dbe compliance training maryland department of transportation november 1 and 5, 2010 new york state...
Post on 25-Dec-2015
215 Views
Preview:
TRANSCRIPT
DBE COMPLIANCE TRAININGMARYLAND DEPARTMENT OF TRANSPORTATION
NOVEMBER 1 AND 5, 2010
New York State Department of TransportationDBE Program Training
May 7 and 8, 2013
Martha Kenley
National DBE Program Manager
Federal Highway Administration
Office of Civil Rights
martha.kenley@dot.gov
104/19/23
LEARINING OBJECTIVES
Day 1 History and Background Contract Administration Goals Good Faith Effort Reviews Certification Standards
2
Day 2Certification ProceduresContractor ComplianceCompliance and Enforcement
LEARNING OBJECTIVES
3
HISTORY
Title VI of the Civil Rights Act of 1964
1980 – DOT issued regulations to implement uniform MBE programs on Federally-assisted DOT projects. Included distinct goals for both MBEs and WBEs. Not a required percentage—negotiated State by State
•
4
HISTORY
1982 – Congress passed Surface Transportation Assistance Act 10% National DBE goal (only for MBEs)
1987 – Congress passed the Surface Transportation and Uniform Relocation Assistance Act Added women as presumed disadvantaged
class Added small business size standard
5
HISTORY
DBE Program has continued to be reauthorized and most recently in Section 1101 (b) of Moving Ahead for Progress in the 21st Century (MAP-21)
04/19/23 6
HISTORY
1995 – Adarand v. Pena. U.S. Supreme Court case: Federal racial classifications must undergo strict scrutiny. Must show:
Serve compelling government interest; and
Is narrowly tailored to further that compelling government interest
7
HISTORY
1999 – 49 CFR Part 26 created as DBE program regulations “Good faith efforts” introducedMaximize race-neutral concept 10% goal became “aspirational”Narrow tailoring”
8
NARROW TAILORING
DBE Programs must be “narrowly tailored,” meaning they must be structured only to remedy the effects of past and present discrimination, be flexible and end when the remedial purposes have been achieved
9
2005 9th Circuit Court of Appeals case in which a majority-owned subcontractor sued the DOT, contending he was denied work on a Federal-aid highway contract because even though he submitted the lowest bid, the prime hired a DBE to meet the contract goal
The court held that the Federal DBE Program served a compelling State interest and was constitutional on its face, but that to be “narrowly tailored,” States must limit race conscious measures (contract goals) to those groups that the State can show have actually suffered from discrimination
As a result, Ninth Circuit States were required to conduct disparity studies to determine whether discrimination and its effects have occurred and what specific classes were affected
DBE PRIMARY OBJECTIVE
Provide means for increasing DBE participation in DOT-assisted contracts to create a level playing field on which DBEs can compete fairly with all firms in the transportation industry
FHWA, FAA, and FTA
04/19/23 11
PROGRAM GUIDANCE
Must be issued by OST
In the form of Q and As
OSDBU websitehttp://www.osdbu.dot.gov/DBEProgram/index.cfm
04/19/23 12
DBE PROGRAM COMPLIANCE
State DOT must have: Program Plan - 49 CFR § 26.21 - must have a FHWA
approved, up-to-date DBE Program Plan which describes exactly how the program is administered - policies and procedures
Policy Statement - 49 CFR § 26.23 -commitment to DBE program and responsibilities for implementation
Liaison Officer - 49 CFR § 26.25 - must have independent and direct access to CEO. Should be involved in all DBE decisions
13
RECORDS & REPORTS
State DOT must have and maintain: Records of all DBE participation on contracts, race-
conscious and race-neutral - 49 CFR §26.11(a) Bidders List - 49 CFR §26.11
All firms bidding or participating (primes & subs) Include: name, the age of firm, and annual gross
receipts Primes should include DBEs that bid but were not
used Must submit semi-annual DBE uniform reports
14
DBE DIRECTORY § 26.31
State DOT must maintain a directory of all certified DBEs Address Phone number (email) Types of work the firm has been certified to perform Keep up-to-date Be as specific as possible NAICS Code that most narrowly defines what DBE
performs on federally-assisted contracts
15
DBE CONTRACT ADMINISTRATION
Contract must contain these provisions
Non-discriminationPrompt paymentRetainageEnforcement Provisions
ASSURANCES § 26.13
Each contract, prime and sub must contain the stated assurance as written
Failure by the contractor to carry out these requirements is a material breach of this contract, which may result in the termination of this contract or such other remedy as the recipient deems appropriate.
04/19/23 17
PROMPT PAYMENT §26.29
Must have contract provision that requires primes to pay all subcontractors, material suppliers, truckers no later than 30 days after receipt of payment from State DOT
Must have means of enforcement and mechanism for monitoring
18
RETAINAGE §26.29
Prompt and full payment of retainage from prime to sub within 30 days after the subcontractor’s work is satisfactorily completed
“Satisfactory Completion” means all subcontract work is complete
Incremental payment by State DOT to prime for work that includes sub’s work is deemed satisfactorily completed
04/19/23 19
RETAINAGE §26.29
DOT must select one of the following options for retainage:Decline to hold retainage and prohibit
prime from holding retainageDecline to hold retainage from prime,
but allow prime to hold from sub Hold retainage from prime and provide
for incremental acceptance
State Prime DBE/Subs
Does not withhold from Prime Does not withhold from subcontractors
Does not withhold from Prime Does withhold from subs
Prime must pay within 30 days of completion of subcontractor’s work
Withholds from Primepartial payments to prime upon completion of work
Does withhold from subs
Prime must pay all retainage to sub for completion of accepted work within 30 days of prime’s receipt of payment from State DOT/LPA.
04/19/23 21
SMALL BUSINESS §26.39
State DOT must include a small business element to its DBE program to facilitate participation by small businesses generally, not just DBEsPurpose is to assist State DOTs in attaining
race-neutral DBE participation
22
SMALL BUSINESS
Procurement No local preference; no MBE/WBEBusiness size must conform to DBE
regulations Consult 13 CFR Part 121 for business size caps—
In no case can exceed $22.41 Million State DOTs must verify business size
23
SMALL BUSINESS
Confusion over phrase “set aside” The prohibition on set-asides in § 26.43 specifically
applies to set asides for DBEs. The prohibition exists because set-asides for DBEs would be race-conscious, and therefore would raise constitutional issues
Race-neutral set-asides for small businesses do not raise these same constitutional issues, because of their race-neutral character. Consequently, they are not prohibited by §26.43, and can be among the
approaches used under §26.39
24
SMALL BUSINESS
Best practices:Small business race-neutral set asidesUnbundling, i.e. breaking up larger contracts into smaller contractsReducing bonding requirementsSimplifying prequalification requirements
04/19/23 25
Overall Goal--the program requires each State to establish an overall DBE goal
The annual goal is expressed as a percentage of a State DOT’s federal aid funds
Percentage of DBE participation one would expect in a discrimination-free market
Goal must be based on demonstrable evidence of availability of ready, willing, and able DBEs relative to ALL businesses ready, willing and able to participate on DOT-assisted contracts. 26 CFR 26.45(b).
Annual DBE Goal - Purpose
27
Annual DBE Goal - Basics
Encouraged to follow USDOT’s “Tips for Goal-Setting in the DBE Program” http://www.osdbu.dot.gov/documents/pdf/dbe/Tips_for_Goal.pdf
28
Identify Method Selected
1. Bidder’s List
2. Census Data + DBE Directory
3. Disparity Study
4. Use Goal of Other DOT Recipient
5. Alternate Method
Annual DBE Goal – Step One
29
Bidders List methodDetermine the number of ALL businesses,
successful OR unsuccessful that have bid or quoted on prime or subcontracts during the same time period
State DOT must have mechanism to capture data on DBE and non-DBE subcontractors that submitted bids or quotes.
30
Annual DBE Goal – Step One
Best data available
How was data collected
What were data sources and why are they reliable
31
Annual DBE Goal - Basics
Must consider potential minority and women-owned firms that could be eligible for DBE certificationSurvey of businesses through custom
census—filtered by business size/typeSurvey of unsuccessful subcontractors on
bidder’s list if not identified as DBEsMBEs and WBEs in State programs
32
Annual DBE Goal - Basics
Determine Relevant Geographic Market Area (GMA): Geographic distribution of contractors and subcontractors and area in which contracting dollars are spent
Note: relevant Market Area may not be State Boundaries
33
Annual DBE Goal – Step One
34
GMA: 2008 – 2012
In-State Dollars Total DollarsRepresentative
State Percentage
Geographic Distribution of Participating Prime
Contractors$727,048,359 $779,140,546 93.31%
Geographic Distribution of Participating Subcontractors
$113,513,436 $151,557,115 74.91%
Total State Market % $840,561,795 $930,697,661 90.32%
Annual DBE Goal – Step One
Example:
Base Figure represents the relative availability of DBEs in relevant geographic market area (GMA).
35
Annual DBE Goal – Step One
Number of Ready, Willing and Able DBEs and Potential DBEs
_________________________ = Base Figure %
Number of All Firms
Ready, Willing & Able
Bidders List Example:
36
Annual DBE Goal – Step One
10 DBEs bid or quoted
on prime or
subcontracts
___________________ = 10.00 % Base Figure
100 Total Firms bid
or quoted on prime
or subcontracts
Weighting by Work Type
Provides a more narrowly-tailored model of availability
Weights used are proportion of dollars spent within each industry: resulting percentage is more heavily influenced by availability in industries where more dollars are spent
May use NAICS, internal work codes, etc.
37
Annual DBE Goal – Step One
38
Annual DBE Goal – Step One
1. Decide which work types best represent your DOT-assisted contracts
2. Tally the dollars spent in each work type category as a percentage of the total contract dollars spent
3. Assign work types to each DBE and non-DBE firm
Industry
% of Dollars (weight) DBEs Non-DBEs Weighted %
Trucking 5.00% 1 18 0.28%Engineering/Design 5.00% 1 17 0.29%Construction 90.00% 8 65 11.08%Total 100.00% 10 100 11.65%
Annual DBE Goal – Step One
Weighting Example: State DOT contracts primarily in Trucking, Engineering/Design, and Construction:
39
DOT must examine all available evidence and determine what adjustments, if any, are necessary
It is not necessary to make a Step Two Adjustment
If state DOT has data but does not use it, state must explain why
Annual DBE Goal – Step Two
40
Median past DBE participation (MPP) Use DBE participation data from past 5 years
to demonstrate capacity (percentages) If MPP figure is very similar to Step One base
figure, should not make any adjustment for past participation
If past participation is disparately low compared to Base Figure, making a step two adjustment may perpetuate past discrimination
Annual DBE Goal – Step Two
41
Median Past Participation Example:
1.Tally total DBE achievement percentage for 5 years.
Annual DBE Goal – Step Two
Total DBE Achieved
(RC+RN) Total Contract Amt Total DBE %2008 $750.00 $5,000.00 15.00%2009 $480.00 $4,000.00 12.00%2010 $200.00 $1,000.00 20.00%2011 $240.00 $6,000.00 4.00%2012 $360.00 $6,000.00 6.00%
42
Annual DBE Goal – Step Two
Choose median (not average) percentage
Median is 12% very close to Base Figure of 11.65%--no adjustment warranted
04/19/23 43
2011 4.00%2012 6.00%2009 12.00%2008 15.00%2010 20.00%
Consider Other Factors
Disparity studies Lack of access to financing Statistical employment data Other data affecting likely DBE
participation—drastic changes in the economy
44
Annual DBE Goal – Step Two
Race-Conscious – Race Neutral Projections
Must meet maximum feasible portion of annual goal through race-neutral means
STA projects portion of goal it projects it will meet
Race-consciousRace-neutral
45
Annual DBE Goal – Other Elements
Race-Neutral Projection Example:
1. Tally total RN DBE achievement percentage for 5 years.
46
Annual DBE Goal – Other Elements
Race-Neutral DBE
Amt Total Contract Amt RN DBE %
2008 $100.00 $5,000.00 2.00%
2009 $200.00 $4,000.00 5.00%2010 $30.00 $1,000.00 3.00%
2011 $420.00 $6,000.00 7.00%2012 $300.00 $6,000.00 5.00%
2. Choose median RN percentage:
2008 2.00%2010 3.00%2009 5.00%2012 5.00%2011 7.00%
47
Annual DBE Goal – Other Elements
3. Apply to Adjusted Base Figure for final Goal:
Adj. BF: 11.65%6.65% Race-Conscious
5.00% Race-Neutral=
Public Participation1. Consultation with minority, women's and
general contractor groups, community organizations, and other officials or organizations
2. Published notice of proposed overall goal for 30 days, and must accept comments on the goals for 45 days from the date of the notice.
48
Annual DBE Goal – Other Elements
ACCOUNTABILITY §26.47(c)
State DOT that has not meet its overall
DBE goal in any given year must submit written analysis to FHWA of why the goal was not met and corrective actions to be taken
49
ANALYSIS
Contract goals below RC projection and/or not adjusted during the year?
Many contracts without goals? Alternative delivery projects (design/build; CMAR,
etc.) with goals that are too low? Significant percentage of contract dollars awarded
based on good faith efforts?
ACCOUNTABILITY
Timeframe State DOT must submit detailed analysis and
established corrective measures to FHWA Division within 90 days of end of fiscal year FOR APPROVAL
If FHWA approves, State DOT in compliance FHWA may give conditional approval
Modifications to overall goal methodologyChanges to RC/RN projectionsAdditional RC or RN measures
51
ACCOUNTABILITY
State DOT is in non-compliance if ANY of the following occur:Do not submit analysis and corrective
actions to FHWA timelyFHWA disapproves of analysis or corrective
actionsDo not fully implement corrective actions or
FHWA imposed conditions for acceptance
52
ACCOUNTABILITY
FHWA can intervene before end of fiscal year if Uniform Report shows unlikelihood of meeting annual goal
53
DBE OVERVIEW
Race Conscious PracticesAssist only DBEsSet contract goalsEvaluate good faith efforts
Race Neutral PracticesDo not affect contract awardDo not require bid gfe analysisAssist ALL small businesses
54
RACE NEUTRAL §26.51
Maximize Race NeutralSupportive ServicesDBE PrimesDBE Participation Beyond GoalDBE Participation on No Goal Contracts
04/19/23 55
CONTRACT GOALS §26.51
Must establish contract goals to meet portion of goal not met race-neutrally
States are not required to set DBE goals on every Federal-aid contract, but must set goals on enough individual contracts to cumulatively reach the overall goal
Alternate Program Delivery
04/19/23 56
CONTRACT GOALS
All contracts that include Federal funds must incorporate the DBE program and may not impose State or local MBE/WBE subcontracting goals
Federally-funded contracts may not include local hiring goals or preferences 23 CFR § 635.117(b)
Setting Contract Goals
Construction AND ConsultantSubcontractable Work ItemsSurvey of DBEsLocationReasonable and Attainable
04/19/23 58
CONSULTANT CONTRACTS
May include DBE goal in the advertisement or solicitation
The top-ranked firm required to demonstrate how the firm would meet the goal at the negotiation phase of the procurement process.
59
CONSULTANT CONTRACTS
If, during the negotiation phase of the procurement process, work committed to DBEs is decreased or eliminated through negotiation of the detailed scope of services the prime consultant must use good faith efforts in revision of its proposal to provide for the participation of DBEs
60
CONSULTANT CONTRACTS
To harmonize Federal statutory policy, a State may establish the use/participation of certified DBE sub-consultant firms as an evaluation criterion which shall be no more than ten (10) percent of the total evaluation criteria in assessing the qualifications of firms to perform the solicited services.
61
DBE OVERVIEW
Contract Goals
If a prime does not meet the DBE contract goal, it must provide the State DOT with documentation to show that it used “good faith efforts” to do so
62
GOOD FAITH EFFORTS
§26.53 and Appendix AAward contract to lowest responsive bidderResponsive if DBE goal metResponsive if demonstrate good faith efforts
04/19/23 63
GOOD FAITH EFFORTS
Bidder took all necessary and reasonable steps to achieve a DBE goal that by their scope, intensity, and appropriateness to the objective could reasonably be expected to obtain sufficient DBE participation
Efforts should be those that one could reasonably expect a bidder to take if the bidder were actively and aggressively trying to meet the goal
04/19/23 64
GOOD FAITH EFFORTS
State DOT must consider the quality, quantity, and intensity of the different kind of efforts the bidder made
Must evaluate overall effort of the bidder’s documented good faith efforts
04/19/23 65
DBE OVERVIEW
Good Faith EffortsRigorous review of documented effortsReview performance of other biddersLowest price not sufficient reason to rejectReview all subcontractor quotes Follow up with DBEs to see if contactedBeware of meaningless, pro-forma
contact/solicitation
66
GOOD FAITH EFFORTS
No formula or point system allowedDetermining sufficiency of a bidder’s
good faith efforts is a judgment call; meeting quantitative formulas is not required, nor possible
Intrinsically fact-specific judgment call particular to specifics of the procurement
04/19/23 67
GOOD FAITH EFFORTS
Responding to all GFE factors does not necessarily mean the bidder demonstrated adequate good faith efforts
04/19/23 68
GOOD FAITH EFFORTS
When apparent low bidder fails to meet the contract goal, but the second low bidder meets it, you may reasonably raise the question of whether, with additional efforts, the apparent low bidder could have met the goal
04/19/23 69
GOOD FAITH EFFORTS
Did bidder make enough work items available to meet the goal
Did bidder choose to self-perform available DBE work items?
Did bidder solicit all available DBEs available for work items
Did bidder follow up with specific DBEs?
04/19/23 70
GOOD FAITH EFFORTS
Did bidder document all solicitations?Emails Phone logsVerify by calling a sampling of DBEs
04/19/23 71
GOOD FAITH EFFORTS
May not reject DBE based upon price if price is not unreasonable
Most primes do not hire subcontractors based upon low bid alone
Did another bidder use a DBE that low bidder rejected because of unreasonable price?
If so, price probably not unreasonable
04/19/23 72
GOOD FAITH EFFORTS
Was there more the bidder could have done to meet the goal?
Missing a goal by a just a few percentage points usually translates into thousands of dollars of missed DBE opportunities
Soliciting DBEs that do not do relevant work constitutes pro forma efforts
04/19/23 73
EVALUATING GFE
Verify bidder’s list of DBEs are certified for work listed
Verify DBE quotesEnsure adequate description of DBE
workWhat is the DBE going to performPartial work items sufficiently described
04/19/23 74
GOOD FAITH EFFORTS
Review of prime commitments and upfront is sometimes based on faulty assumptions
• DBE(s) have capacity to perform the work• DBE material suppliers will act as regular
dealers and an automatic 60% is credited to the goal
Prime commitments are commensurate with the availability of work and quantities estimated under the prime contract
04/19/23 75
GOOD FAITH EFFORTS
Beware of large amount of trucking listed to meet goalHow many trucks does the DBE own?What companies will be providing
supplemental trucking services? DBE/non-DBE
04/19/23 76
GOOD FAITH EFFORTS
Draft well-reasoned and thorough memorandum on all Good Faith Efforts decisions
Reasonable Good Faith Efforts decisions are difficult to challenge because the decision maker is given latitude to weigh a variety of factors in reaching their conclusion
04/19/23 77
GOOD FAITH EFFORTS
If bidder’s good faith efforts are deemed inadequate, the bidder must be offered an opportunity for administrative reconsideration
Give opportunity to provide written documentation or oral argument
Reconsideration official cannot take part in the original determination
04/19/23 78
GOOD FAITH EFFORTS
Bidder must have the opportunity to meet in person with the reconsideration official
Bidder must receive a written decisionNot administratively appealable to
USDOT
04/19/23 79
GOOD FAITH EFFORTS
A contract that was awarded to a bidder who did not meet the goal or demonstrate adequate good faith efforts is ineligible for Federal participation
04/19/23 80
DBE SUPPORTIVE SERVICES
DBE/SS –gone to formula based allocation process. Allocation is a percentage of a State DOT’s federal transportation apportioned fundsIncrease DBE capacity and ability to compete
04/19/23 81
DBE CERTIFICATION STANDARDS
DBE CertificationUnified Certification Programs
(UCPs)Receive and review applicationsPerform interviews and onsite
investigations
04/19/23 82
DBE CERTIFICATION STANDARDS
§§26.63 – 26.71Group MembershipSocial DisadvantageEconomic DisadvantageBusiness SizeOwnershipControl
83
WHAT IS A DBE?
A Disadvantaged Business Enterprise (DBE) is a for-profit small business that is:
At least 51% owned by one or more individuals who are socially and economically disadvantaged
Managed, operated and controlled by one or more of the socially and economically disadvantaged owners
84
Social – Citizen or lawfully admitted permanent residents Groups with presumed social and economic
disadvantageAfrican Americans Subcontinent Asian
Americans
Hispanic Americans Women
Native Americans Others must prove individual social and economic disadvantage
Asian Pacific Americans
86
SOCIAL DISADVANTAGE
Social Disadvantage Signed, notarized statement of
membership in a presumptively disadvantaged group
If in question, certifying entity has burden of proof
GROUP MEMBERSHIP
Additional information may be required beyond notarized statement if well-founded reason-49 CFR 26.63
Written explanation of reasons for questioning group membership
Length of time individual held to be member of group
Whether person is regarded as a member by relevant community
Appropriate documentation of group membership
87
88
INDIVIDUAL DISADVANTAGE
Not in presumptively disadvantaged class, or group membership not proven, applicant required to prove individual social disadvantaged status
Appendix E— Must include the followingOne distinguishing featurePersonal experiencesBarriers to entry in business world
Education - Employment - Business History
DBE OWNERSHIP
Applicant must be owned (51%) by individuals Cannot be owned by another firm, even if DBE Except:
Disadvantaged individual owns and controls applicant firm through parent or holding company, e.g. for tax purposes (26.69(d))
Parent or holding company owns and controls subsidiary Certify the subsidiary if cumulatively 51% ownership by
disadvantaged individuals
Indian Tribe/Native Hawaiian organization, ANCs
89
OWNERSHIP
Not acceptable:Promise to contribute capitalUnsecured note payable to firm or owner not
disadvantagedParticipation as an employee
Loans from financial institutions preferred
Joint checking accountsExamine loans from family or friends
91
OWNERSHIP
Presumed not acceptable:Gifts from any non-disadvantaged
individual or non-DBE firm who isInvolved in the applicant firmInvolved in same or similar line of
businessEngaged in an ongoing business
relationship with the applicant firm.
92
OWNERSHIP
To overcome presumption applicant has burden of proof to demonstrate by clear and convincing evidence:Gift was made for reasons other than
DBE certificationDisadvantaged individual actually
controls the applicant firm
93
ECONOMIC DISADVANTAGE
Less than $1.32M Exclude equity in primary residence and
ownership interest in DBE at issueTransferring personal assets to companies to
avoid exceeding PNW calculationPresent value of retirement assets continue to
be counted as part of PNW Is owner reporting all land/other businesses?Beware of “valueless property”
97
ECONOMIC DISADVANTAGE
Personal Net Worth 49 CFR 26.67 (a) (2) (i) You must require each individual owner of a
firm applying to participate as a DBE, whose ownership and control are relied upon for DBE certification to certify that he or she has a personal net worth that does not exceed $1.32 million.
(ii) You must require each individual who makes this certification to support it with a signed, notarized statement of personal net worth, with appropriate supporting documentation.
98
FOR MARRIED APPLICANTS
Confirm whether or not PNW statement is reporting marital assets
If an asset is held as community property, or jointly between two people, 50% of the value of the asset is normally attributed to each person
99
PERSONAL NET WORTH
Should you simply accept an owner’s PNW statement?
Where the State DOT has a reasonable basis to believe PNW statement is incomplete or inaccurate, the recipient may “look behind” it, by seeking further information or conducting an investigation to resolve issues.
100
101
BUSINESS SIZE
49 CFR 26.65 Must exist as a small business under
SBA standards (13 CFR 121)Size standard applied must be for type of
work firm seeks to perform in DOT-assisted contracts
Receipts of affiliates must be included
BUSINESS SIZE
Size standards by NAICS Code website:
http://www.sba.gov/content/small-business-size-standards
102
NAICS CODES
NAICS Code. Work performed by DBE must be described in terms of most specific NAICS Code that best describes type of work DBE owners can control and will perform on State DOT contracts
May have multiple NAICS Codes State DOTs may also add a narrative description of
work– clear and specific Ensure NAICS Codes are current and accurate
103
NAICS CODE
Website
http://www.naics.com/search.htm
104
CONTROL
Consider all facts in record viewed as a whole
“You must grant certification to a firm only for specific types of work in which the socially and economically disadvantaged owners have the ability to control the firm” – 49 CFR §26.71(n)
105
DETERMINE CONTROL
Has expertise/ability to intelligently and critically evaluate information presented by others
Makes independent decisionsNo restrictions
107
CONTROL
Family-owned firmFirm controlled by family as group not
eligibleNon-disadvantaged family members may
participate Is disadvantaged owner really in charge?
109
CONTROL
Firm formerly owned by non-disadvantaged individual/family member Transfers ownership to disadvantaged
individualRemains involved in the firm
New owner has burden of proof by clear and convincing evidenceTransfer not made for DBE certificationDisadvantaged individual controls firm
110
CONTROL/INDEPENDENCE
State DOT (or UCP) must only certify independent firms as DBEs – 49 CFR § 26.71(b)
Does not depend on another firm for viability
112
CONTROL
ExpertiseDisadvantaged owner must have
Overall understanding of type of business Managerial and technical competenceRelevant experience and educationAbility to intelligently and critically evaluate
information from others in firmAdministrative functions insufficient
113
BUSINESS STRUCTURES
Sole ProprietorshipsPartnershipsCorporations (C, S, Close)Limited Liability CorporationsLimited PartnershipsLLPs/Professional Corps.Trusts
115
PARTNERSHIPS
Examine:
Partnership Agreement Can significant decisions be made when
disadvantaged owner is not present? Do decisions require concurrence by non-
disadvantaged individual? Who has signature authority? Personal tax returns for business size
116
C CORPORATIONS
Articles of Incorporation and bylaws filed with State
Stockholders are owners--elect the Directors. May have different classes of stock Directors manage overall strategy of the
business, appoint officers. Officers are under the direction of the directors
and manage day-to-day business operations. Corporations are required to have annual
meetings with record keeping (minutes).
117
C CORPORATIONS
Must own at least 51% of each class of voting stock and 51% of aggregate of all stock outstanding
Held directly by disadvantaged personsMust hold highest officer positionMust control Board of Directors
118
C CORPORATIONS
Examine Identify officers and board members,
include gender/ethnicity, date appointed, whether they are involved in or have ownership in other business
Trace firm’s ownership backCorporate tax returns to confirm business
size requirements
119
C CORPORATIONS
Examine Bylaws; Meeting Minutes Who’s on the board? What constitutes a quorum? Can significant decisions be made when
disadvantaged owner is not present? Do decisions require concurrence by non-
disadvantaged individual? Who has signature authority? Who’s running the meetings?
120
TRUSTS
Operate under Declaration of Trust Terminates upon the earlier of
death of beneficiary or termination date of trust. Governed by Trustee as set forth in Declaration of Trust
Can’t be owner of DBE, unless….
121
TRUSTS
If Applicant is owned by Trust examine Declaration of Trust:Beneficial owner and trustee must be
disadvantaged persons; orBeneficial owner must be disadvantaged
AND exercise control of firm rather than trustee; or
Same disadvantaged person is grantor, beneficiary and trustee of revocable living trust.
122
INTERSTATE CERTIFICATION
49 CFR §26.83
Time FramesApplicant sends Home State A certification
letter to State B, requests certificationState B confirms with State A or on-line
State B may accept State A’s certification
without further action
123
INTERSTATE CERTIFICATION
If State B does not choose to accept Applicant sends all documents to State B
Copy of State A application and all other supporting documents, affidavits of no change, correspondence
Copy of notices from other States about application status, denials, decertifications
Copy of any certification appeals with DOT Affidavit that all information is true and correct
State B has 7 days to request onsite from State A State A has 7 days to provide onsite to State B
124
INTERSTATE CERTIFICATION
State B has 60 days from receipt of all applicant materials to certify firm
If, within 60 days of receipt of all applicant information State B finds good cause to object to State A certification must send notice to applicant of specific reasons for determination and offer applicant opportunity to respond via writing or in person.
State B must have meeting within 30 days of applicant’s request
125
INTERSTATE CERTIFICATION
Applicant firm has Burden of Proof—Applicant need only address issues
raised by State BState B must issue written decision
within 30 days of applicant’s written response or meeting with decision maker (later of the two)
Applicant may appeal to DOCR
126
INTERSTATE CERTIFICATION
Good Cause to RejectEvidence of fraudNew informationCertification factually erroneous or
inconsistent with regulationsLaws of State B require different resultApplicant does not submit required
documentation
127
OTHER CERTIFICATION
§§ 26.84 and 26.84 deleted DOT/SBE
MOU lapsed; SBA allows self-certification DOCR database of DBE decertifications and
denials A DBE stays certified until its certification is
removed through due process procedures in 49 CFR §26.87
No such thing as “recertification” or “expiration”
128
CERTIFICATION DENIALS
Must provide written explanation with reasons for denialSpecific evidence in record leading to denialSpecific portion of the regulations upon
which denial is based Include ALL reasons for denial Include information of appeal rights under
26.89, including address and 90 day time frame
129
CERTIFICATION APPEALS
UCP must provide entire record to USDOT within 20 days of request
USDOT decision based upon status of firm as of date of appeal
USDOT affirms UCP decision unless it is not supported by evidence in the record
USDOT may remand for additional investigation if record incomplete or unclear
If USDOT reverses denial, UCP must take immediate action to certify firm
USDOT will not uphold denial based on grounds not specified in UCP decision
130
CERTIFICATION DENIAL
Establish time period of no more than one year (from time firm receives letter of denial) before firm may reapply for certification
Less than one year with FHWA Division approval
Normal re-application waiting period does not apply to firms that withdraw-but can go to “end of line” when issue corrected (New rule)
Unless abuse of withdrawal is determined
131
CHANGED CIRCUMSTANCES
DBE must inform UCP in writing of any change affecting size, disadvantaged status, ownership or control
Changes in managementAttach supporting documentation Notification in form of affidavitWithin 30 days of the change
132
ANNUAL AFFIDAVIT
DBE must provide every year sworn affidavit affirming no changes in circumstances affecting size, disadvantaged status, ownership or control or any material changes in the information provided in the application form.
Must specifically affirm that firm continues to meet business size standards
Supporting documentation attached—Tax Returns personal and corporate
133
REMOVING DBE CERTIFICATION
26.87 Procedures Written notification that there is “reasonable cause
to believe that a certified firm is ineligible” Specific reasons, evidence, regulations Opportunity for informal hearing to respond and
provide supporting evidence—firm could choose to submit writing
UCP has burden of proof Decision-maker not involved in original decision Maintain complete record of hearing
134
REMOVING DBE CERTIFICATION
Grounds for decisionChange in firm since certification Information not available at time of cert Information concealed or misrepresentedChange in federal regulationsDocumented finding that original decision
was factually erroneousNOT changed opinion
135
REMOVING DBE CERTIFICATION
Firm remains certified until internal decision is rendered
Removal of NAICS Code, or partial decertification requires same process
Written notice of decisionSpecific record evidence, regulationsAppeal information
136
REMOVING DBE CERTIFICATION
Effects of Certification Removal Prime or State DOT made commitment to use DBE
AND subcontractor executed before DBE is notified of its ineligibility, prime may count work toward goal BUT State DOT cannot count toward annual goal—except if because exceeded size standard
Prime or State DOT made commitment but subcontractor not executed before DBE is notified, prime cannot count work toward goal, must make good faith efforts to replace with eligible DBE
137
THIRD-PARTY COMPLAINTS
Written complaint may be filed by any person alleging DBE ineligible
Not required to accept general allegations or anonymous complaint
Complainant’s identity must be kept confidential
Must review records; may request additional information and investigate
138
USDOT INITIATED PROCEEDINGS
FHWA finds reasonable cause to believe certified firm is ineligibleDirect UCP to initiate removal proceedingsFHWA must provide UCP and DBE with
notice, including reasonsUCP must immediately start removal
proceedings
139
DAY 2
04/19/23 140
CERTIFICATION PROCEDURES
Receive an applicationNew rule says certifying entity must request
additional information within 30 days after receipt of the application
90 days from complete application Extend once for no more than 60 days with
written notice and explanation with specific reasons for extension
Failure to timely process is constructive denial appealable to DOT
141
CERTIFICATION APPLICATION
Statement from applicant of type of work it intends to perform
Date Firm Established Date Disadvantaged Person Took Ownership Manner in which ownership obtained Legal form of ownership
142
CERTIFICATION
Keep files confidential notwithstanding State law
Safeguard from disclosure to unauthorized persons information that may reasonably be regarded as proprietary or confidential
143
What/When/Why Onsite Reviews Are Required
Objectives for On-site Review What to look for/ask for Conducting Interviews
ONSITE REVIEWS
144
WHEN?
Original Application--26.83(1)Annual Update indicates material changeDBE notification of material changeAdditional NAICS Code requested3rd Party Complaint, etc.As a matter of procedure at certain intervals
of time
WHY?
Onsite reviews are most effective means of confirming representations that:The Disadvantaged Owner controls firm for
each NAICS Code requestedThe firm operates independentlyOwns what it what it says it owns
146
WHY?
If plan to operate as a regular dealer, determine it has warehouse and/or distribution equipment
If manufacturer, determine if it has plant
Has staff and equipment necessary to do the job
147
DETERMINE CONTROL
Independence Is firm dependent on another for viability?Are all, or most of its contracts, with one prime?
Has the DOT discovered via onsite review that the firm co-located with another firm?
Present or recent employer/employee relationships between the DBE owner and non-DBE?
148
COME PREPARED
Know before you go:Business StructureOwner or OwnersPercentage OwnershipPNWGross ReceiptsBecome Familiar with Business Documents
150
ONSITE REVIEW
Develop QuestionnaireType out answersPrint out onsiteSignature
151
ONSITE REVEIWS
Interview Disadvantaged Owner AloneFind out what an owner of this type of
business should know and ask the tough questions—ask an expert to go with you
Interview Principal OfficersLet them talk…Review recent contracts—who signed
152
ONSITE REVIEWS
On-site Visit to Job Site if ActiveIs the applicant’s equipment in
use?Do the worker’s know who they
work for?
153
TERMINATION FOR CONVENIENCE
§26.53 (f)
Prime contractors may not terminate for convenience a DBE that it relied upon to obtain the contract without:
Good CauseState DOT (DBE Liaison) written
approval
154
TERMINATION FOR CONVENIENCE
What Constitutes Good Cause? DBE fails or refuses to sign contract DBE fails or refuses to perform to normal industry standards DBE fails to meet prime’s reasonable bond requirements DBE goes bankrupt DBE is suspended or debarred (ineligible for fed. contracts) DBE is not a responsible contractor (in opinion of recipient) DBE voluntarily withdraws DBE is ineligible to receive DBE credit for work type DBE (key person) death or disability Other documented good cause
155
TERMINATION FOR CONVENIENCE
What Does Not Constitute Good Cause?Prime wants to self-perform the workPrime wants to substitute with another DBE
or non-DBE subcontractorPrime contractor makes it impossible for
DBE to perform its work in an acceptable manner
156
TERMINATION FOR CONVENIENCE
Request to Terminate for Good CausePrime gives written notice to DBE of intent
to terminate with copy to State DOTDBE has 5 days to respond to notice and
explain why it objects and why State DOT should not approve prime’s request (shorter period if public safety involved)
Applies to post-awards and pre-award deletions and substitutions
157
SUBSTITUTION §26.53(g)(h)
DBE is terminated for any reasonPrime must make good faith efforts to
fine another DBE to the extent needed to meet goal
Need not be for same work itemContractual administrative remedies will
be invoked if prime does not comply
04/19/23 158
PROGRAM OVERSIGHT §26.37
State DOTs must provide written certification that it has reviewed records AND monitored work sites in-state to ensure work committed to DBEs is actually performed by DBEs to which the work was committed
Every contract
159
DBE COMPLIANCE
Must review subcontractDoes it align with commitmentWhat is DBE supposed to be doing?
04/19/23 160
DBE OVERVIEW
Prime Contractor and State DOT only get credit when DBE performs a commercially useful function (CUF)
Do not confuse CUF with certification
16104/19/23
19
CUF REVIEWS
Is the DBE operating independently?
Using its own employeesUsing its own equipment In charge
Is the DBE performing what the contract said it would perform?
04/19/23
NORMAL INDUSTRY PRACTICE
Normal Industry PracticeIs role on project consistent with
normal industry practice?Would a prime contractor hire a non-
DBE subcontractor to perform these services?
Is the DBE performing in the same manner as other contractors?
16304/19/23
DBE OVERVIEW
No matter what DBE is hired to perform, count only the value of the actual work or service it is actually performing on specific contract
04/19/23 164
DEFINITIONS AND COUNTING
SubcontractorManufacturerRegular DealerService Provider (Consultant or
Broker)Hauler
04/19/23 165
DEFINITIONS AND COUNTING
DBE Subcontractor Most common Performing specific work items with own forces
pursuant to a contract agreement with prime Furnish and install Count 100% of prime’s payment to DBE
toward contract goal ---if-----NEXT SLIDE
04/19/23 166
DEFINITIONS AND COUNTING
DBE Subcontractor, furnish and installCount cost of materials if the DBE
Negotiates price Determines quality and quantity of materials Orders the materials Pays for the materials
May not count cost of material, supplies, equipment purchased/leased from prime
04/19/23 167
DBE COMPLIANCE
Joint ChecksCheck by prime contractor made out to
supplier or manufacturer AND DBE OK if Approval and Oversight
prior approval from the recipient a written joint check agreement among the
parties (including the suppliers concerned) providing full and prompt disclosure of the expected use of joint checks
04/19/23 168
DEFINITIONS AND COUNTING
DBE ManufacturerPrime purchases materials from a DBE
manufacturer may count 100% of cost if: DBE operates a factory that produces materials
on the premises to meet contract specifications DBE takes product and alters it to meet
contract specifications
04/19/23 169
DEFINITIONS AND COUNTING
DBE Regular Dealer Prime contracts with a regular dealer to supply
and deliver products. Regular dealer owns, operates a store or
warehouse that contains products it sells to public For bulk items DBE must own and operate
distribution equipment, have a master agreement with a supplier
Count 60% of cost of materials/supplies
04/19/23 170
DEFINITIONS AND COUNTING
DBE TruckersOwn and operate at least one truck on the projectManage trucking operation for portion of contract it is responsible forMay supplement by leasing trucks from established equipment leasing business if it has exclusive use and control
04/19/23 171
COUNTING TRUCKING
Count value of trucking services provided by DBE with trucks it owns
If DBE supplements its fleet:Count value of trucking services provided by
other DBE firms with their own trucksCount value of trucking services provided by
non-DBE firms in an amount not to exceed value of trucking services provided by DBE firms. 1:1
04/19/23 172
TRUCKING
Must develop mechanism to monitor trucking operationsDBE must report payments to supplemental
haulers, indicating whether or not DBERandom audits to verifyCollect ticketsVerify trucking firm before allowed on jobsiteRequire list of all trucks to be used on job
04/19/23 173
DEFINITIONS AND COUNTING
DBE Service Provider Prime hires a DBE to provide a bona fide
service Professional Technical Managerial Brokerage
Count entire amount of fees or commissions if reasonable
04/19/23 174
20
PERFORMANCE RED FLAGS
Supervision of DBE employees by prime or other contractor
DBE’s owner unaware of the status of the work or the performance of the business
Inquiries are answered by prime, not DBE
Laborers don’t know who they work for
04/19/23
21
PERFORMANCE RED FLAGS
Are DBEs being “helped” in their performance? Work performed jointly with another firm
Any portion of the work performed by the prime or any other firm?
Use common sense—is independence compromised?
04/19/23
22
EQUIPMENT
DBE may lease equipment if consistent with standard industry practice and at competitive rates
A lease agreement Is required and should be on long- term basis
A DBE may lease equipment on an ad hoc basis from another contractor, excluding the prime, with approval from the DOT
Equipment leased and used by the DBE with payment deducted from the prime contractor's payment(s) to the DBE is not allowed
04/19/23
23
EQUIPMENT RED FLAGS
Equipment used by DBE belongs to the prime contractor or another contractor with no formal lease agreement
Equipment signs and markings cover another owner's identity, usually through the use of magnetic signs
04/19/23
24
MATERIALS RED FLAGS
Materials for the DBE ordered, or paid for, by the prime
Joint checks used to pay for the materials
Materials or supplies necessary for the DBE’s performance are delivered by or billed to another business
04/19/23
TRUCKING RED FLAGS
DBE truck never at jobsitePrime is using its trucks for
portion of work committed to DBE
Unfamiliar trucks at jobsiteDrivers can’t identify employers
18004/19/23
CONTRACT COMPLIANCE
Prime lists DBE X toward goal to perform rebar services. Due to weather delays, prime is behind schedule (bonus for early completion). Oversight reveals Prime’s employees help DBE tie rebar to save time.
Is this allowed? Can it be counted?
18104/19/23
SANCTIONS
What does the contract say?Withhold estimates, progress paymentsBreach of contractLiquidated damagesInternal prequalification process
remediesOIG investigation if fraud suspected
Watch Closely
Joint VenturesMentor Protégés
Prior approval of planDistinct roles
COMPLIANCE AND ENFORCEMENT
Compliance & Enforcement
Failure to comply by State DOT
Suspension/termination of Federal fundsRefusal to approve projects, grants, contracts
184
COMPLIANCE AND ENFORCEMENT
Enforcement actions General Complaints made against DOT
Any person Within 180 days In writing Confidentiality
Compliance Reviews by FHWA Finding of Noncompliance
Reasonable cause notice Conciliation Enforcement Actions
185
COMPLIANCE AND ENFORCEMENT
Enforcement Actions - Contractors Suspension/debarment
False representation as DBE Attempt to use ineligible firm Over-reportingOIGReferral to Dept. of Justice
186
top related