Future Workforce Needs and Development—What Are the Conditions for Construction Business Formation and Success? For many years, the Town+Gown Research Agenda has contained this research question, which, framed generally begins by focusing on a fragmented construction industry that contains many sub-markets within a local area and a wide spectrum of organizational forms, with the size and complexity of prevalent construction project types can defining, to some degree, the nature of the local market. The construction industry is also a haven for small businesses, where despite some consolidation in the industry, after the several top national firms, the size and revenues of the remaining construction companies drop off sharply. It is thought that research and analysis would be helpful to understand the local construction marketplace(s) better in order to develop appropriate public policy strategies to fill market gaps, to help support business capacity development, especially for small businesses, and to increase/preserve competition by reducing unnecessary barriers. Additional questions focus on the origins and life cycle of construction contractors and subcontractors, the sources and training of entrepreneurs, the internal and external barriers they face, and the components of success to shed light on small business capacity issues and issues businesses face as they try to move from one level to the next.
In 2011-2012, a research project focused on the City’s Minority and Women Business Enterprise (M/WBE) program as a case study to explore how service programs can obtain the right kinds of information from their target audiences with the goal of understanding their particular needs and enabling the programs to reach and provide their target audiences with services more effectively. A research project in the following academic year identified external and internal impediments that can act as barriers to small construction firm success, but limitations presented by M/WBE data from the New York City Department of Design and Construction (DDC) prevented the researchers to connect the data to the identified impediments.
The New York City Department of Small Business Services (SBS) and the Mayor’s Office of Contract Services (MOCS), along with DDC, wanted to expand on these initial analyses to understand better the factors that contribute to the success of small construction firms that bid on government contracts. Discussions about how to take these completed analyses forward concluded that available City agency data—City-wide procurement and contract data, M/WBE firm data at City agencies and at SBS—operated as a limit to the next level of analysis, which led to securing the National Establishment Time-Series Database (NETS database). An academic team consisting of Janet Rovenpor (Professor of Management, Manhattan College), Lesley Hirsch (Director, New York City Labor Market Information Service at the CUNY Graduate Center) and Jonathan Auerbach (Ph.D. candidate at Columbia University, Department of Statistics) undertook to utilize New York State business enterprise data from the NETS database to help the City understand the dynamics of growth and continued development of firms in the local construction industry. The NETS database is constructed from annual snapshots of Dun and Bradstreet data, which have been collected every January since 1990, and is a series of data that is closest to a continual census of businesses, government agencies, and nonprofits in the United States. This research study started with a macro-level approach to the issue and did not focus on small M/WBE small construction business enterprises per se, performing a statistical survivability analysis of longitudinal data pertaining to all small construction firms in New York State and drilling down to those in New York City.
In 2014-2015, the researchers analyzed the NETS database, specifically, to explore what establishment characteristics are associated with survival rates, examining construction, financial, insurance, real estate and architectural firms located in the New York City, MSA and State geographic levels over the 1989-2012 time period. They particularly focused on whether the establishment was small (less than 10 employees), a M/WBE or a government contractor. The dependent variable of interest was the number of years a company survived before going out of business or its “survival rate”. The researchers found that industry classification and M/WBE status have larger estimated regression coefficients than establishment size and employment. The magnitude of the coefficients, however, did not necessarily reflect importance. Size and employment explained more variation since these coefficients are in log-units per dollar and employee respectively, and can thus be magnified by as much as five or six times. Much of the model confirmed conventional wisdom. Younger establishments had higher hazard rates, while older firms had lower. Firms with many employees had lower hazard rates, while small businesses with fewer than 10 employees have higher hazard rates. The hazard rate increased with log-sales, but higher sales did not necessarily translate to higher profits and may instead correspond with establishments more vulnerable to the recessions in the early and late 2000s. Women-owned firms had much lower hazard rates regardless of government contracting, while, minority firms that contract with government did not. The coefficient for contracting with the government was roughly the inverse of the coefficient for the interaction between minority and government, so that the two appeared to cancel after multiplication. The researchers concluded that future analyses may investigate how the survivability of firms with M/WBE status varies by industry classification.
In 2016-2017, another project focused on ways local government can leverage its role in the built environment to provide replicable workforce development programming for small construction business enterprises, using Opportunity Academy workforce development course described below as a case study. This research recommended that City construction agencies, including DDC, leverage this workforce development course model, specifically recommending that DDC evaluate the success of the existing model to provide benchmarks on how to successfully expand this program and secure future funding and work with industry working groups.
Opportunity Academy. DDC partnered with the New York City School Construction Authority (SCA) and LaGuardia Community College (LAGCC) to establish, in 2016, Opportunity Academy (OA), which is a workforce development course for public construction project payment and change order processes, which is a portion of the function performed by construction office administrators (OA Workforce Development Course). DDC, SCA and LAGCC make up the “OA Partnership”. For the 2016-17 OA Workforce Development Course, DDC and SCA developed separate, but aligned, course curricula, which were overseen by the two general course instructors, and staff from DDC and SCA, as experts in various aspects related to public construction payment and change order processes, functioned as guest lecturers for specific classes. The 2017-2018 OA Workforce Development Course is a 16-week class-based course, with two class sessions each week at which the DDC and SCA guest lectures will take place. There will be supplemental course modules in addition to the guest lectures. Students who graduate the course will participate in the internship component. Plans have been underway within the OA partnership to turn the OA Workforce Development Course into an academic course eligible for academic credit at LAGCC.
Town+Gown manages the OA program at DDC and created the course materials for the DDC component. These course materials contain contextual and specific information for the New York City public works program beginning with the City’s capital planning, budgeting and finance processes, the various payment processes and the construction management processes, some or all of which would be useful for researchers focusing on built environment-related research. The OA course book is available for background research purposes here.