PRL herein presents its proposed Annual DBE Goal and Methodology for FFY 2019, which represents a 1.40% Race-Neutral DBE goal.
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1 PROGRESS RAIL LOCOMOTIVE INC. DISADVANTAGED BUSINESS ENTERPRISE (DBE) TRANSIT VEHICLE MANUFACTURER PROPOSED DBE GOAL AND METHODOLOGY FOR FEDERAL FISCAL YEAR
2 I. INTRODUCTION Progress Rail Locomotive Inc. PRL is required to prepare and submit a Disadvantaged Business Enterprise (DBE) Goal for DBE participation as a condition of acquiring transit vehicle procurements with Federal Transit Administration (FTA) financial assistance. Pursuant to Moving Ahead for Progress in the 21 st Century; 49 CFR Part 26 Participation by Disadvantaged Business Enterprises in U.S. Department of Transportation Programs and the FTA Master Funding Agreement, PRL submits its 2019 Federal Fiscal Year (FFY) DBE goal. II. BACKGROUND PRL, formerly known as Electro-Motive Diesel, Inc.( EMD ) is the world s largest manufacturer of freight and passenger locomotives. Today, we continue the EMD legacy by providing the same reliable products the industry has come to depend on not only with the iconic EMD product name, but also innovative features and technologies to meet stringent customer requirements and maintain high performance. As a worldwide leader, PRL offers diesel-electric EMD locomotives and aftermarket parts for all commercial railroads, including freight, intercity passenger, commuter, switching-industrial, and mining applications. More than 65,000 EMDpowered locomotives have been delivered to more than 75 countries to date. As a Transit Vehicle Manufacturer ( TVM ), PRL designs, manufactures, rebuilds, repowers, maintains, and services passenger and transit locomotives -- the highly sophisticated, heavy-duty prime mover for passenger trains for transit railroads in the United States. In the TVM arena, PRL focuses exclusively on the locomotive (not passenger railcars or other ancillary vehicles). Our passenger locomotive offerings include high-speed operation (up to 125 miles per hour), for intercity and commuter operations. Since 2014, PRL has pursued new, repower and overhaul locomotive TVM procurements with FTA recipients. As a TVM, PRL understands we must develop and implement a DBE Program plan and annually submit our DBE goal and methodology. Under the guidance of Guylando Moreno, DBE Liaison Officer, PRL offers its 2019 FFY DBE Goal and Methodology for FTA assisted projects that PRL plans to propose in FFY III. SUMMARY OF THE OVERALL GOAL PRL herein presents its proposed Annual DBE Goal and Methodology for FFY 2019, which represents a 1.40% Race-Neutral DBE goal. The manufacturing of a locomotive is highly sophisticated and heavily regulated, including by the US Environmental Protection Agency (EPA) for diesel engine emissions for locomotives of all types (including remanufactured locomotives) and by the Federal Railroad Administration (FRA), which regulates Locomotive Safety Standards The EPA and FRA require the locomotive manufacturer to certify that the new locomotive and/or remanufactured locomotive meet these stringent regulatory standards. We must maintain the highest quality, meet federal regulatory requirements and maintain the integrity of the design build locomotive specifications. Our industry is challenging for small, minority, women and DBEs who are similarly required to follow the same high standards when providing their manufactured products to PRL. The locomotive is a design build project for each client. Approximately 98% of the locomotive is manufactured to engineered specification. Therefore, each part must be manufactured to the new locomotive design, repower or overhaul. As a result, PRL does not purchase its locomotive 2
3 parts from conventional suppliers, but rather from specialized manufacturers, many of whom are not certified DBEs. PRL completed a two-step analysis to determine our FFY 2019 DBE goal. Based on that analysis and careful consideration, we have defined our FFY 2019 DBE goal as 1.40%. Our goal is based on the best available information that is representative of the relative availability of DBEs, and non-dbes in our geographic market area. Our geographic market area includes eight States: Illinois, Indiana, Michigan, Ohio, Kentucky, Georgia, Alabama, and Wisconsin. The geographic market was based on the states where PRL s TVM sub-procurements are awarded to and / or where most manufacturer quotes are received for sub-procurements. In addition, the eight states are prospective clients for locomotive TVM procurements. Our DBE numerator is 135 which is representative of the eight states DBE Unified Certification Program Directories and who have identified NAICS codes as manufacturers of locomotive parts. The denominator is 10,998 which is representative of the relative availability of DBEs and non-dbes, in the eight states and in the NAICS codes for locomotive parts manufacturing. The denominator is also derived from the Census Bureau County Business Pattern data for The goal analysis is discussed in Section IV. III. FTA-ASSISTED CONTRACTING PROGRAM FOR FFY 2019 Table 1 represents three (3) proposed locomotive TVM projects that PRL is planning to pursue in FFY These seven projects were considered for preparing the Annual DBE Goal- Setting Methodology. The projects include new, repower and overhaul locomotives and are anticipated to be awarded within FFY Agency Name Long Island Rail Road Maryland Area Regional Commuter Seattle Washington Sounder Procurement Type Anticipated FTA Funds Available Repower NA 2018 Overhaul NA 2018 Repower NA 2019 Table 1 Anticipated Award Month and or Year The anticipated FTA share of funds for each TVM procurement was sought from each of the agencies; however, the agencies did not have the advance information or chose to withhold the information. Therefore, the information on the FTA share for the TVM procurement is not available. IV. OVERALL DBE GOAL METHODOLOGY Step 1: Determination of a Base Figure (26.45) 1 To establish the PRL Base Figure of the relative availability of DBEs to all comparable firms (DBE and Non-DBEs) available for the proposed seven TVM procurement opportunities; PRL followed 1 of the 5-prescribed federal goal-setting methodologies as identified in 49 CFR Part How Do Recipients Set Overall Goals represents Title 49 CFR Part 26 regulatory referenced section. 3
4 PRL followed the Tips for Goal Setting in the DBE Program (2014) to establish the numerator and denominator as described below. For the numerator: For the denominator: State UCP DBE Database of Certified Firms DBEs and Non-DBEs Step 1: Base Figure: Based on the locations of the vendors that PRL has procurement business with, we considered our geographic market to be Illinois, Indiana, Wisconsin, Michigan, Ohio, Alabama, Georgia and Kentucky. These eight states were selected as markets in which DBEs could potentially be ready, willing and able to manufacture parts for a new, repower or overhaul locomotive. The Unified Certification Program (UCP) Directory of certified DBE firms and the 2015 Census Bureau County Business Pattern of business establishments in each state for the respective NAICS codes (Table 2) were utilized to establish the numerator and denominator. Table 2 represents the NAICS codes, NAICS Code description and the description of the locomotive components and or parts in which PRL will be pursuing sub-procurements with vendors from non-dbes and DBEs who are certified to participate in manufacturing parts for a new locomotive, repower or overhaul. The NAICS codes helped to avoid overestimating the number of DBEs and non-dbe firms in establishing either our numerator or the denominator. NAICS NAICS Code Description Sheet metal work manufacturing Description of Components/parts Sheet metal fabrications Machine Shops Machining Bolts, nuts, screws, rivet and washer manufacturing Fasteners Pipe fabricating made from purchased metal pipe Fabricate pipes Tapered roller bearings Bearings Harness assemblies for electronic use and applications manufacturing Relays, electrical and electronic manufacturing Relays Electrical conductors (except switchgear-type) lugs and connectors, electrical manufacturing Wire harnesses Lugs, connectors Metal merchant wholesalers Misc. Steel Table 2 To determine the relative availability of DBEs, PRL divided the numerator 2 representing ready, willing and able DBE firms in each NAICS code, by the denominator 3 representing all firms (DBE and Non-DBEs) available in each NAICS code. Application of this formula is: 2 Numerator represents all DBE firms established within the PRL s market area. 3 Denominator represents all comparable available established firms (DBEs and non-dbes). 4
5 Number of Ready, Willing and Able DBEs Number of All Available Firms (including DBEs and Non-DBEs) When the nine NAICS codes were cross-matched with the availability of manufacturers in each of the eight states, each calculation rendered a relative availability of DBE and non-dbe locomotive manufacturers. The best available data for the eight states defined the relative availability of DBEs and non-dbes for the nine specified NAICS codes for manufacturers. The databases used, resulted in our DBE numerator at 135 and the DBE and non-dbe denominator at 10,998. PRL further divided the numerator by the denominator to establish the Relative Availability. See Table 3. NAICS NAICS Description - Manufacturing 5 Description of Components and parts DBEs/non-DBEs in 8 -States* DBEs & Non- DBEs DBEs Relative Availability Sheet metal work manufacturing Fabrications % Machine Shops Machining % Bolts, nuts, screws, rivet and washer manufacturing Fasteners % Tapered roller bearings Bearings % Pipe fabricating made from purchased metal pipe Fabricate pipes % Harness assemblies for electronic use and applications manufacturing Wire harnesses % Relays, electrical and electronic manufacturing Relays % electrical conductors (except switchgear-type) lugs and connectors, electrical manufacturing Lugs, connectors % Metal merchant wholesalers Steel % Total *Illinois, Indiana, Wisconsin, Michigan, Kentucky, Georgia, Alabama, Ohio Table 3: DBE numerator is 135 and the DBE and non-dbe denominator is 10,998 Following the establishment of the numerator, denominator and relative availability, PRL processed a weighted base figure. Typically, when determining a base figure, the relative availability is weighted by the dollars of specific contracts. PRL attempted to secure the FTA funded portion on the three proposed procurements in FFY 2019, however, the transit agencies did not make available the FTA share/values of its future TVM procurements. Therefore, in the absence of specific FTA funded contract dollar value of the future TVM procurements, the weighted base figure was reached by using the number of components to build the F-125 locomotive. For each of the nine defined NAICS codes, the number of components within each code was divided by the total components which are 5491 for the F125 locomotive model used in this analysis. The weighted factor was multiplied by the relative availability of each NAICS code and summed. The locomotive parts weighted factor for each NAICS code is also a representation of narrowly tailoring the DBE availability based on the types and number of parts that it takes to manufacture, rebuild or overhaul a locomotive. For the weighting calculation,
6 PRL used the F125 locomotive model to establish the number of components and components per NAICS code. The weighted factor used the associated number of components per NAICS code divided by 5491 as the base number of locomotive components for the F125. Number of Components per NAICS code = Weighting 5491 Components (F125 Locomotive) The relative availability (numerator and denominator), weighting by components and weighted base figure are shown in Table 4 below. Weighting based on number of parts for a F125 locomotive Weighted NAICS NAICS Description Relative Availability # of Parts Weighting* Base Figure Sheet metal work manufacturing Machine Shops Bolts, nuts, screws, rivet and washer manufacturing Tapered roller bearings Pipe fabricating made from purchased metal pipe Harness assemblies for electronic use and applications manufacturing Relays, electrical and electronic manufacturing electrical conductors (except switchgear-type) lugs and connectors, electrical manufacturing Metal merchant wholesalers Total * # of components per NAICS code divided by total # of components (5491) Total (%) 1.40% Table 4 Once we applied the rule of thumb of identifying the relative availability of DBE and non-dbe locomotive manufacturers and identifying the total weighted average, it is reasonable to accept 1.40% as the weighted DBE base figure. This percentage is justifiably determined by using the number of parts used in locomotive manufacturing in the absence of the transit agencies providing specific and complete FTA funded contract dollars for their FFY 2019 TVM procurements. 6
7 Step 2: Adjusting the Base Figure Upon establishing the base figure, PRL reviewed and assessed other known evidence potentially impacting the relative availability of DBEs within the geographic market area, in accordance with prescribed narrow tailoring provisions set forth under 49 CFR Part Step 2; DBE Goal Adjustment guidelines. Evidence considered in making an adjustment to the base figure included PRL s Past DBE Goal Attainments, Disparity Studies, and Public Participation. A. Past DBE Goal Attainments PRL considered its historical past DBE goal attainments for federal FFYs 2013 to One project MetroLink Southern California Regional Rail Authority (SCRRA) was awarded to PRL in This project was a production of new locomotives. Since 2013, no other TVM contract has been awarded to PRL. Since there is only one (1) TVM contract, we cannot reasonably conduct an analysis of DBE participation on one (1) project. In addition, the FFY 2019 proposed projects are far different in type of manufacturing and dollar value to the one procurement awarded in 2013 for new locomotives. Consequently, past participation was not used to adjust the proposed DBE goal. B. Disparity Studies In the Tips for Goal-setting in the DBE Program the guidance is to either conduct a disparity study or consider the information contained in a disparity study to make an upward or downward DBE goal adjustment. In addition, the Tips indicate that the goal setting must also be a narrowly tailored analysis with sufficient evidence of discrimination within the recipient or sub recipient own transit contracting marketplace to determine if there is the need for race- or genderconscious remedial action. A disparity study also measures the availability of DBEs, Minority and Women businesses that are able to work on federally funded projects. PRL did not conduct a disparity study for its FTA financial assisted procurements. Absent completing a disparity study and based on the Tips guidance, PRL did review and consider the availability and disparity analysis information contained in 5 disparity studies that were completed in the last 3 years. The disparity studies reviewed were: 2015 Illinois State Toll Highway Authority Disparity Study 2015 State of Indiana Department of Transportation DBE Disparity Study 2015 State of Indiana Department of Administration Minority and Women Business Disparity Study 2016 State of Ohio Department of Transportation DBE Disparity Study 2016 Georgia State Department of Transportation DBE Disparity Study The 5 disparity studies were reviewed for relevance to the locomotive procurement contracting opportunities and PRL s geographic market area. The 5 disparity study analyses were based on minority- and women owned businesses and DBE and non-dbes who were awarded state Departments of Transportation highway construction related contracts or public works contracts within each state. PRL continued to review each study to determine if the study included an availability analysis of minority, women businesses and DBEs with locomotive manufacturing NAICS codes. While each study report covered their entire state as the geographic market area to establish the relative availability, the study reports did not collect 7
8 data on the availability of minority and women businesses, DBE or non-dbes as locomotive or railroad manufacturers or suppliers. Therefore, PRL could not rely on the 5 disparity study reports to establish the narrow tailoring requirement of the relative availability of minority and women businesses and DBEs to non- DBEs and to establish sufficient evidence on whether or not discrimination exists in transit procurements and specifically to locomotive manufacturing. Consequently, the 5 disparity study reports were not used to adjust the proposed DBE goal. Proposed FFY 2019 DBE Goal for TVM Procurements Based on the methodology and goal analysis, PRL proposes a 1.40% DBE goal for FFY The final analysis will be completed following a 30-day public consultation and participation period. PRL will solicit comments from DBEs, non-dbes, minority and women business organizations and non-minority/women business organizations on PRL s proposed DBE goal. The comments will be considered for an adjustment to the proposed goal. Following the public comment and participation period, the intent is to transmit a final FFY 2019 DBE Goal and Methodology to FTA by August 1,
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