200
certified firms in their data base and King County has over 700 businesses in their Small
Contractor Supplier (SCS) certification program (2009). An initial review of 2006 Port
construction contractors indicated there were some firms that would no longer qualify as a small
business with a size standard of, for example, 50% of SBA standard. Consideration of the
impact on existing small business contractors will be evaluated as a new size standard is adopted. 
Policies Related to Procurement (Section 5) 
Price Incentive in Goods and Purchased Services: 
A price incentive tool is being implemented in King County to increase competitiveness of their
SCS firms wherein a small SCS firm will be given incentive ranking if it is within a 5% Fair
Market Price Range in goods and services. This Resolution would allow the Port to consider a
similar tool as it goes forth with updated goods and services procedures. The Port would
establish this pricing incentive or "equalization credit" and/or could award to the low small
business firm that is within an established fair market range of the lowest non-small business
How this would work: For example, a large business that submits a bid for $10,000 to provide a
service and is the lowest bid, and a small business offers the same service for $10,400. If the
Port establishes a 5% fair market range incentive, the bid could be awarded to the small business
since its offer is within 5% of the lowest bid.

Tay Yoshitani, Chief Executive Officer 
May 6, 2009 
Page 5 

Potential Costs: King County"s Office of Business Relations Economic Development (BRED)
conducted a price preference analysis, canvassing both the public and the private sector. In
analyzing the general market, they found the competitive factor to be 5%, meaning an entity was
willing to invest up to 5% to still receive a benefit. King County estimated that if they paid up to
5% more for goods and services, it would cost up to $70,000 based on the 2005 contract
participation level and no other updated costs are available to date. Port staff will be engaged in
further analysis of this incentive option, including the potential financial impact, assessing data
to be used to evaluate the impact of incentive, etc.
Potential Legal Risks: Whenever an award goes to someone who is not the lowest responsible
bidder, the Port will face a potential claim from the lowest responsible bidder. If a contract is
challenged, it will be important to show that the Port has in place a process that would "prevent
fraud, collusion, favoritism, and improvidence in the administration of public business" and
ensures that the Port "receives the best work or supplies at the most reasonable prices
practicable" Edwards v. Renton, 67 Wash.2d 598, 602 (1965). Port staff will establish
parameters and procedures for such a preference prior to implementation. 
Small Business Utilization Requirement: 
A pass-fail requirement may be used on major construction, small works, and professional and
personal service contracts as appropriate. If the prime contractor or proposer is unable to meet
the small business utilization requirement, the prime contractor"s bid or proposal will be rejected.
This requirement shall be a matter of responsibility and not responsiveness. This requirement
may be used after careful review of appropriateness for a specific procurement, including
whether there is sufficient subcontracting opportunities and availability of qualified small
businesses in the specific craft or industry, and other criteria. 
Aspirational Women and Minority-Owned Business goals:
A study "The Impact of State Affirmative Action Procurement Policies on Minority and 
Women-Owned Businesses in Five States" (The Insight Center for Community Economic
Development, 2007,, indicated that MBEs and WBEs did not grow as fast
as similar businesses in other states when affirmative procurement policies ended or were
interrupted such as in late 1998 when I-200 passed. The most dramatic impact is on formative or
start-up firms as 19% of Washington WBEs started between 1993-1998 had at least five
employees in 2007 compared to 41% in Florida and Oregon who had in-tact affirmative
procurement programs during the same period. MBEs in Washington also were less likely to
have five employees in 2007 than in the other four states studied. During the same time periods,
there was no significant difference in the growth rate of white male-owned businesses in any of
the five states under study (control group).
In the study "State Policies and Programs for Minority- and Women-Business Development"
(Insight, Dec. 14, 2007), WA State discretionary spending went from 5.7% MBE and 5.2% WBE
in 1997-98 to a low of 1% MBE and .7% WBE in 2004 and had increased to 1.2% and 1.8%
respectively in 2006.

Tay Yoshitani, Chief Executive Officer 
May 6, 2009 
Page 6 

In 2007, the Port showed 10% overall small business participation (16.7% goods, services,
consultants and 6% major construction); non-construction sub-tiers contractors and vendors were
manually counted. The overall breakdown was 6.6% SBE and 2.1% MBE and 1.3% WBE.
Figures for 2008 are being tabulated. Prior to 2007, sub-tier contracting data is available only on
major construction contracting. 
Aspirational (voluntary) women and minority-owned business goals may be established on major
construction projects as well as on professional and personal service contracts on a project-byproject
basis as appropriate. Port Legal has raised concern of using minority and women-owned
business "aspirational goals" overlaid on pass/fail requirements for prime contractors on a single
project as it may create confusion between the requirement and the goal, and imposing on prime
contractors the requirement that they use good faith efforts will tend to undermine the
aspirational and voluntary nature of the M/WBE goal. There shall be no benefit or penalty if the
aspirational M/WBE goal is not met. 
Evaluation Points for Utilization of Small Businesses: 
This section would allow the Port to use evaluation points for the participation of small business
as a factor in the award of the prime contract. This incentive establishes a required minimum
percentage of the total hours or total dollar amount to be performed by small businesses or
number of small firms to be included in the contract and shall be developed in compliance with
existing Port procurement procedures. This incentive may apply to goods and services, and
professional and personal services. 
Roles and Responsibilities (Section 6) 
All Port personnel will make reasonable efforts to increase the opportunity for small businesses
to compete for opportunities with the Port. In addition, with the Port"s recent departmental reorganization
, this Resolution explicitly outlines the significant roles responsible for the
implementation and success of the Program. Specific roles include the CEO, Senior Executive
Team, Office of Social Responsibility, Central Procurement Office, and Capital Development
Division, however all departments must participate fully for the Program"s success. 
Monitoring and Reporting (Section 8) 
Goal Setting: 
Resolution 3506 states an annual Port goal of at least $20 million or 10% of all goods and
services from qualified small businesses beginning in year 2003. This Resolution does not state
a specific percentage or dollar amount. OSR will take the lead in setting annual Port-wide small
business participation goals and work with Divisions/Departments to set Division and
Department-level goals. This allows flexibility to adjust targets to match market trends, previous
Port small business participation levels, and other factors.

Tay Yoshitani, Chief Executive Officer 
May 6, 2009 
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In addition to SBEs, it is the desire of the Port to track certified MBE and WBE participation on
prime and sub-tier levels. The Port is not currently tracking sub-tier participation on service
agreements or goods/services procurements. There may be financial implications to tracking
participation in sub-tiers and this evaluation is underway. The Office of Social Responsibility
has an interest in tracking participation by ethnic group as this will better focus efforts and
establishes good baseline information for future disparity and availability studies that may be
Performance Measurement (Section 9) 
Each direct report to the CEO will be held accountable for meeting the goals of the small
business program in their performance evaluation.
As we move forth with the Small Business Program as outlined in the Resolution, there will be
continued review and study of the financial impact of the Program"s proposed components as
such information may not be fully known at this time. Financial impacts will be a consideration
in the timing of various components. 
In considering the proposed components of the Small Business Program outlined in this
Resolution, a scan of the various local, regional, and State programs, best practices, and literature
review was conducted. To the extent that pertinent small business data is available, it will be
updated and reviewed as the Port moves forward with implementation of the Program. 
The Port"s Small Business Program supports economic development as increased opportunity for
small businesses directly support many jobs within the region and state and contribute to our
local tax base. The Program supports social responsibility and social equity in the community as
small businesses are able to more fully participate in the varied economic activities of the Port.
Many small businesses currently participate in the Port"s environmental efforts and continue to
seek opportunities with the Port in furthering these efforts.
Adoption of Resolution No. 3506 in 2003.

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