Out with the old: Modernizing subcontractor diversity with AI so everyone wins

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Striving to achieve project diversity goals creates complex challenges for general contractors. Although beneficial, these initiatives can be challenging for prime contractors who must also grapple with tight budgets and condensed schedules, leaving little time or resources to meet diversity goals, which can reach as high as 40% of construction cost. Identifying and hiring suitable subcontractors may seem straightforward, but the reality quickly becomes more complicated. Traditional approaches to finding certified small, local, and diverse subcontractors have failed to evolve, and can no longer keep pace with modern construction processes.

Yet the intention of these goals, which is to extend opportunities to underrepresented groups, can have a transformative impact on workers, businesses, and the surrounding community. Moreover, expanding the bidding process to a wider group of subcontractors drives down costs by increasing competition. For example, when Restani Construction Corp. won a New York State project to build four bridges in Westchester County, they partnered with Tough Leaf, a construction technology company, to optimize how they matched, vetted, and reached out to disadvantaged business enterprises (DBEs). This innovative approach increased the bids received by 3.5x and saved $1.1 million on the project. Improving DBE sourcing makes good business sense.

Despite all this, as well as the $110 billion earmarked annually for diverse businesses in construction by federal, state, and local agencies across the U.S., and a desire by private organizations to champion environmental, social, and governance (ESG) efforts, achieving diversity goals remains a persistent challenge. Connecting with diverse firms possessing the right capabilities, experience, and project history is time-consuming and often requires extensive manpower and meticulous attention to detail.  Furthermore, primes face substantial risks, including fines, disqualification, and payment withholding, intensifying the pressure should they fall short of diversity participation requirements.

Diverse subcontractor sourcing is stuck in 2005

Wissam Akra, Founder and CEO of Tough Leaf, realized this during his years as a Construction Industry Executive.  “We always had a challenge finding the right diverse businesses,” he recalled. “You couldn’t find accurate data about job history anywhere online. Government databases only list businesses and their contact information, which is usually wrong. It doesn’t go into depth on what their capabilities are. So you have to call thousands of firms.” Akra’s experience isn’t unique. Regardless of the project, if a general contractor is tasked with achieving a diversity participation goal, the traditional approach would involve:

• Searching public agency databases or internal spreadsheets

• Calling or emailing diverse firms

• Requesting information on insurance, bonding capacity, union affiliations, project history, etc.

• Verifying the information received

• Ensuring the firm has capacity for the project

• Confirming the company will provide a quote by the deadline

These steps take anywhere from 70 to 200+ hours per project. With tight budgets and timelines, compounded with the fact that approximately 40% of diverse firm information in public databases is incorrect, general contractors are woefully positioned for failure.

The challenges of sourcing diverse firms can be frustrating for others as well.

• Developers, owners, and government agencies struggle to build effective programs that monitor how general contractors and construction managers source diverse firms and track the dollars awarded to diverse firms.

• Diverse subcontractors may invest dozens of hours estimating projects they have no chance of winning, as they do not align with the project requirements. 

The solution: Use AI to work smarter

The key to overcoming these challenges lies in leveraging technology to work smarter, not harder. That is what led Akra to start Tough Leaf, which streamlines the process of matching, vetting, and contacting small, local, and diverse firms, and assists with educational and capacity-building services to help them take on more complex projects.

Prime contractors working with Tough Leaf receive more bids in less time and solid good-faith documentation to address the compliance requirements on every project. “This would have taken us two people for a month – we received necessary info in a week,” said Sachin Bhide, Senior Estimator at JRM Construction Management. Nicole Dupiton, Director at Structural Technologies, added, “We struggled to find the right MWBE subcontractors before we partnered with Tough Leaf. They fit perfectly with our process.“

Smarter tools facilitate efficient information management, enabling diverse firms to showcase their capabilities, primes to confidently identify suitable partners, and agencies to manage projects more efficiently. While achieving diversity goals in construction may seem daunting, it’s not insurmountable. Tough Leaf addresses the industry’s inherent complexities, and by embracing innovative solutions, stakeholders can work together to foster a more diverse and inclusive construction sector.
To learn more visit www.ToughLeaf.com.

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