[PDF Version]
[Code of Federal Regulations]
[Title 49, Volume 1]
[Revised as of October 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 49CFR26]
[Page 283-342]
TITLE 49--TRANSPORTATION
Subtitle A--Office of the Secretary of Transportation
PART 26_PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN DEPARTMENT
OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS
Subpart A_General
Sec.
26.1 What are the objectives of this part?
26.3 To whom does this part apply?
26.5 What do the terms used in this part mean?
26.7 What discriminatory actions are forbidden?
26.9 How does the Department issue guidance and interpretations under
this part?
26.11 What records do recipients keep and report?
26.13 What assurances must recipients and contractors make?
26.15 How can recipients apply for exemptions or waivers?
Subpart B_Administrative Requirements for DBE Programs for Federally-
Assisted Contracting
26.21 Who must have a DBE program?
26.23 What is the requirement for a policy statement?
26.25 What is the requirement for a liaison officer?
26.27 What efforts must recipients make concerning DBE financial
institutions?
26.29 What prompt payment mechanisms must recipients have?
26.31 What requirements pertain to the DBE directory?
26.33 What steps must a recipient take to address overconcentration of
DBEs in certain types of work?
26.35 What role do business development and mentor-prot[eacute]g[eacute]
programs have in the DBE program?
26.37 What are a recipient's responsibilities for monitoring the
performance of other program participants?
Subpart C_Goals, Good Faith Efforts, and Counting
26.41 What is the role of the statutory 10 percent goal in this program?
26.43 Can recipients use set-asides or quotas as part of this program?
26.45 How do recipients set overall goals?
[[Page 284]]
26.47 Can recipients be penalized for failing to meet overall goals?
26.49 How are overall goals established for transit vehicle
manufacturers?
26.51 What means do recipients use to meet overall goals?
26.53 What are the good faith efforts procedures recipients follow in
situations where there are contract goals?
26.55 How is DBE participation counted toward goals?
Subpart D_Certification Standards
26.61 How are burdens of proof allocated in the certification process?
26.63 What rules govern group membership determinations?
26.65 What rules govern business size determinations?
26.67 What rules determine social and economic disadvantage?
26.69 What rules govern determinations of ownership?
26.71 What rules govern determinations concerning control?
26.73 What are other rules affecting certification?
Subpart E_Certification Procedures
26.81 What are the requirements for Unified Certification Programs?
26.83 What procedures do recipients follow in making certification
decisions?
26.84 How do recipients process applications submitted pursuant to the
DOT/SBA MOU?
26.85 How do recipients respond to requests from DBE-certified firms or
the SBA made pursuant to the DOT/SBA MOU?
26.86 What rules govern recipients' denials of initial requests for
certification?
26.87 What procedures does a recipient use to remove a DBE's
eligibility?
26.89 What is the process for certification appeals to the Department of
Transportation?
26.91 What actions do recipients take following DOT certification appeal
decisions?
Subpart F_Compliance and Enforcement
26.101 What compliance procedures apply to recipients?
26.103 What enforcement actions apply in FHWA and FTA programs?
26.105 What enforcement actions apply in FAA programs?
26.107 What enforcement actions apply to firms participating in the DBE
program?
26.109 What are the rules governing information, confidentiality,
cooperation, and intimidation or retaliation?
Appendix A to Part 26--Guidance Concerning Good Faith Efforts
Appendix B to Part 26--Uniform Report of DBE Awards or Commitments and
Payments Form
Appendix C to Part 26--DBE Business Development Program Guidelines
Appendix D to Part 26--Mentor-Prot[eacute]g[eacute] Program Guidelines
Appendix E to Part 26--Individual Determinations of Social and Economic
Disadvantage
Appendix F to Part 26--Uniform Certification Application Form
Authority: 23 U.S.C. 324; 42 U.S.C. 2000d, et seq.; 49 U.S.C 1615,
47107, 47113, 47123; Sec. 1101(b), Pub. L. 105-178, 112 Stat. 107, 113.
Source: 64 FR 5126, Feb. 2, 1999, unless otherwise noted.
Subpart A_General
Sec. 26.1 What are the objectives of this part?
This part seeks to achieve several objectives:
(a) To ensure nondiscrimination in the award and administration of
DOT-assisted contracts in the Department's highway, transit, and airport
financial assistance programs;
(b) To create a level playing field on which DBEs can compete fairly
for DOT-assisted contracts;
(c) To ensure that the Department's DBE program is narrowly tailored
in accordance with applicable law;
(d) To ensure that only firms that fully meet this part's
eligibility standards are permitted to participate as DBEs;
(e) To help remove barriers to the participation of DBEs in DOT-
assisted contracts;
(f) To assist the development of firms that can compete successfully
in the marketplace outside the DBE program; and
(g) To provide appropriate flexibility to recipients of Federal
financial assistance in establishing and providing opportunities for
DBEs.
Sec. 26.3 To whom does this part apply?
(a) If you are a recipient of any of the following types of funds,
this part applies to you:
(1) Federal-aid highway funds authorized under Titles I (other than
Part B) and V of the Intermodal Surface Transportation Efficiency Act of
1991 (ISTEA), Pub. L. 102-240, 105 Stat. 1914,
[[Page 285]]
or Titles I, III, and V of the Transportation Equity Act for the 21st
Century (TEA-21), Pub. L. 105-178, 112 Stat. 107.
(2) Federal transit funds authorized by Titles I, III, V and VI of
ISTEA, Pub. L. 102-240 or by Federal transit laws in Title 49, U.S.
Code, or Titles I, III, and V of the TEA-21, Pub. L. 105-178.
(3) Airport funds authorized by 49 U.S.C. 47101, et seq.
(b) [Reserved]
(c) If you are letting a contract, and that contract is to be
performed entirely outside the United States, its territories and
possessions, Puerto Rico, Guam, or the Northern Marianas Islands, this
part does not apply to the contract.
(d) If you are letting a contract in which DOT financial assistance
does not participate, this part does not apply to the contract.
Sec. 26.5 What do the terms used in this part mean?
Affiliation has the same meaning the term has in the Small Business
Administration (SBA) regulations, 13 CFR part 121.
(1) Except as otherwise provided in 13 CFR part 121, concerns are
affiliates of each other when, either directly or indirectly:
(i) One concern controls or has the power to control the other; or
(ii) A third party or parties controls or has the power to control
both; or
(iii) An identity of interest between or among parties exists such
that affiliation may be found.
(2) In determining whether affiliation exists, it is necessary to
consider all appropriate factors, including common ownership, common
management, and contractual relationships. Affiliates must be considered
together in determining whether a concern meets small business size
criteria and the statutory cap on the participation of firms in the DBE
program.
Alaska Native means a citizen of the United States who is a person
of one-fourth degree or more Alaskan Indian (including Tsimshian Indians
not enrolled in the Metlaktla Indian Community), Eskimo, or Aleut blood,
or a combination of those bloodlines. The term includes, in the absence
of proof of a minimum blood quantum, any citizen whom a Native village
or Native group regards as an Alaska Native if their father or mother is
regarded as an Alaska Native.
Alaska Native Corporation (ANC) means any Regional Corporation,
Village Corporation, Urban Corporation, or Group Corporation organized
under the laws of the State of Alaska in accordance with the Alaska
Native Claims Settlement Act, as amended (43 U.S.C. 1601, et seq.).
Compliance means that a recipient has correctly implemented the
requirements of this part.
Contract means a legally binding relationship obligating a seller to
furnish supplies or services (including, but not limited to,
construction and professional services) and the buyer to pay for them.
For purposes of this part, a lease is considered to be a contract.
Contractor means one who participates, through a contract or
subcontract (at any tier), in a DOT-assisted highway, transit, or
airport program.
Department or DOT means the U.S. Department of Transportation,
including the Office of the Secretary, the Federal Highway
Administration (FHWA), the Federal Transit Administration (FTA), and the
Federal Aviation Administration (FAA).
Disadvantaged business enterprise or DBE means a for-profit small
business concern--
(1) That is at least 51 percent owned by one or more individuals who
are both socially and economically disadvantaged or, in the case of a
corporation, in which 51 percent of the stock is owned by one or more
such individuals; and
(2) Whose management and daily business operations are controlled by
one or more of the socially and economically disadvantaged individuals
who own it.
DOT-assisted contract means any contract between a recipient and a
contractor (at any tier) funded in whole or in part with DOT financial
assistance, including letters of credit or loan guarantees, except a
contract solely for the purchase of land.
[[Page 286]]
DOT/SBA Memorandum of Understanding or MOU, refers to the agreement
signed on November 23, 1999, between the Department of Transportation
(DOT) and the Small Business Administration (SBA) streamlining
certification procedures for participation in SBA's 8(a) Business
Development (8(a) BD) and Small Disadvantaged Business (SDB) programs,
and DOT's Disadvantaged Business Enterprise (DBE) program for small and
disadvantaged businesses.
Good faith efforts means efforts to achieve a DBE goal or other
requirement of this part which, by their scope, intensity, and
appropriateness to the objective, can reasonably be expected to fulfill
the program requirement.
Immediate family member means father, mother, husband, wife, son,
daughter, brother, sister, grandmother, grandfather, grandson,
granddaughter, mother-in-law, or father-in-law.
Indian tribe means any Indian tribe, band, nation, or other
organized group or community of Indians, including any ANC, which is
recognized as eligible for the special programs and services provided by
the United States to Indians because of their status as Indians, or is
recognized as such by the State in which the tribe, band, nation, group,
or community resides. See definition of ``tribally-owned concern'' in
this section.
Joint venture means an association of a DBE firm and one or more
other firms to carry out a single, for-profit business enterprise, for
which the parties combine their property, capital, efforts, skills and
knowledge, and in which the DBE is responsible for a distinct, clearly
defined portion of the work of the contract and whose share in the
capital contribution, control, management, risks, and profits of the
joint venture are commensurate with its ownership interest.
Native Hawaiian means any individual whose ancestors were natives,
prior to 1778, of the area which now comprises the State of Hawaii.
Native Hawaiian Organization means any community service
organization serving Native Hawaiians in the State of Hawaii which is a
not-for-profit organization chartered by the State of Hawaii, is
controlled by Native Hawaiians, and whose business activities will
principally benefit such Native Hawaiians.
Noncompliance means that a recipient has not correctly implemented
the requirements of this part.
Operating Administration or OA means any of the following parts of
DOT: the Federal Aviation Administration (FAA), Federal Highway
Administration (FHWA), and Federal Transit Administration (FTA). The
``Administrator'' of an operating administration includes his or her
designees.
Personal net worth means the net value of the assets of an
individual remaining after total liabilities are deducted. An
individual's personal net worth does not include: The individual's
ownership interest in an applicant or participating DBE firm; or the
individual's equity in his or her primary place of residence. An
individual's personal net worth includes only his or her own share of
assets held jointly or as community property with the individual's
spouse.
Primary industry classification means the North American Industrial
Classification System (NAICS) designation which best describes the
primary business of a firm. The NAICS is described in the North American
Industry Classification Manual--United States, 1997 which is available
from the National Technical Information Service, 5285 Port Royal Road,
Springfield, VA, 22161; by calling 1 (800) 553-6847; or via the Internet
at: http://www.ntis.gov/product/naics.htm.
Primary recipient means a recipient which receives DOT financial
assistance and passes some or all of it on to another recipient.
Principal place of business means the business location where the
individuals who manage the firm's day-to-day operations spend most
working hours and where top management's business records are kept. If
the offices from which management is directed and where business records
are kept are in different locations, the recipient will determine the
principal place of business for DBE program purposes.
Program means any undertaking on a recipient's part to use DOT
financial assistance, authorized by the laws to which this part applies.
[[Page 287]]
Race-conscious measure or program is one that is focused
specifically on assisting only DBEs, including women-owned DBEs.
Race-neutral measure or program is one that is, or can be, used to
assist all small businesses. For the purposes of this part, race-neutral
includes gender-neutrality.
Recipient is any entity, public or private, to which DOT financial
assistance is extended, whether directly or through another recipient,
through the programs of the FAA, FHWA, or FTA, or who has applied for
such assistance.
Secretary means the Secretary of Transportation or his/her designee.
Set-aside means a contracting practice restricting eligibility for
the competitive award of a contract solely to DBE firms.
Small Business Administration or SBA means the United States Small
Business Administration.
SBA certified firm refers to firms that have a current, valid
certification from or recognized by the SBA under the 8(a) BD or SDB
programs.
Small business concern means, with respect to firms seeking to
participate as DBEs in DOT-assisted contracts, a small business concern
as defined pursuant to section 3 of the Small Business Act and Small
Business Administration regulations implementing it (13 CFR part 121)
that also does not exceed the cap on average annual gross receipts
specified in Sec. 26.65(b).
Socially and economically disadvantaged individual means any
individual who is a citizen (or lawfully admitted permanent resident) of
the United States and who is--
(1) Any individual who a recipient finds to be a socially and
economically disadvantaged individual on a case-by-case basis.
(2) Any individual in the following groups, members of which are
rebuttably presumed to be socially and economically disadvantaged:
(i) ``Black Americans,'' which includes persons having origins in
any of the Black racial groups of Africa;
(ii) ``Hispanic Americans,'' which includes persons of Mexican,
Puerto Rican, Cuban, Dominican, Central or South American, or other
Spanish or Portuguese culture or origin, regardless of race;
(iii) ``Native Americans,'' which includes persons who are American
Indians, Eskimos, Aleuts, or Native Hawaiians;
(iv) ``Asian-Pacific Americans,'' which includes persons whose
origins are from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam,
Laos, Cambodia (Kampuchea), Thailand, Malaysia, Indonesia, the
Philippines, Brunei, Samoa, Guam, the U.S. Trust Territories of the
Pacific Islands (Republic of Palau), the Commonwealth of the Northern
Marianas Islands, Macao, Fiji, Tonga, Kirbati, Juvalu, Nauru, Federated
States of Micronesia, or Hong Kong;
(v) ``Subcontinent Asian Americans,'' which includes persons whose
origins are from India, Pakistan, Bangladesh, Bhutan, the Maldives
Islands, Nepal or Sri Lanka;
(vi) Women;
(vii) Any additional groups whose members are designated as socially
and economically disadvantaged by the SBA, at such time as the SBA
designation becomes effective.
Tribally-owned concern means any concern at least 51 percent owned
by an Indian tribe as defined in this section.
You refers to a recipient, unless a statement in the text of this
part or the context requires otherwise (i.e., `You must do XYZ' means
that recipients must do XYZ).
[64 FR 5126, Feb. 2, 1999, as amended at 64 FR 34570, June 28, 1999; 68
FR 35553, June 16, 2003]
Sec. 26.7 What discriminatory actions are forbidden?
(a) You must never exclude any person from participation in, deny
any person the benefits of, or otherwise discriminate against anyone in
connection with the award and performance of any contract covered by
this part on the basis of race, color, sex, or national origin.
(b) In administering your DBE program, you must not, directly or
through contractual or other arrangements, use criteria or methods of
administration that have the effect of defeating or substantially
impairing accomplishment of the objectives of the program with respect
to individuals of
[[Page 288]]
a particular race, color, sex, or national origin.
Sec. 26.9 How does the Department issue guidance and interpretations
under this part?
(a) This part applies instead of subparts A and C through E of 49
CFR part 23 in effect prior to March 4, 1999. (See 49 CFR Parts 1 to 99,
revised as of October 1, 1998.) Only guidance and interpretations
(including interpretations set forth in certification appeal decisions)
consistent with this part 26 and issued after March 4, 1999 have
definitive, binding effect in implementing the provisions of this part
and constitute the official position of the Department of
Transportation.
(b) The Secretary of Transportation, Office of the Secretary of
Transportation, FHWA, FTA, and FAA may issue written interpretations of
or written guidance concerning this part. Written interpretations and
guidance are valid and binding, and constitute the official position of
the Department of Transportation, only if they are issued over the
signature of the Secretary of Transportation or if they contain the
following statement:
The General Counsel of the Department of Transportation has reviewed
this document and approved it as consistent with the language and intent
of 49 CFR part 26.
Sec. 26.11 What records do recipients keep and report?
(a) [Reserved]
(b) You must continue to provide data about your DBE program to the
Department as directed by DOT operating administrations.
(c) You must create and maintain a bidders list.
(1) The purpose of this list is to provide you as accurate data as
possible about the universe of DBE and non-DBE contractors and
subcontractors who seek to work on your Federally-assisted contracts for
use in helping you set your overall goals.
(2) You must obtain the following information about DBE and non-DBE
contractors and subcontractors who seek to work on your Federally-
assisted contracts:
(i) Firm name;
(ii) Firm address;
(iii) Firm's status as a DBE or non-DBE;
(iv) Age of the firm; and
(v) The annual gross receipts of the firm. You may obtain this
information by asking each firm to indicate into what gross receipts
bracket they fit (e.g., less than $500,000; $500,000-$1 million; $1-2
million; $2-5 million; etc.) rather than requesting an exact figure from
the firm.
(3) You may acquire the information for your bidders list in a
variety of ways. For example, you can collect the data from all bidders,
before or after the bid due date. You can conduct a survey that will
result in statistically sound estimate of the universe of DBE and non-
DBE contractors and subcontractors who seek to work on your Federally-
assisted contracts. You may combine different data collection approaches
(e.g., collect name and address information from all bidders, while
conducting a survey with respect to age and gross receipts information).
[64 FR 5126, Feb. 2, 1999, as amended at 65 FR 68951, Nov. 15, 2000]
Sec. 26.13 What assurances must recipients and contractors make?
(a) Each financial assistance agreement you sign with a DOT
operating administration (or a primary recipient) must include the
following assurance:
The recipient shall not discriminate on the basis of race, color,
national origin, or sex in the award and performance of any DOT-assisted
contract or in the administration of its DBE program or the requirements
of 49 CFR part 26. The recipient shall take all necessary and reasonable
steps under 49 CFR part 26 to ensure nondiscrimination in the award and
administration of DOT-assisted contracts. The recipient's DBE program,
as required by 49 CFR part 26 and as approved by DOT, is incorporated by
reference in this agreement. Implementation of this program is a legal
obligation and failure to carry out its terms shall be treated as a
violation of this agreement. Upon notification to the recipient of its
failure to carry out its approved program, the Department may impose
sanctions as provided for under part 26 and may, in appropriate cases,
refer the matter for enforcement under 18 U.S.C. 1001 and/or the Program
Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801 et seq.).
(b) Each contract you sign with a contractor (and each subcontract
the
[[Page 289]]
prime contractor signs with a subcontractor) must include the following
assurance:
The contractor, sub recipient or subcontractor shall not
discriminate on the basis of race, color, national origin, or sex in the
performance of this contract. The contractor shall carry out applicable
requirements of 49 CFR part 26 in the award and administration of DOT-
assisted contracts. 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.
Sec. 26.15 How can recipients apply for exemptions or waivers?
(a) You can apply for an exemption from any provision of this part.
To apply, you must request the exemption in writing from the Office of
the Secretary of Transportation, FHWA, FTA, or FAA. The Secretary will
grant the request only if it documents special or exceptional
circumstances, not likely to be generally applicable, and not
contemplated in connection with the rulemaking that established this
part, that make your compliance with a specific provision of this part
impractical. You must agree to take any steps that the Department
specifies to comply with the intent of the provision from which an
exemption is granted. The Secretary will issue a written response to all
exemption requests.
(b) You can apply for a waiver of any provision of Subpart B or C of
this part including, but not limited to, any provisions regarding
administrative requirements, overall goals, contract goals or good faith
efforts. Program waivers are for the purpose of authorizing you to
operate a DBE program that achieves the objectives of this part by means
that may differ from one or more of the requirements of Subpart B or C
of this part. To receive a program waiver, you must follow these
procedures:
(1) You must apply through the concerned operating administration.
The application must include a specific program proposal and address how
you will meet the criteria of paragraph (b)(2) of this section. Before
submitting your application, you must have had public participation in
developing your proposal, including consultation with the DBE community
and at least one public hearing. Your application must include a summary
of the public participation process and the information gathered through
it.
(2) Your application must show that--
(i) There is a reasonable basis to conclude that you could achieve a
level of DBE participation consistent with the objectives of this part
using different or innovative means other than those that are provided
in subpart B or C of this part;
(ii) Conditions in your jurisdiction are appropriate for
implementing the proposal;
(iii) Your proposal would prevent discrimination against any
individual or group in access to contracting opportunities or other
benefits of the program; and
(iv) Your proposal is consistent with applicable law and program
requirements of the concerned operating administration's financial
assistance program.
(3) The Secretary has the authority to approve your application. If
the Secretary grants your application, you may administer your DBE
program as provided in your proposal, subject to the following
conditions:
(i) DBE eligibility is determined as provided in subparts D and E of
this part, and DBE participation is counted as provided in Sec. 26.49;
(ii) Your level of DBE participation continues to be consistent with
the objectives of this part;
(iii) There is a reasonable limitation on the duration of your
modified program; and
(iv) Any other conditions the Secretary makes on the grant of the
waiver.
(4) The Secretary may end a program waiver at any time and require
you to comply with this part's provisions. The Secretary may also extend
the waiver, if he or she determines that all requirements of paragraphs
(b)(2) and (3) of this section continue to be met. Any such extension
shall be for no longer than period originally set for the duration of
the program.
[[Page 290]]
Subpart B_Administrative Requirements for DBE Programs for Federally-
Assisted Contracting
Sec. 26.21 Who must have a DBE program?
(a) If you are in one of these categories and let DOT-assisted
contracts, you must have a DBE program meeting the requirements of this
part:
(1) All FHWA recipients receiving funds authorized by a statute to
which this part applies;
(2) FTA recipients receiving planning, capital and/or operating
assistance who will award prime contracts (excluding transit vehicle
purchases) exceeding $250,000 in FTA funds in a Federal fiscal year;
(3) FAA recipients receiving grants for airport planning or
development who will award prime contracts exceeding $250,000 in FAA
funds in a Federal fiscal year.
(b)(1) You must submit a DBE program conforming to this part by
August 31, 1999 to the concerned operating administration (OA). Once the
OA has approved your program, the approval counts for all of your DOT-
assisted programs (except that goals are reviewed by the particular
operating administration that provides funding for your DOT-assisted
contracts).
(2) You do not have to submit regular updates of your DBE programs,
as long as you remain in compliance. However, you must submit
significant changes in the program for approval.
(c) You are not eligible to receive DOT financial assistance unless
DOT has approved your DBE program and you are in compliance with it and
this part. You must continue to carry out your program until all funds
from DOT financial assistance have been expended.
[64 FR 5126, Feb. 2, 1999, as amended at 64 FR 34570, June 28, 1999; 65
FR 68951, Nov. 15, 2000]
Sec. 26.23 What is the requirement for a policy statement?
You must issue a signed and dated policy statement that expresses
your commitment to your DBE program, states its objectives, and outlines
responsibilities for its implementation. You must circulate the
statement throughout your organization and to the DBE and non-DBE
business communities that perform work on your DOT-assisted contracts.
Sec. 26.25 What is the requirement for a liaison officer?
You must have a DBE liaison officer, who shall have direct,
independent access to your Chief Executive Officer concerning DBE
program matters. The liaison officer shall be responsible for
implementing all aspects of your DBE program. You must also have
adequate staff to administer the program in compliance with this part.
Sec. 26.27 What efforts must recipients make concerning DBE financial
institutions?
You must thoroughly investigate the full extent of services offered
by financial institutions owned and controlled by socially and
economically disadvantaged individuals in your community and make
reasonable efforts to use these institutions. You must also encourage
prime contractors to use such institutions.
Sec. 26.29 What prompt payment mechanisms must recipients have?
(a) You must establish, as part of your DBE program, a contract
clause to require prime contractors to pay subcontractors for
satisfactory performance of their contracts no later than 30 days from
receipt of each payment you make to the prime contractor.
(b) You must ensure prompt and full payment of retainage from the
prime contractor to the subcontractor within 30 days after the
subcontractor's work is satisfactorily completed. You must use one of
the following methods to comply with this requirement:
(1) You may decline to hold retainage from prime contractors and
prohibit prime contractors from holding retainage from subcontractors.
(2) You may decline to hold retainage from prime contractors and
require a contract clause obligating prime contractors to make prompt
and full payment of any retainage kept by prime contractor to the
subcontractor within
[[Page 291]]
30 days after the subcontractor's work is satisfactorily completed.
(3) You may hold retainage from prime contractors and provide for
prompt and regular incremental acceptances of portions of the prime
contract, pay retainage to prime contractors based on these acceptances,
and require a contract clause obligating the prime contractor to pay all
retainage owed to the subcontractor for satisfactory completion of the
accepted work within 30 days after your payment to the prime contractor.
(c) For purposes of this section, a subcontractor's work is
satisfactorily completed when all the tasks called for in the
subcontract have been accomplished and documented as required by the
recipient. When a recipient has made an incremental acceptance of a
portion of a prime contract, the work of a subcontractor covered by that
acceptance is deemed to be satisfactorily completed.
(d) Your DBE program must provide appropriate means to enforce the
requirements of this section. These means may include appropriate
penalties for failure to comply, the terms and conditions of which you
set. Your program may also provide that any delay or postponement of
payment among the parties may take place only for good cause, with your
prior written approval.
(e) You may also establish, as part of your DBE program, any of the
following additional mechanisms to ensure prompt payment:
(1) A contract clause that requires prime contractors to include in
their subcontracts language providing that prime contractors and
subcontractors will use appropriate alternative dispute resolution
mechanisms to resolve payment disputes. You may specify the nature of
such mechanisms.
(2) A contract clause providing that the prime contractor will not
be reimbursed for work performed by subcontractors unless and until the
prime contractor ensures that the subcontractors are promptly paid for
the work they have performed.
(3) Other mechanisms, consistent with this part and applicable state
and local law, to ensure that DBEs and other contractors are fully and
promptly paid.
[68 FR 35553, June 16, 2003]
Sec. 26.31 What requirements pertain to the DBE directory?
You must maintain and make available to interested persons a
directory identifying all firms eligible to participate as DBEs in your
program. In the listing for each firm, you must include its address,
phone number, and the types of work the firm has been certified to
perform as a DBE. You must revise your directory at least annually and
make updated information available to contractors and the public on
request.
Sec. 26.33 What steps must a recipient take to address
overconcentration of DBEs in certain types of work?
(a) If you determine that DBE firms are so overconcentrated in a
certain type of work as to unduly burden the opportunity of non-DBE
firms to participate in this type of work, you must devise appropriate
measures to address this overconcentration.
(b) These measures may include the use of incentives, technical
assistance, business development programs, mentor-prot[eacute]g[eacute]
programs, and other appropriate measures designed to assist DBEs in
performing work outside of the specific field in which you have
determined that non-DBEs are unduly burdened. You may also consider
varying your use of contract goals, to the extent consistent with Sec.
26.51, to unsure that non-DBEs are not unfairly prevented from competing
for subcontracts.
(c) You must obtain the approval of the concerned DOT operating
administration for your determination of overconcentration and the
measures you devise to address it. Once approved, the measures become
part of your DBE program.
Sec. 26.35 What role do business development and mentor-
prot[eacute]g[eacute] programs have in the DBE program?
(a) You may or, if an operating administration directs you to, you
must establish a DBE business development program (BDP) to assist firms
in gaining the ability to compete successfully
[[Page 292]]
in the marketplace outside the DBE program. You may require a DBE firm,
as a condition of receiving assistance through the BDP, to agree to
terminate its participation in the DBE program after a certain time has
passed or certain objectives have been reached. See Appendix C of this
part for guidance on administering BDP programs.
(b) As part of a BDP or separately, you may establish a ``mentor-
prot[eacute]g[eacute]'' program, in which another DBE or non-DBE firm is
the principal source of business development assistance to a DBE firm.
(1) Only firms you have certified as DBEs before they are proposed
for participation in a mentor-prot[eacute]g[eacute] program are eligible
to participate in the mentor-prot[eacute]g[eacute] program.
(2) During the course of the mentor-prot[eacute]g[eacute]
relationship, you must:
(i) Not award DBE credit to a non-DBE mentor firm for using its own
prot[eacute]g[eacute] firm for more than one half of its goal on any
contract let by the recipient; and
(ii) Not award DBE credit to a non-DBE mentor firm for using its own
prot[eacute]g[eacute] firm for more than every other contract performed
by the prot[eacute]g[eacute] firm.
(3) For purposes of making determinations of business size under
this part, you must not treat prot[eacute]g[eacute] firms as affiliates
of mentor firms, when both firms are participating under an approved
mentor-prot[eacute]g[eacute] program. See Appendix D of this part for
guidance concerning the operation of mentor-prot[eacute]g[eacute]
programs.
(c) Your BDPs and mentor-prot[eacute]g[eacute] programs must be
approved by the concerned operating administration before you implement
them. Once approved, they become part of your DBE program.
Sec. 26.37 What are a recipient's responsibilities for monitoring the
performance of other program participants?
(a) You must implement appropriate mechanisms to ensure compliance
with the part's requirements by all program participants (e.g., applying
legal and contract remedies available under Federal, state and local
law). You must set forth these mechanisms in your DBE program.
(b) Your DBE program must also include a monitoring and enforcement
mechanism to ensure that work committed to DBEs at contract award is
actually performed by DBEs.
(c) This mechanism must provide for a running tally of actual DBE
attainments (e.g., payments actually made to DBE firms), including a
means of comparing these attainments to commitments. In your reports of
DBE participation to the Department, you must display both commitments
and attainments.
[64 FR 5126, Feb. 2, 1999, as amended at 65 FR 68951, Nov. 15, 2000; 68
FR 35554, June 16, 2003]
Subpart C_Goals, Good Faith Efforts, and Counting
Sec. 26.41 What is the role of the statutory 10 percent goal in this
program?
(a) The statutes authorizing this program provide that, except to
the extent the Secretary determines otherwise, not less than 10 percent
of the authorized funds are to be expended with DBEs.
(b) This 10 percent goal is an aspirational goal at the national
level, which the Department uses as a tool in evaluating and monitoring
DBEs' opportunities to participate in DOT-assisted contracts.
(c) The national 10 percent goal does not authorize or require
recipients to set overall or contract goals at the 10 percent level, or
any other particular level, or to take any special administrative steps
if their goals are above or below 10 percent.
Sec. 26.43 Can recipients use set-asides or quotas as part of this
program?
(a) You are not permitted to use quotas for DBEs on DOT-assisted
contracts subject to this part.
(b) You may not set-aside contracts for DBEs on DOT-assisted
contracts subject to this part, except that, in limited and extreme
circumstances, you may use set-asides when no other method could be
reasonably expected to redress egregious instances of discrimination.
[[Page 293]]
Sec. 26.45 How do recipients set overall goals?
(a)(1) Except as provided in paragraph (a)(2) of this section, you
must set an overall goal for DBE participation in your DOT-assisted
contracts.
(2) If you are a FTA or FAA recipient who reasonably anticipates
awarding (excluding transit vehicle purchases) $250,000 or less in FTA
or FAA funds in prime contracts in a Federal fiscal year, you are not
required to develop overall goals for FTA or FAA respectively for that
fiscal year. However, if you have an existing DBE program, it must
remain in effect and you must seek to fulfill the objectives outlined in
Sec. 26.1.
(b) Your overall goal must be based on demonstrable evidence of the
availability of ready, willing and able DBEs relative to all businesses
ready, willing and able to participate on your DOT-assisted contracts
(hereafter, the ``relative availability of DBEs''). The goal must
reflect your determination of the level of DBE participation you would
expect absent the effects of discrimination. You cannot simply rely on
either the 10 percent national goal, your previous overall goal or past
DBE participation rates in your program without reference to the
relative availability of DBEs in your market.
(c) Step 1. You must begin your goal setting process by determining
a base figure for the relative availability of DBEs. The following are
examples of approaches that you may take toward determining a base
figure. These examples are provided as a starting point for your goal
setting process. Any percentage figure derived from one of these
examples should be considered a basis from which you begin when
examining all evidence available in your jurisdiction. These examples
are not intended as an exhaustive list. Other methods or combinations of
methods to determine a base figure may be used, subject to approval by
the concerned operating administration.
(1) Use DBE Directories and Census Bureau Data. Determine the number
of ready, willing and able DBEs in your market from your DBE directory.
Using the Census Bureau's County Business Pattern (CBP) data base,
determine the number of all ready, willing and able businesses available
in your market that perform work in the same NAICS codes. (Information
about the CBP data base may be obtained from the Census Bureau at their
web site, www.census.gov/epcd/cbp/view/cbpview.html.) Divide the number
of DBEs by the number of all businesses to derive a base figure for the
relative availability of DBEs in your market.
(2) Use a bidders list. Determine the number of DBEs that have bid
or quoted on your DOT-assisted prime contracts or subcontracts in the
previous year. Determine the number of all businesses that have bid or
quoted on prime or subcontracts in the same time period. Divide the
number of DBE bidders and quoters by the number for all businesses to
derive a base figure for the relative availability of DBEs in your
market.
(3) Use data from a disparity study. Use a percentage figure derived
from data in a valid, applicable disparity study.
(4) Use the goal of another DOT recipient. If another DOT recipient
in the same, or substantially similar, market has set an overall goal in
compliance with this rule, you may use that goal as a base figure for
your goal.
(5) Alternative methods. You may use other methods to determine a
base figure for your overall goal. Any methodology you choose must be
based on demonstrable evidence of local market conditions and be
designed to ultimately attain a goal that is rationally related to the
relative availability of DBEs in your market.
(d) Step 2. Once you have calculated a base figure, you must examine
all of the evidence available in your jurisdiction to determine what
adjustment, if any, is needed to the base figure in order to arrive at
your overall goal.
(1) There are many types of evidence that must be considered when
adjusting the base figure. These include:
(i) The current capacity of DBEs to perform work in your DOT-
assisted contracting program, as measured by the volume of work DBEs
have performed in recent years;
(ii) Evidence from disparity studies conducted anywhere within your
jurisdiction, to the extent it is not already accounted for in your base
figure; and
[[Page 294]]
(iii) If your base figure is the goal of another recipient, you must
adjust it for differences in your local market and your contracting
program.
(2) If available, you must consider evidence from related fields
that affect the opportunities for DBEs to form, grow and compete. These
include, but are not limited to:
(i) Statistical disparities in the ability of DBEs to get the
financing, bonding and insurance required to participate in your
program;
(ii) Data on employment, self-employment, education, training and
union apprenticeship programs, to the extent you can relate it to the
opportunities for DBEs to perform in your program.
(3) If you attempt to make an adjustment to your base figure to
account for the continuing effects of past discrimination (often called
the ``but for'' factor) or the effects of an ongoing DBE program, the
adjustment must be based on demonstrable evidence that is logically and
directly related to the effect for which the adjustment is sought.
(e) Once you have determined a percentage figure in accordance with
paragraphs (c) and (d) of this section, you should express your overall
goal as follows:
(1) If you are an FHWA recipient, as a percentage of all Federal-aid
highway funds you will expend in FHWA-assisted contracts in the
forthcoming fiscal year;
(2) If you are an FTA or FAA recipient, as a percentage of all FTA
or FAA funds (exclusive of FTA funds to be used for the purchase of
transit vehicles) that you will expend in FTA or FAA-assisted contracts
in the forthcoming fiscal year. In appropriate cases, the FTA or FAA
Administrator may permit you to express your overall goal as a
percentage of funds for a particular grant or project or group of grants
and/or projects.
(f)(1) If you set overall goals on a fiscal year basis, you must
submit them to the applicable DOT operating administration for review on
August 1 of each year, unless the Administrator of the concerned
operating administration establishes a different submission date.
(2) If you are an FTA or FAA recipient and set your overall goal on
a project or grant basis, you must submit the goal for review at a time
determined by the FTA or FAA Administrator.
(3) You must include with your overall goal submission a description
of the methodology you used to establish the goal, including your base
figure and the evidence with which it was calculated, and the
adjustments you made to the base figure and the evidence relied on for
the adjustments. You should also include a summary listing of the
relevant available evidence in your jurisdiction and, where applicable,
an explanation of why you did not use that evidence to adjust your base
figure. You must also include your projection of the portions of the
overall goal you expect to meet through race-neutral and race-conscious
measures, respectively (see Sec. 26.51(c)).
(4) You are not required to obtain prior operating administration
concurrence with the your overall goal. However, if the operating
administration's review suggests that your overall goal has not been
correctly calculated, or that your method for calculating goals is
inadequate, the operating administration may, after consulting with you,
adjust your overall goal or require that you do so. The adjusted overall
goal is binding on you.
(5) If you need additional time to collect data or take other steps
to develop an approach to setting overall goals, you may request the
approval of the concerned operating administration for an interim goal
and/or goal-setting mechanism. Such a mechanism must:
(i) Reflect the relative availability of DBEs in your local market
to the maximum extent feasible given the data available to you; and
(ii) Avoid imposing undue burdens on non-DBEs.
(g) In establishing an overall goal, you must provide for public
participation. This public participation must include:
(1) Consultation with minority, women's and general contractor
groups, community organizations, and other officials or organizations
which could
[[Page 295]]
be expected to have information concerning the availability of
disadvantaged and non-disadvantaged businesses, the effects of
discrimination on opportunities for DBEs, and your efforts to establish
a level playing field for the participation of DBEs.
(2) A published notice announcing your proposed overall goal,
informing the public that the proposed goal and its rationale are
available for inspection during normal business hours at your principal
office for 30 days following the date of the notice, and informing the
public that you and the Department will accept comments on the goals for
45 days from the date of the notice. The notice must include addresses
to which comments may be sent, and you must publish it in general
circulation media and available minority-focused media and trade
association publications.
(h) Your overall goals must provide for participation by all
certified DBEs and must not be subdivided into group-specific goals.
[64 FR 5126, Feb. 2, 1999, as amended at 64 FR 34570, June 28, 1999; 65
FR 68951, Nov. 15, 2000; 68 FR 35553, June 16, 2003]
Sec. 26.47 Can recipients be penalized for failing to meet overall
goals?
(a) You cannot be penalized, or treated by the Department as being
in noncompliance with this rule, because your DBE participation falls
short of your overall goal, unless you have failed to administer your
program in good faith.
(b) If you do not have an approved DBE program or overall goal, or
if you fail to implement your program in good faith, you are in
noncompliance with this part.
Sec. 26.49 How are overall goals established for transit vehicle
manufacturers?
(a) If you are an FTA recipient, you must require in your DBE
program that each transit vehicle manufacturer, as a condition of being
authorized to bid or propose on FTA-assisted transit vehicle
procurements, certify that it has complied with the requirements of this
section. You do not include FTA assistance used in transit vehicle
procurements in the base amount from which your overall goal is
calculated.
(b) If you are a transit vehicle manufacturer, you must establish
and submit for FTA's approval an annual overall percentage goal. In
setting your overall goal, you should be guided, to the extent
applicable, by the principles underlying Sec. 26.45. The base from
which you calculate this goal is the amount of FTA financial assistance
included in transit vehicle contracts you will perform during the fiscal
year in question. You must exclude from this base funds attributable to
work performed outside the United States and its territories,
possessions, and commonwealths. The requirements and procedures of this
part with respect to submission and approval of overall goals apply to
you as they do to recipients.
(c) As a transit vehicle manufacturer, you may make the
certification required by this section if you have submitted the goal
this section requires and FTA has approved it or not disapproved it.
(d) As a recipient, you may, with FTA approval, establish project-
specific goals for DBE participation in the procurement of transit
vehicles in lieu of complying through the procedures of this section.
(e) If you are an FHWA or FAA recipient, you may, with FHWA or FAA
approval, use the procedures of this section with respect to
procurements of vehicles or specialized equipment. If you choose to do
so, then the manufacturers of this equipment must meet the same
requirements (including goal approval by FHWA or FAA) as transit vehicle
manufacturers must meet in FTA-assisted procurements.
Sec. 26.51 What means do recipients use to meet overall goals?
(a) You must meet the maximum feasible portion of your overall goal
by using race-neutral means of facilitating DBE participation. Race-
neutral DBE participation includes any time a DBE wins a prime contract
through customary competitive procurement procedures, is awarded a
subcontract on a prime contract that does not carry a DBE goal, or even
if there is a DBE goal, wins a subcontract from a prime contractor that
did not consider
[[Page 296]]
its DBE status in making the award (e.g., a prime contractor that uses a
strict low bid system to award subcontracts).
(b) Race-neutral means include, but are not limited to, the
following:
(1) Arranging solicitations, times for the presentation of bids,
quantities, specifications, and delivery schedules in ways that
facilitate DBE, and other small businesses, participation (e.g.,
unbundling large contracts to make them more accessible to small
businesses, requiring or encouraging prime contractors to subcontract
portions of work that they might otherwise perform with their own
forces);
(2) Providing assistance in overcoming limitations such as inability
to obtain bonding or financing (e.g., by such means as simplifying the
bonding process, reducing bonding requirements, eliminating the impact
of surety costs from bids, and providing services to help DBEs, and
other small businesses, obtain bonding and financing);
(3) Providing technical assistance and other services;
(4) Carrying out information and communications programs on
contracting procedures and specific contract opportunities (e.g.,
ensuring the inclusion of DBEs, and other small businesses, on recipient
mailing lists for bidders; ensuring the dissemination to bidders on
prime contracts of lists of potential subcontractors; provision of
information in languages other than English, where appropriate);
(5) Implementing a supportive services program to develop and
improve immediate and long-term business management, record keeping, and
financial and accounting capability for DBEs and other small businesses;
(6) Providing services to help DBEs, and other small businesses,
improve long-term development, increase opportunities to participate in
a variety of kinds of work, handle increasingly significant projects,
and achieve eventual self-sufficiency;
(7) Establishing a program to assist new, start-up firms,
particularly in fields in which DBE participation has historically been
low;
(8) Ensuring distribution of your DBE directory, through print and
electronic means, to the widest feasible universe of potential prime
contractors; and
(9) Assisting DBEs, and other small businesses, to develop their
capability to utilize emerging technology and conduct business through
electronic media.
(c) Each time you submit your overall goal for review by the
concerned operating administration, you must also submit your projection
of the portion of the goal that you expect to meet through race-neutral
means and your basis for that projection. This projection is subject to
approval by the concerned operating administration, in conjunction with
its review of your overall goal.
(d) You must establish contract goals to meet any portion of your
overall goal you do not project being able to meet using race-neutral
means.
(e) The following provisions apply to the use of contract goals:
(1) You may use contract goals only on those DOT-assisted contracts
that have subcontracting possibilities.
(2) You are not required to set a contract goal on every DOT-
assisted contract. You are not required to set each contract goal at the
same percentage level as the overall goal. The goal for a specific
contract may be higher or lower than that percentage level of the
overall goal, depending on such factors as the type of work involved,
the location of the work, and the availability of DBEs for the work of
the particular contract. However, over the period covered by your
overall goal, you must set contract goals so that they will cumulatively
result in meeting any portion of your overall goal you do not project
being able to meet through the use of race-neutral means.
(3) Operating administration approval of each contract goal is not
necessarily required. However, operating administrations may review and
approve or disapprove any contract goal you establish.
(4) Your contract goals must provide for participation by all
certified DBEs and must not be subdivided into group-specific goals.
(f) To ensure that your DBE program continues to be narrowly
tailored to overcome the effects of discrimination,
[[Page 297]]
you must adjust your use of contract goals as follows:
(1) If your approved projection under paragraph (c) of this section
estimates that you can meet your entire overall goal for a given year
through race-neutral means, you must implement your program without
setting contract goals during that year.
Example to Paragraph (f)(1): Your overall goal for Year I is 12
percent. You estimate that you can obtain 12 percent or more DBE
participation through the use of race-neutral measures, without any use
of contract goals. In this case, you do not set any contract goals for
the contracts that will be performed in Year I.
(2) If, during the course of any year in which you are using
contract goals, you determine that you will exceed your overall goal,
you must reduce or eliminate the use of contract goals to the extent
necessary to ensure that the use of contract goals does not result in
exceeding the overall goal. If you determine that you will fall short of
your overall goal, then you must make appropriate modifications in your
use of race-neutral and/or race-conscious measures to allow you to meet
the overall goal.
Example to Paragraph (f)(2): In Year II, your overall goal is 12
percent. You have estimated that you can obtain 5 percent DBE
participation through use of race-neutral measures. You therefore plan
to obtain the remaining 7 percent participation through use of DBE
goals. By September, you have already obtained 11 percent DBE
participation for the year. For contracts let during the remainder of
the year, you use contract goals only to the extent necessary to obtain
an additional one percent DBE participation. However, if you determine
in September that your participation for the year is likely to be only 8
percent total, then you would increase your use of race-neutral and/or
race-conscious means during the remainder of the year in order to
achieve your overall goal.
(3) If the DBE participation you have obtained by race-neutral means
alone meets or exceeds your overall goals for two consecutive years, you
are not required to make a projection of the amount of your goal you can
meet using such means in the next year. You do not set contract goals on
any contracts in the next year. You continue using only race-neutral
means to meet your overall goals unless and until you do not meet your
overall goal for a year.
Example to Paragraph (f)(3): Your overall goal for Years I and Year
II is 10 percent. The DBE participation you obtain through race-neutral
measures alone is 10 percent or more in each year. (For this purpose, it
does not matter whether you obtained additional DBE participation
through using contract goals in these years.) In Year III and following
years, you do not need to make a projection under paragraph (c) of this
section of the portion of your overall goal you expect to meet using
race-neutral means. You simply use race-neutral means to achieve your
overall goals. However, if in Year VI your DBE participation falls short
of your overall goal, then you must make a paragraph (c) projection for
Year VII and, if necessary, resume use of contract goals in that year.
(4) If you obtain DBE participation that exceeds your overall goal
in two consecutive years through the use of contract goals (i.e., not
through the use of race-neutral means alone), you must reduce your use
of contract goals proportionately in the following year.
Example to Paragraph (f)(4): In Years I and II, your overall goal is
12 percent, and you obtain 14 and 16 percent DBE participation,
respectively. You have exceeded your goals over the two-year period by
an average of 25 percent. In Year III, your overall goal is again 12
percent, and your paragraph (c) projection estimates that you will
obtain 4 percent DBE participation through race-neutral means and 8
percent through contract goals. You then reduce the contract goal
projection by 25 percent (i.e., from 8 to 6 percent) and set contract
goals accordingly during the year. If in Year III you obtain 11 percent
participation, you do not use this contract goal adjustment mechanism
for Year IV, because there have not been two consecutive years of
exceeding overall goals.
(g) In any year in which you project meeting part of your goal
through race-neutral means and the remainder through contract goals, you
must maintain data separately on DBE achievements in those contracts
with and without contract goals, respectively. You must report this data
to the concerned operating administration as provided in Sec. 26.11.
[[Page 298]]
Sec. 26.53 What are the good faith efforts procedures recipients
follow in situations where there are contract goals?
(a) When you have established a DBE contract goal, you must award
the contract only to a bidder/offeror who makes good faith efforts to
meet it. You must determine that a bidder/offeror has made good faith
efforts if the bidder/offeror does either of the following things:
(1) Documents that it has obtained enough DBE participation to meet
the goal; or
(2) Documents that it made adequate good faith efforts to meet the
goal, even though it did not succeed in obtaining enough DBE
participation to do so. If the bidder/offeror does document adequate
good faith efforts, you must not deny award of the contract on the basis
that the bidder/offeror failed to meet the goal. See Appendix A of this
part for guidance in determining the adequacy of a bidder/offeror's good
faith efforts.
(b) In your solicitations for DOT-assisted contracts for which a
contract goal has been established, you must require the following:
(1) Award of the contract will be conditioned on meeting the
requirements of this section;
(2) All bidders/offerors will be required to submit the following
information to the recipient, at the time provided in paragraph (b)(3)
of this section:
(i) The names and addresses of DBE firms that will participate in
the contract;
(ii) A description of the work that each DBE will perform;
(iii) The dollar amount of the participation of each DBE firm
participating;
(iv) Written documentation of the bidder/offeror's commitment to use
a DBE subcontractor whose participation it submits to meet a contract
goal;
(v) Written confirmation from the DBE that it is participating in
the contract as provided in the prime contractor's commitment; and
(vi) If the contract goal is not met, evidence of good faith efforts
(see Appendix A of this part); and
(3) At your discretion, the bidder/offeror must present the
information required by paragraph (b)(2) of this section--
(i) Under sealed bid procedures, as a matter of responsiveness, or
with initial proposals, under contract negotiation procedures; or
(ii) At any time before you commit yourself to the performance of
the contract by the bidder/offeror, as a matter of responsibility.
(c) You must make sure all information is complete and accurate and
adequately documents the bidder/offeror's good faith efforts before
committing yourself to the performance of the contract by the bidder/
offeror.
(d) If you determine that the apparent successful bidder/offeror has
failed to meet the requirements of paragraph (a) of this section, you
must, before awarding the contract, provide the bidder/offeror an
opportunity for administrative reconsideration.
(1) As part of this reconsideration, the bidder/offeror must have
the opportunity to provide written documentation or argument concerning
the issue of whether it met the goal or made adequate good faith efforts
to do so.
(2) Your decision on reconsideration must be made by an official who
did not take part in the original determination that the bidder/offeror
failed to meet the goal or make adequate good faith efforts to do so.
(3) The bidder/offeror must have the opportunity to meet in person
with your reconsideration official to discuss the issue of whether it
met the goal or made adequate good faith efforts to do so.
(4) You must send the bidder/offeror a written decision on
reconsideration, explaining the basis for finding that the bidder did or
did not meet the goal or make adequate good faith efforts to do so.
(5) The result of the reconsideration process is not
administratively appealable to the Department of Transportation.
(e) In a ``design-build'' or ``turnkey'' contracting situation, in
which the recipient lets a master contract to a contractor, who in turn
lets subsequent subcontracts for the work of the project, a recipient
may establish a goal for the project. The master contractor then
establishes contract goals,
[[Page 299]]
as appropriate, for the subcontracts it lets. Recipients must maintain
oversight of the master contractor's activities to ensure that they are
conducted consistent with the requirements of this part.
(f)(1) You must require that a prime contractor not terminate for
convenience a DBE subcontractor listed in response to paragraph (b)(2)
of this section (or an approved substitute DBE firm) and then perform
the work of the terminated subcontract with its own forces or those of
an affiliate, without your prior written consent.
(2) When a DBE subcontractor is terminated, or fails to complete its
work on the contract for any reason, you must require the prime
contractor to make good faith efforts to find another DBE subcontractor
to substitute for the original DBE. These good faith efforts shall be
directed at finding another DBE to perform at least the same amount of
work under the contract as the DBE that was terminated, to the extent
needed to meet the contract goal you established for the procurement.
(3) You must include in each prime contract a provision for
appropriate administrative remedies that you will invoke if the prime
contractor fails to comply with the requirements of this section.
(g) You must apply the requirements of this section to DBE bidders/
offerors for prime contracts. In determining whether a DBE bidder/
offeror for a prime contract has met a contract goal, you count the work
the DBE has committed to performing with its own forces as well as the
work that it has committed to be performed by DBE subcontractors and DBE
suppliers.
Sec. 26.55 How is DBE participation counted toward goals?
(a) When a DBE participates in a contract, you count only the value
of the work actually performed by the DBE toward DBE goals.
(1) Count the entire amount of that portion of a construction
contract (or other contract not covered by paragraph (a)(2) of this
section) that is performed by the DBE's own forces. Include the cost of
supplies and materials obtained by the DBE for the work of the contract,
including supplies purchased or equipment leased by the DBE (except
supplies and equipment the DBE subcontractor purchases or leases from
the prime contractor or its affiliate).
(2) Count the entire amount of fees or commissions charged by a DBE
firm for providing a bona fide service, such as professional, technical,
consultant, or managerial services, or for providing bonds or insurance
specifically required for the performance of a DOT-assisted contract,
toward DBE goals, provided you determine the fee to be reasonable and
not excessive as compared with fees customarily allowed for similar
services.
(3) When a DBE subcontracts part of the work of its contract to
another firm, the value of the subcontracted work may be counted toward
DBE goals only if the DBE's subcontractor is itself a DBE. Work that a
DBE subcontracts to a non-DBE firm does not count toward DBE goals.
(b) When a DBE performs as a participant in a joint venture, count a
portion of the total dollar value of the contract equal to the distinct,
clearly defined portion of the work of the contract that the DBE
performs with its own forces toward DBE goals.
(c) Count expenditures to a DBE contractor toward DBE goals only if
the DBE is performing a commercially useful function on that contract.
(1) A DBE performs a commercially useful function when it is
responsible for execution of the work of the contract and is carrying
out its responsibilities by actually performing, managing, and
supervising the work involved. To perform a commercially useful
function, the DBE must also be responsible, with respect to materials
and supplies used on the contract, for negotiating price, determining
quality and quantity, ordering the material, and installing (where
applicable) and paying for the material itself. To determine whether a
DBE is performing a commercially useful function, you must evaluate the
amount of work subcontracted, industry practices, whether the amount the
firm is to be paid under the contract is commensurate with the work it
is actually performing and the
[[Page 300]]
DBE credit claimed for its performance of the work, and other relevant
factors.
(2) A DBE does not perform a commercially useful function if its
role is limited to that of an extra participant in a transaction,
contract, or project through which funds are passed in order to obtain
the appearance of DBE participation. In determining whether a DBE is
such an extra participant, you must examine similar transactions,
particularly those in which DBEs do not participate.
(3) If a DBE does not perform or exercise responsibility for at
least 30 percent of the total cost of its contract with its own work
force, or the DBE subcontracts a greater portion of the work of a
contract than would be expected on the basis of normal industry practice
for the type of work involved, you must presume that it is not
performing a commercially useful function.
(4) When a DBE is presumed not to be performing a commercially
useful function as provided in paragraph (c)(3) of this section, the DBE
may present evidence to rebut this presumption. You may determine that
the firm is performing a commercially useful function given the type of
work involved and normal industry practices.
(5) Your decisions on commercially useful function matters are
subject to review by the concerned operating administration, but are not
administratively appealable to DOT.
(d) Use the following factors in determining whether a DBE trucking
company is performing a commercially useful function:
(1) The DBE must be responsible for the management and supervision
of the entire trucking operation for which it is responsible on a
particular contract, and there cannot be a contrived arrangement for the
purpose of meeting DBE goals.
(2) The DBE must itself own and operate at least one fully licensed,
insured, and operational truck used on the contract.
(3) The DBE receives credit for the total value of the
transportation services it provides on the contract using trucks it
owns, insures, and operates using drivers it employs.
(4) The DBE may lease trucks from another DBE firm, including an
owner-operator who is certified as a DBE. The DBE who leases trucks from
another DBE receives credit for the total value of the transportation
services the lessee DBE provides on the contract.
(5) The DBE may also lease trucks from a non-DBE firm, including
from an owner-operator. The DBE who leases trucks from a non-DBE is
entitled to credit for the total value of transportation services
provided by non-DBE lessees not to exceed the value of transportation
services provided by DBE-owned trucks on the contract. Additional
participation by non-DBE lessees receives credit only for the fee or
commission it receives as a result of the lease arrangement. If a
recipient chooses this approach, it must obtain written consent from the
appropriate Department Operating Administration.
Example to this paragraph (d)(5): DBE Firm X uses two of its own
trucks on a contract. It leases two trucks from DBE Firm Y and six
trucks from non-DBE Firm Z. DBE credit would be awarded for the total
value of transportation services provided by Firm X and Firm Y, and may
also be awarded for the total value of transportation services provided
by four of the six trucks provided by Firm Z. In all, full credit would
be allowed for the participation of eight trucks. With respect to the
other two trucks provided by Firm Z, DBE credit could be awarded only
for the fees or commissions pertaining to those trucks Firm X receives
as a result of the lease with Firm Z.
(6) For purposes of this paragraph (d), a lease must indicate that
the DBE has exclusive use of and control over the truck. This does not
preclude the leased truck from working for others during the term of the
lease with the consent of the DBE, so long as the lease gives the DBE
absolute priority for use of the leased truck. Leased trucks must
display the name and identification number of the DBE.
(e) Count expenditures with DBEs for materials or supplies toward
DBE goals as provided in the following:
(1)(i) If the materials or supplies are obtained from a DBE
manufacturer, count 100 percent of the cost of the materials or supplies
toward DBE goals.
[[Page 301]]
(ii) For purposes of this paragraph (e)(1), a manufacturer is a firm
that operates or maintains a factory or establishment that produces, on
the premises, the materials, supplies, articles, or equipment required
under the contract and of the general character described by the
specifications.
(2)(i) If the materials or supplies are purchased from a DBE regular
dealer, count 60 percent of the cost of the materials or supplies toward
DBE goals.
(ii) For purposes of this section, a regular dealer is a firm that
owns, operates, or maintains a store, warehouse, or other establishment
in which the materials, supplies, articles or equipment of the general
character described by the specifications and required under the
contract are bought, kept in stock, and regularly sold or leased to the
public in the usual course of business.
(A) To be a regular dealer, the firm must be an established, regular
business that engages, as its principal business and under its own name,
in the purchase and sale or lease of the products in question.
(B) A person may be a regular dealer in such bulk items as petroleum
products, steel, cement, gravel, stone, or asphalt without owning,
operating, or maintaining a place of business as provided in this
paragraph (e)(2)(ii) if the person both owns and operates distribution
equipment for the products. Any supplementing of regular dealers' own
distribution equipment shall be by a long-term lease agreement and not
on an ad hoc or contract-by-contract basis.
(C) Packagers, brokers, manufacturers' representatives, or other
persons who arrange or expedite transactions are not regular dealers
within the meaning of this paragraph (e)(2).
(3) With respect to materials or supplies purchased from a DBE which
is neither a manufacturer nor a regular dealer, count the entire amount
of fees or commissions charged for assistance in the procurement of the
materials and supplies, or fees or transportation charges for the
delivery of materials or supplies required on a job site, toward DBE
goals, provided you determine the fees to be reasonable and not
excessive as compared with fees customarily allowed for similar
services. Do not count any portion of the cost of the materials and
supplies themselves toward DBE goals, however.
(f) If a firm is not currently certified as a DBE in accordance with
the standards of subpart D of this part at the time of the execution of
the contract, do not count the firm's participation toward any DBE
goals, except as provided for in Sec. 26.87(i)).
(g) Do not count the dollar value of work performed under a contract
with a firm after it has ceased to be certified toward your overall
goal.
(h) Do not count the participation of a DBE subcontractor toward a
contractor's final compliance with its DBE obligations on a contract
until the amount being counted has actually been paid to the DBE.
[64 FR 5126, Feb. 2, 1999, as amended at 65 FR 68951, Nov. 15, 2000; 68
FR 35554, June 16, 2003]
Subpart D_Certification Standards
Sec. 26.61 How are burdens of proof allocated in the certification
process?
(a) In determining whether to certify a firm as eligible to
participate as a DBE, you must apply the standards of this subpart.
(b) The firm seeking certification has the burden of demonstrating
to you, by a preponderance of the evidence, that it meets the
requirements of this subpart concerning group membership or individual
disadvantage, business size, ownership, and control.
(c) You must rebuttably presume that members of the designated
groups identified in Sec. 26.67(a) are socially and economically
disadvantaged. This means they do not have the burden of proving to you
that they are socially and economically disadvantaged. In order to
obtain the benefit of the rebuttable presumption, individuals must
submit a signed, notarized statement that they are a member of one of
the groups in Sec. 26.67(a). Applicants do have the obligation to
provide you information concerning their economic disadvantage (see
Sec. 26.67).
(d) Individuals who are not presumed to be socially and economically
disadvantaged, and individuals concerning whom the presumption of
disadvantage has been rebutted, have the burden of
[[Page 302]]
proving to you, by a preponderance of the evidence, that they are
socially and economically disadvantaged. (See Appendix E of this part.)
(e) You must make determinations concerning whether individuals and
firms have met their burden of demonstrating group membership,
ownership, control, and social and economic disadvantage (where
disadvantage must be demonstrated on an individual basis) by considering
all the facts in the record, viewed as a whole.
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35554, June 16, 2003]
Sec. 26.63 What rules govern group membership determinations?
(a)(1) If, after reviewing the signed notarized statement of
membership in a presumptively disadvantaged group (see Sec. 26.61(c)),
you have a well founded reason to question the individual's claim of
membership in that group, you must require the individual to present
additional evidence that he or she is a member of the group.
(2) You must provide the individual a written explanation of your
reasons for questioning his or her group membership and a written
request for additional evidence as outlined in paragraph (b) of this
section.
(3) In implementing this section, you must take special care to
ensure that you do not impose a disproportionate burden on members of
any particular designated group. Imposing a disproportionate burden on
members of a particular group could violate Sec. 26.7(b) and/or Title
VI of the Civil Rights Act of 1964 and 49 CFR part 21.
(b) In making such a determination, you must consider whether the
person has held himself out to be a member of the group over a long
period of time prior to application for certification and whether the
person is regarded as a member of the group by the relevant community.
You may require the applicant to produce appropriate documentation of
group membership.
(1) If you determine that an individual claiming to be a member of a
group presumed to be disadvantaged is not a member of a designated
disadvantaged group, the individual must demonstrate social and economic
disadvantage on an individual basis.
(2) Your decisions concerning membership in a designated group are
subject to the certification appeals procedure of Sec. 26.89.
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35554, June 16, 2003]
Sec. 26.65 What rules govern business size determinations?
(a) To be an eligible DBE, a firm (including its affiliates) must be
an existing small business, as defined by Small Business Administration
(SBA) standards. You must apply current SBA business size standard(s)
found in 13 CFR part 121 appropriate to the type(s) of work the firm
seeks to perform in DOT-assisted contracts.
(b) Even if it meets the requirements of paragraph (a) of this
section, a firm is not an eligible DBE in any Federal fiscal year if the
firm (including its affiliates) has had average annual gross receipts,
as defined by SBA regulations (see 13 CFR 121.402), over the firm's
previous three fiscal years, in excess of $16.6 million. The Secretary
adjusts this amount for inflation from time to time.
Sec. 26.67 What rules determine social and economic disadvantage?
(a) Presumption of disadvantage. (1) You must rebuttably presume
that citizens of the United States (or lawfully admitted permanent
residents) who are women, Black Americans, Hispanic Americans, Native
Americans, Asian-Pacific Americans, Subcontinent Asian Americans, or
other minorities found to be disadvantaged by the SBA, are socially and
economically disadvantaged individuals. You must require applicants to
submit a signed, notarized certification that each presumptively
disadvantaged owner is, in fact, socially and economically
disadvantaged.
(2) (i) You must require each individual owner of a firm applying to
participate as a DBE (except a firm applying to participate as a DBE
airport concessionaire) 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 $750,000.
[[Page 303]]
(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. This statement and
documentation must not be unduly lengthy, burdensome, or intrusive.
(iii) In determining an individual's net worth, you must observe the
following requirements:
(A) Exclude an individual's ownership interest in the applicant
firm;
(B) Exclude the individual's equity in his or her primary residence
(except any portion of such equity that is attributable to excessive
withdrawals from the applicant firm).
(C) Do not use a contingent liability to reduce an individual's net
worth.
(D) With respect to assets held in vested pension plans, Individual
Retirement Accounts, 401(k) accounts, or other retirement savings or
investment programs in which the assets cannot be distributed to the
individual at the present time without significant adverse tax or
interest consequences, include only the present value of such assets,
less the tax and interest penalties that would accrue if the asset were
distributed at the present time.
(iv) Notwithstanding any provision of Federal or state law, you must
not release an individual's personal net worth statement nor any
documentation supporting it to any third party without the written
consent of the submitter. Provided, that you must transmit this
information to DOT in any certification appeal proceeding under Sec.
26.89 in which the disadvantaged status of the individual is in
question.
(b) Rebuttal of presumption of disadvantage. (1) If the statement of
personal net worth that an individual submits under paragraph (a)(2) of
this section shows that the individual's personal net worth exceeds
$750,000, the individual's presumption of economic disadvantage is
rebutted. You are not required to have a proceeding under paragraph
(b)(2) of this section in order to rebut the presumption of economic
disadvantage in this case.
(2) If you have a reasonable basis to believe that an individual who
is a member of one of the designated groups is not, in fact, socially
and/or economically disadvantaged you may, at any time, start a
proceeding to determine whether the presumption should be regarded as
rebutted with respect to that individual. Your proceeding must follow
the procedures of Sec. 26.87.
(3) In such a proceeding, you have the burden of demonstrating, by a
preponderance of the evidence, that the individual is not socially and
economically disadvantaged. You may require the individual to produce
information relevant to the determination of his or her disadvantage.
(4) When an individual's presumption of social and/or economic
disadvantage has been rebutted, his or her ownership and control of the
firm in question cannot be used for purposes of DBE eligibility under
this subpart unless and until he or she makes an individual showing of
social and/or economic disadvantage. If the basis for rebutting the
presumption is a determination that the individual's personal net worth
exceeds $750,000, the individual is no longer eligible for participation
in the program and cannot regain eligibility by making an individual
showing of disadvantage.
(c) [Reserved]
(d) Individual determinations of social and economic disadvantage.
Firms owned and controlled by individuals who are not presumed to be
socially and economically disadvantaged (including individuals whose
presumed disadvantage has been rebutted) may apply for DBE
certification. You must make a case-by-case determination of whether
each individual whose ownership and control are relied upon for DBE
certification is socially and economically disadvantaged. In such a
proceeding, the applicant firm has the burden of demonstrating to you,
by a preponderance of the evidence, that the individuals who own and
control it are socially and economically disadvantaged. An individual
whose personal net worth exceeds $750,000 shall not be deemed to be
economically disadvantaged. In making these determinations, use the
guidance found in Appendix E of this part. You must require that
applicants provide sufficient information
[[Page 304]]
to permit determinations under the guidance of Appendix E of this part.
[64 FR 5126, Feb. 2, 1999, as amended at 64 FR 34570, June 28, 1999; 68
FR 35554, June 16, 2003]
Sec. 26.69 What rules govern determinations of ownership?
(a) In determining whether the socially and economically
disadvantaged participants in a firm own the firm, you must consider all
the facts in the record, viewed as a whole.
(b) To be an eligible DBE, a firm must be at least 51 percent owned
by socially and economically disadvantaged individuals.
(1) In the case of a corporation, such individuals must own at least
51 percent of the each class of voting stock outstanding and 51 percent
of the aggregate of all stock outstanding.
(2) In the case of a partnership, 51 percent of each class of
partnership interest must be owned by socially and economically
disadvantaged individuals. Such ownership must be reflected in the
firm's partnership agreement.
(3) In the case of a limited liability company, at least 51 percent
of each class of member interest must be owned by socially and
economically disadvantaged individuals.
(c) The firm's ownership by socially and economically disadvantaged
individuals must be real, substantial, and continuing, going beyond pro
forma ownership of the firm as reflected in ownership documents. The
disadvantaged owners must enjoy the customary incidents of ownership,
and share in the risks and profits commensurate with their ownership
interests, as demonstrated by the substance, not merely the form, of
arrangements.
(d) All securities that constitute ownership of a firm shall be held
directly by disadvantaged persons. Except as provided in this paragraph
(d), no securities or assets held in trust, or by any guardian for a
minor, are considered as held by disadvantaged persons in determining
the ownership of a firm. However, securities or assets held in trust are
regarded as held by a disadvantaged individual for purposes of
determining ownership of the firm, if--
(1) The beneficial owner of securities or assets held in trust is a
disadvantaged individual, and the trustee is the same or another such
individual; or
(2) The beneficial owner of a trust is a disadvantaged individual
who, rather than the trustee, exercises effective control over the
management, policy-making, and daily operational activities of the firm.
Assets held in a revocable living trust may be counted only in the
situation where the same disadvantaged individual is the sole grantor,
beneficiary, and trustee.
(e) The contributions of capital or expertise by the socially and
economically disadvantaged owners to acquire their ownership interests
must be real and substantial. Examples of insufficient contributions
include a promise to contribute capital, an unsecured note payable to
the firm or an owner who is not a disadvantaged individual, or mere
participation in a firm's activities as an employee. Debt instruments
from financial institutions or other organizations that lend funds in
the normal course of their business do not render a firm ineligible,
even if the debtor's ownership interest is security for the loan.
(f) The following requirements apply to situations in which
expertise is relied upon as part of a disadvantaged owner's contribution
to acquire ownership:
(1) The owner's expertise must be--
(i) In a specialized field;
(ii) Of outstanding quality;
(iii) In areas critical to the firm's operations;
(iv) Indispensable to the firm's potential success;
(v) Specific to the type of work the firm performs; and
(vi) Documented in the records of the firm. These records must
clearly show the contribution of expertise and its value to the firm.
(2) The individual whose expertise is relied upon must have a
significant financial investment in the firm.
(g) You must always deem as held by a socially and economically
disadvantaged individual, for purposes of determining ownership, all
interests in a business or other assets obtained by the individual--
(1) As the result of a final property settlement or court order in a
divorce or legal separation, provided that no
[[Page 305]]
term or condition of the agreement or divorce decree is inconsistent
with this section; or
(2) Through inheritance, or otherwise because of the death of the
former owner.
(h)(1) You must presume as not being held by a socially and
economically disadvantaged individual, for purposes of determining
ownership, all interests in a business or other assets obtained by the
individual as the result of a gift, or transfer without adequate
consideration, from any non-disadvantaged individual or non-DBE firm who
is--
(i) Involved in the same firm for which the individual is seeking
certification, or an affiliate of that firm;
(ii) Involved in the same or a similar line of business; or
(iii) Engaged in an ongoing business relationship with the firm, or
an affiliate of the firm, for which the individual is seeking
certification.
(2) To overcome this presumption and permit the interests or assets
to be counted, the disadvantaged individual must demonstrate to you, by
clear and convincing evidence, that--
(i) The gift or transfer to the disadvantaged individual was made
for reasons other than obtaining certification as a DBE; and
(ii) The disadvantaged individual actually controls the management,
policy, and operations of the firm, notwithstanding the continuing
participation of a non-disadvantaged individual who provided the gift or
transfer.
(i) You must apply the following rules in situations in which
marital assets form a basis for ownership of a firm:
(1) When marital assets (other than the assets of the business in
question), held jointly or as community property by both spouses, are
used to acquire the ownership interest asserted by one spouse, you must
deem the ownership interest in the firm to have been acquired by that
spouse with his or her own individual resources, provided that the other
spouse irrevocably renounces and transfers all rights in the ownership
interest in the manner sanctioned by the laws of the state in which
either spouse or the firm is domiciled. You do not count a greater
portion of joint or community property assets toward ownership than
state law would recognize as belonging to the socially and economically
disadvantaged owner of the applicant firm.
(2) A copy of the document legally transferring and renouncing the
other spouse's rights in the jointly owned or community assets used to
acquire an ownership interest in the firm must be included as part of
the firm's application for DBE certification.
(j) You may consider the following factors in determining the
ownership of a firm. However, you must not regard a contribution of
capital as failing to be real and substantial, or find a firm
ineligible, solely because--
(1) A socially and economically disadvantaged individual acquired
his or her ownership interest as the result of a gift, or transfer
without adequate consideration, other than the types set forth in
paragraph (h) of this section;
(2) There is a provision for the co-signature of a spouse who is not
a socially and economically disadvantaged individual on financing
agreements, contracts for the purchase or sale of real or personal
property, bank signature cards, or other documents; or
(3) Ownership of the firm in question or its assets is transferred
for adequate consideration from a spouse who is not a socially and
economically disadvantaged individual to a spouse who is such an
individual. In this case, you must give particularly close and careful
scrutiny to the ownership and control of a firm to ensure that it is
owned and controlled, in substance as well as in form, by a socially and
economically disadvantaged individual.
Sec. 26.71 What rules govern determinations concerning control?
(a) In determining whether socially and economically disadvantaged
owners control a firm, you must consider all the facts in the record,
viewed as a whole.
(b) Only an independent business may be certified as a DBE. An
independent business is one the viability of which does not depend on
its relationship with another firm or firms.
(1) In determining whether a potential DBE is an independent
business, you must scrutinize relationships with
[[Page 306]]
non-DBE firms, in such areas as personnel, facilities, equipment,
financial and/or bonding support, and other resources.
(2) You must consider whether present or recent employer/employee
relationships between the disadvantaged owner(s) of the potential DBE
and non-DBE firms or persons associated with non-DBE firms compromise
the independence of the potential DBE firm.
(3) You must examine the firm's relationships with prime contractors
to determine whether a pattern of exclusive or primary dealings with a
prime contractor compromises the independence of the potential DBE firm.
(4) In considering factors related to the independence of a
potential DBE firm, you must consider the consistency of relationships
between the potential DBE and non-DBE firms with normal industry
practice.
(c) A DBE firm must not be subject to any formal or informal
restrictions which limit the customary discretion of the socially and
economically disadvantaged owners. There can be no restrictions through
corporate charter provisions, by-law provisions, contracts or any other
formal or informal devices (e.g., cumulative voting rights, voting
powers attached to different classes of stock, employment contracts,
requirements for concurrence by non-disadvantaged partners, conditions
precedent or subsequent, executory agreements, voting trusts,
restrictions on or assignments of voting rights) that prevent the
socially and economically disadvantaged owners, without the cooperation
or vote of any non-disadvantaged individual, from making any business
decision of the firm. This paragraph does not preclude a spousal co-
signature on documents as provided for in Sec. 26.69(j)(2).
(d) The socially and economically disadvantaged owners must possess
the power to direct or cause the direction of the management and
policies of the firm and to make day-to-day as well as long-term
decisions on matters of management, policy and operations.
(1) A disadvantaged owner must hold the highest officer position in
the company (e.g., chief executive officer or president).
(2) In a corporation, disadvantaged owners must control the board of
directors.
(3) In a partnership, one or more disadvantaged owners must serve as
general partners, with control over all partnership decisions.
(e) Individuals who are not socially and economically disadvantaged
may be involved in a DBE firm as owners, managers, employees,
stockholders, officers, and/or directors. Such individuals must not,
however, possess or exercise the power to control the firm, or be
disproportionately responsible for the operation of the firm.
(f) The socially and economically disadvantaged owners of the firm
may delegate various areas of the management, policymaking, or daily
operations of the firm to other participants in the firm, regardless of
whether these participants are socially and economically disadvantaged
individuals. Such delegations of authority must be revocable, and the
socially and economically disadvantaged owners must retain the power to
hire and fire any person to whom such authority is delegated. The
managerial role of the socially and economically disadvantaged owners in
the firm's overall affairs must be such that the recipient can
reasonably conclude that the socially and economically disadvantaged
owners actually exercise control over the firm's operations, management,
and policy.
(g) The socially and economically disadvantaged owners must have an
overall understanding of, and managerial and technical competence and
experience directly related to, the type of business in which the firm
is engaged and the firm's operations. The socially and economically
disadvantaged owners are not required to have experience or expertise in
every critical area of the firm's operations, or to have greater
experience or expertise in a given field than managers or key employees.
The socially and economically disadvantaged owners must have the ability
to intelligently and critically evaluate information presented by other
participants in the firm's activities and to use this information to
make independent decisions concerning
[[Page 307]]
the firm's daily operations, management, and policymaking. Generally,
expertise limited to office management, administration, or bookkeeping
functions unrelated to the principal business activities of the firm is
insufficient to demonstrate control.
(h) If state or local law requires the persons to have a particular
license or other credential in order to own and/or control a certain
type of firm, then the socially and economically disadvantaged persons
who own and control a potential DBE firm of that type must possess the
required license or credential. If state or local law does not require
such a person to have such a license or credential to own and/or control
a firm, you must not deny certification solely on the ground that the
person lacks the license or credential. However, you may take into
account the absence of the license or credential as one factor in
determining whether the socially and economically disadvantaged owners
actually control the firm.
(i)(1) You may consider differences in remuneration between the
socially and economically disadvantaged owners and other participants in
the firm in determining whether to certify a firm as a DBE. Such
consideration shall be in the context of the duties of the persons
involved, normal industry practices, the firm's policy and practice
concerning reinvestment of income, and any other explanations for the
differences proffered by the firm. You may determine that a firm is
controlled by its socially and economically disadvantaged owner although
that owner's remuneration is lower than that of some other participants
in the firm.
(2) In a case where a non-disadvantaged individual formerly
controlled the firm, and a socially and economically disadvantaged
individual now controls it, you may consider a difference between the
remuneration of the former and current controller of the firm as a
factor in determining who controls the firm, particularly when the non-
disadvantaged individual remains involved with the firm and continues to
receive greater compensation than the disadvantaged individual.
(j) In order to be viewed as controlling a firm, a socially and
economically disadvantaged owner cannot engage in outside employment or
other business interests that conflict with the management of the firm
or prevent the individual from devoting sufficient time and attention to
the affairs of the firm to control its activities. For example, absentee
ownership of a business and part-time work in a full-time firm are not
viewed as constituting control. However, an individual could be viewed
as controlling a part-time business that operates only on evenings and/
or weekends, if the individual controls it all the time it is operating.
(k)(1) A socially and economically disadvantaged individual may
control a firm even though one or more of the individual's immediate
family members (who themselves are not socially and economically
disadvantaged individuals) participate in the firm as a manager,
employee, owner, or in another capacity. Except as otherwise provided in
this paragraph, you must make a judgment about the control the socially
and economically disadvantaged owner exercises vis-a-vis other persons
involved in the business as you do in other situations, without regard
to whether or not the other persons are immediate family members.
(2) If you cannot determine that the socially and economically
disadvantaged owners--as distinct from the family as a whole--control
the firm, then the socially and economically disadvantaged owners have
failed to carry their burden of proof concerning control, even though
they may participate significantly in the firm's activities.
(l) Where a firm was formerly owned and/or controlled by a non-
disadvantaged individual (whether or not an immediate family member),
ownership and/or control were transferred to a socially and economically
disadvantaged individual, and the non-disadvantaged individual remains
involved with the firm in any capacity, the disadvantaged individual now
owning the firm must demonstrate to you, by clear and convincing
evidence, that:
(1) The transfer of ownership and/or control to the disadvantaged
individual
[[Page 308]]
was made for reasons other than obtaining certification as a DBE; and
(2) The disadvantaged individual actually controls the management,
policy, and operations of the firm, notwithstanding the continuing
participation of a non-disadvantaged individual who formerly owned and/
or controlled the firm.
(m) In determining whether a firm is controlled by its socially and
economically disadvantaged owners, you may consider whether the firm
owns equipment necessary to perform its work. However, you must not
determine that a firm is not controlled by socially and economically
disadvantaged individuals solely because the firm leases, rather than
owns, such equipment, where leasing equipment is a normal industry
practice and the lease does not involve a relationship with a prime
contractor or other party that compromises the independence of the firm.
(n) 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. To become certified in an additional
type of work, the firm need demonstrate to you only that its socially
and economically disadvantaged owners are able to control the firm with
respect to that type of work. You may not, in this situation, require
that the firm be recertified or submit a new application for
certification, but you must verify the disadvantaged owner's control of
the firm in the additional type of work.
(o) A business operating under a franchise or license agreement may
be certified if it meets the standards in this subpart and the
franchiser or licenser is not affiliated with the franchisee or
licensee. In determining whether affiliation exists, you should
generally not consider the restraints relating to standardized quality,
advertising, accounting format, and other provisions imposed on the
franchisee or licensee by the franchise agreement or license, provided
that the franchisee or licensee has the right to profit from its efforts
and bears the risk of loss commensurate with ownership. Alternatively,
even though a franchisee or licensee may not be controlled by virtue of
such provisions in the franchise agreement or license, affiliation could
arise through other means, such as common management or excessive
restrictions on the sale or transfer of the franchise interest or
license.
(p) In order for a partnership to be controlled by socially and
economically disadvantaged individuals, any non-disadvantaged partners
must not have the power, without the specific written concurrence of the
socially and economically disadvantaged partner(s), to contractually
bind the partnership or subject the partnership to contract or tort
liability.
(q) The socially and economically disadvantaged individuals
controlling a firm may use an employee leasing company. The use of such
a company does not preclude the socially and economically disadvantaged
individuals from controlling their firm if they continue to maintain an
employer-employee relationship with the leased employees. This includes
being responsible for hiring, firing, training, assigning, and otherwise
controlling the on-the-job activities of the employees, as well as
ultimate responsibility for wage and tax obligations related to the
employees.
Sec. 26.73 What are other rules affecting certification?
(a)(1) Consideration of whether a firm performs a commercially
useful function or is a regular dealer pertains solely to counting
toward DBE goals the participation of firms that have already been
certified as DBEs. Except as provided in paragraph (a)(2) of this
section, you must not consider commercially useful function issues in
any way in making decisions about whether to certify a firm as a DBE.
(2) You may consider, in making certification decisions, whether a
firm has exhibited a pattern of conduct indicating its involvement in
attempts to evade or subvert the intent or requirements of the DBE
program.
(b) You must evaluate the eligibility of a firm on the basis of
present circumstances. You must not refuse to certify a firm based
solely on historical information indicating a lack of ownership or
control of the firm by socially and economically disadvantaged
individuals at some time in the past, if the
[[Page 309]]
firm currently meets the ownership and control standards of this part.
Nor must you refuse to certify a firm solely on the basis that it is a
newly formed firm.
(c) DBE firms and firms seeking DBE certification shall cooperate
fully with your requests (and DOT requests) for information relevant to
the certification process. Failure or refusal to provide such
information is a ground for a denial or removal of certification.
(d) Only firms organized for profit may be eligible DBEs. Not-for-
profit organizations, even though controlled by socially and
economically disadvantaged individuals, are not eligible to be certified
as DBEs.
(e) An eligible DBE firm must be owned by individuals who are
socially and economically disadvantaged. Except as provided in this
paragraph, a firm that is not owned by such individuals, but instead is
owned by another firm--even a DBE firm--cannot be an eligible DBE.
(1) If socially and economically disadvantaged individuals own and
control a firm through a parent or holding company, established for tax,
capitalization or other purposes consistent with industry practice, and
the parent or holding company in turn owns and controls an operating
subsidiary, you may certify the subsidiary if it otherwise meets all
requirements of this subpart. In this situation, the individual owners
and controllers of the parent or holding company are deemed to control
the subsidiary through the parent or holding company.
(2) You may certify such a subsidiary only if there is cumulatively
51 percent ownership of the subsidiary by socially and economically
disadvantaged individuals. The following examples illustrate how this
cumulative ownership provision works:
Example 1: Socially and economically disadvantaged individuals own
100 percent of a holding company, which has a wholly-owned subsidiary.
The subsidiary may be certified, if it meets all other requirements.
Example 2: Disadvantaged individuals own 100 percent of the holding
company, which owns 51 percent of a subsidiary. The subsidiary may be
certified, if all other requirements are met.
Example 3: Disadvantaged individuals own 80 percent of the holding
company, which in turn owns 70 percent of a subsidiary. In this case,
the cumulative ownership of the subsidiary by disadvantaged individuals
is 56 percent (80 percent of the 70 percent). This is more than 51
percent, so you may certify the subsidiary, if all other requirements
are met.
Example 4: Same as Example 2 or 3, but someone other than the
socially and economically disadvantaged owners of the parent or holding
company controls the subsidiary. Even though the subsidiary is owned by
disadvantaged individuals, through the holding or parent company, you
cannot certify it because it fails to meet control requirements.
Example 5: Disadvantaged individuals own 60 percent of the holding
company, which in turn owns 51 percent of a subsidiary. In this case,
the cumulative ownership of the subsidiary by disadvantaged individuals
is about 31 percent. This is less than 51 percent, so you cannot certify
the subsidiary.
Example 6: The holding company, in addition to the subsidiary
seeking certification, owns several other companies. The combined gross
receipts of the holding companies and its subsidiaries are greater than
the size standard for the subsidiary seeking certification and/or the
gross receipts cap of Sec. 26.65(b). Under the rules concerning
affiliation, the subsidiary fails to meet the size standard and cannot
be certified.
(f) Recognition of a business as a separate entity for tax or
corporate purposes is not necessarily sufficient to demonstrate that a
firm is an independent business, owned and controlled by socially and
economically disadvantaged individuals.
(g) You must not require a DBE firm to be prequalified as a
condition for certification unless the recipient requires all firms that
participate in its contracts and subcontracts to be prequalified.
(h) A firm that is owned by an Indian tribe or Native Hawaiian
organization, rather than by Indians or Native Hawaiians as individuals,
may be eligible for certification. Such a firm must meet the size
standards of Sec. 26.35. Such a firm must be controlled by socially and
economically disadvantaged individuals, as provided in Sec. 26.71.
(i) The following special rules apply to the certification of firms
related to Alaska Native Corporations (ANCs).
(1) Notwithstanding any other provisions of this subpart, a direct
or indirect subsidiary corporation, joint venture, or partnership entity
of an ANC is eligible for certification as a DBE if it
[[Page 310]]
meets all of the following requirements:
(i) The Settlement Common Stock of the underlying ANC and other
stock of the ANC held by holders of the Settlement Common Stock and by
Natives and descendents of Natives represents a majority of both the
total equity of the ANC and the total voting power of the corporation
for purposes of electing directors;
(ii) The shares of stock or other units of common ownership interest
in the subsidiary, joint venture, or partnership entity held by the ANC
and by holders of its Settlement Common Stock represent a majority of
both the total equity of the entity and the total voting power of the
entity for the purpose of electing directors, the general partner, or
principal officers; and
(iii) The subsidiary, joint venture, or partnership entity has been
certified by the Small Business Administration under the 8(a) or small
disadvantaged business program.
(2) As a recipient to whom an ANC-related entity applies for
certification, you do not use the DOT uniform application form (see
Appendix F of this part). You must obtain from the firm documentation
sufficient to demonstrate that entity meets the requirements of
paragraph (i)(1) of this section. You must also obtain sufficient
information about the firm to allow you to administer your program
(e.g., information that would appear in your DBE Directory).
(3) If an ANC-related firm does not meet all the conditions of
paragraph (i)(1) of this section, then it must meet the requirements of
paragraph (h) of this section in order to be certified, on the same
basis as firms owned by Indian Tribes or Native Hawaiian Organizations.
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35555, June 16, 2003]
Subpart E_Certification Procedures
Sec. 26.81 What are the requirements for Unified Certification
Programs?
(a) You and all other DOT recipients in your state must participate
in a Unified Certification Program (UCP).
(1) Within three years of March 4, 1999, you and the other
recipients in your state must sign an agreement establishing the UCP for
that state and submit the agreement to the Secretary for approval. The
Secretary may, on the basis of extenuating circumstances shown by the
recipients in the state, extend this deadline for no more than one
additional year.
(2) The agreement must provide for the establishment of a UCP
meeting all the requirements of this section. The agreement must specify
that the UCP will follow all certification procedures and standards of
this part, on the same basis as recipients; that the UCP shall cooperate
fully with oversight, review, and monitoring activities of DOT and its
operating administrations; and that the UCP shall implement DOT
directives and guidance concerning certification matters. The agreement
shall also commit recipients to ensuring that the UCP has sufficient
resources and expertise to carry out the requirements of this part. The
agreement shall include an implementation schedule ensuring that the UCP
is fully operational no later than 18 months following the approval of
the agreement by the Secretary.
(3) Subject to approval by the Secretary, the UCP in each state may
take any form acceptable to the recipients in that state.
(4) The Secretary shall review the UCP and approve it, disapprove
it, or remand it to the recipients in the state for revisions. A
complete agreement which is not disapproved or remanded within 180 days
of its receipt is deemed to be accepted.
(5) If you and the other recipients in your state fail to meet the
deadlines set forth in this paragraph (a), you shall have the
opportunity to make an explanation to the Secretary why a deadline could
not be met and why meeting the deadline was beyond your control. If you
fail to make such an explanation, or the explanation does not justify
the failure to meet the deadline, the Secretary shall direct you to
complete the required action by a date certain. If you and the other
recipients fail to carry out this direction in a timely manner, you are
collectively in noncompliance with this part.
[[Page 311]]
(b) The UCP shall make all certification decisions on behalf of all
DOT recipients in the state with respect to participation in the DOT DBE
Program.
(1) Certification decisions by the UCP shall be binding on all DOT
recipients within the state.
(2) The UCP shall provide ``one-stop shopping'' to applicants for
certification, such that an applicant is required to apply only once for
a DBE certification that will be honored by all recipients in the state.
(3) All obligations of recipients with respect to certification and
nondiscrimination must be carried out by UCPs, and recipients may use
only UCPs that comply with the certification and nondiscrimination
requirements of this part.
(c) All certifications by UCPs shall be pre-certifications; i.e.,
certifications that have been made final before the due date for bids or
offers on a contract on which a firm seeks to participate as a DBE.
(d) A UCP is not required to process an application for
certification from a firm having its principal place of business outside
the state if the firm is not certified by the UCP in the state in which
it maintains its principal place of business. The ``home state'' UCP
shall share its information and documents concerning the firm with other
UCPs that are considering the firm's application.
(e) Subject to DOT approval as provided in this section, the
recipients in two or more states may form a regional UCP. UCPs may also
enter into written reciprocity agreements with other UCPs. Such an
agreement shall outline the specific responsibilities of each
participant. A UCP may accept the certification of any other UCP or DOT
recipient.
(f) Pending the establishment of UCPs meeting the requirements of
this section, you may enter into agreements with other recipients, on a
regional or inter-jurisdictional basis, to perform certification
functions required by this part. You may also grant reciprocity to other
recipient's certification decisions.
(g) Each UCP shall maintain a unified DBE directory containing, for
all firms certified by the UCP (including those from other states
certified under the provisions of this section), the information
required by Sec. 26.31. The UCP shall make the directory available to
the public electronically, on the internet, as well as in print. The UCP
shall update the electronic version of the directory by including
additions, deletions, and other changes as soon as they are made.
(h) Except as otherwise specified in this section, all provisions of
this subpart and subpart D of this part pertaining to recipients also
apply to UCPs.
Sec. 26.83 What procedures do recipients follow in making
certification decisions?
(a) You must ensure that only firms certified as eligible DBEs under
this section participate as DBEs in your program.
(b) You must determine the eligibility of firms as DBEs consistent
with the standards of subpart D of this part. When a UCP is formed, the
UCP must meet all the requirements of subpart D of this part and this
subpart that recipients are required to meet.
(c) You must take all the following steps in determining whether a
DBE firm meets the standards of subpart D of this part:
(1) Perform an on-site visit to the offices of the firm. You must
interview the principal officers of the firm and review their
r[eacute]sum[eacute]s and/or work histories. You must also perform an
on-site visit to job sites if there are such sites on which the firm is
working at the time of the eligibility investigation in your
jurisdiction or local area. You may rely upon the site visit report of
any other recipient with respect to a firm applying for certification;
(2) If the firm is a corporation, analyze the ownership of stock in
the firm;
(3) Analyze the bonding and financial capacity of the firm;
(4) Determine the work history of the firm, including contracts it
has received and work it has completed;
(5) Obtain a statement from the firm of the type of work it prefers
to perform as part of the DBE program and its preferred locations for
performing the work, if any;
[[Page 312]]
(6) Obtain or compile a list of the equipment owned by or available
to the firm and the licenses the firm and its key personnel possess to
perform the work it seeks to do as part of the DBE program;
(7) Require potential DBEs to complete and submit an appropriate
application form, unless the potential DBE is an SBA certified firm
applying pursuant to the DOT/SBA MOU.
(i) You must use the application form provided in Appendix F to this
part without change or revision. However, you may provide in your DBE
program, with the approval of the concerned operating administration,
for supplementing the form by requesting additional information not
inconsistent with this part.
(ii) You must make sure that the applicant attests to the accuracy
and truthfulness of the information on the application form. This shall
be done either in the form of an affidavit sworn to by the applicant
before a person who is authorized by state law to administer oaths or in
the form of an unsworn declaration executed under penalty of perjury of
the laws of the United States.
(iii) You must review all information on the form prior to making a
decision about the eligibility of the firm.
(d) When another recipient, in connection with its consideration of
the eligibility of a firm, makes a written request for certification
information you have obtained about that firm (e.g., including
application materials or the report of a site visit, if you have made
one to the firm), you must promptly make the information available to
the other recipient.
(e) When another DOT recipient has certified a firm, you have
discretion to take any of the following actions:
(1) Certify the firm in reliance on the certification decision of
the other recipient;
(2) Make an independent certification decision based on
documentation provided by the other recipient, augmented by any
additional information you require the applicant to provide; or
(3) Require the applicant to go through your application process
without regard to the action of the other recipient.
(f) Subject to the approval of the concerned operating
administration as part of your DBE program, you may impose a reasonable
application fee for certification. Fee waivers shall be made in
appropriate cases.
(g) You must safeguard from disclosure to unauthorized persons
information gathered as part of the certification process that may
reasonably be regarded as proprietary or other confidential business
information, consistent with applicable Federal, state, and local law.
(h) Once you have certified a DBE, it shall remain certified for a
period of at least three years unless and until its certification has
been removed through the procedures of Sec. 26.87. You may not require
DBEs to reapply for certification as a condition of continuing to
participate in the program during this three-year period, unless the
factual basis on which the certification was made changes.
(i) If you are a DBE, you must inform the recipient or UCP in
writing of any change in circumstances affecting your ability to meet
size, disadvantaged status, ownership, or control requirements of this
part or any material change in the information provided in your
application form.
(1) Changes in management responsibility among members of a limited
liability company are covered by this requirement.
(2) You must attach supporting documentation describing in detail
the nature of such changes.
(3) The notice must take the form of an affidavit sworn to by the
applicant before a person who is authorized by state law to administer
oaths or of an unsworn declaration executed under penalty of perjury of
the laws of the United States. You must provide the written notification
within 30 days of the occurrence of the change. If you fail to make
timely notification of such a change, you will be deemed to have failed
to cooperate under Sec. 26.109(c).
(j) If you are a DBE, you must provide to the recipient, every year
on the anniversary of the date of your certification, an affidavit sworn
to by the firm's owners before a person who is authorized by state law
to administer
[[Page 313]]
oaths or an unsworn declaration executed under penalty of perjury of the
laws of the United States. This affidavit must affirm that there have
been no changes in the firm's circumstances affecting its ability to
meet size, disadvantaged status, ownership, or control requirements of
this part or any material changes in the information provided in its
application form, except for changes about which you have notified the
recipient under paragraph (i) of this section. The affidavit shall
specifically affirm that your firm continues to meet SBA business size
criteria and the overall gross receipts cap of this part, documenting
this affirmation with supporting documentation of your firm's size and
gross receipts. If you fail to provide this affidavit in a timely
manner, you will be deemed to have failed to cooperate under Sec.
26.109(c).
(k) If you are a recipient, you must make decisions on applications
for certification within 90 days of receiving from the applicant firm
all information required under this part. You may extend this time
period once, for no more than an additional 60 days, upon written notice
to the firm, explaining fully and specifically the reasons for the
extension. You may establish a different time frame in your DBE program,
upon a showing that this time frame is not feasible, and subject to the
approval of the concerned operating administration. Your failure to make
a decision by the applicable deadline under this paragraph is deemed a
constructive denial of the application, on the basis of which the firm
may appeal to DOT under Sec. 26.89.
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35555, June 16, 2003]
Sec. 26.84 How do recipients process applications submitted pursuant
to the DOT/SBA MOU?
(a) When an SBA-certified firm applies for certification pursuant to
the DOT/SBA MOU, you must accept the certification applications, forms
and packages submitted by a firm to the SBA for either the 8(a) BD or
SDB programs, in lieu of requiring the applicant firm to complete your
own application forms and packages. The applicant may submit the package
directly, or may request that the SBA forward the package to you.
Pursuant to the MOU, the SBA will forward the package within thirty
days.
(b) If necessary, you may request additional relevant information
from the SBA. The SBA will provide this additional material within
forty-five days of your written request.
(c) Before certifying a firm based on its 8(a) BD or SDB
certification, you must conduct an on-site review of the firm (see Sec.
26.83(c)(1)). If the SBA conducted an on-site review, you may rely on
the SBA's report of the on-site review. In connection with this review,
you may also request additional relevant information from the firm.
(d) Unless you determine, based on the on-site review and
information obtained in connection with it, that the firm does not meet
the eligibility requirements of Subpart D of this part, you must certify
the firm.
(e) You are not required to process an application for certification
from an SBA-certified firm having its principal place of business
outside the state(s) in which you operate unless there is a report of a
``home state'' on-site review on which you may rely.
(f) You are not required to process an application for certification
from an SBA-certified firm if the firm does not provide products or
services that you use in your DOT-assisted programs or airport
concessions.
[68 FR 35555, June 16, 2003]
Sec. 26.85 How do recipients respond to requests from DBE-certified
firms or the SBA made pursuant to the DOT/SBA MOU?
(a) Upon receipt of a signed, written request from a DBE-certified
firm, you must transfer to the SBA a copy of the firm's application
package. You must transfer this information within thirty days of
receipt of the request.
(b) If necessary, the SBA may make a written request to the
recipient for additional materials (e.g., the report of the on-site
review). You must provide a copy of this material to the SBA within
forty-five days of the additional request.
(c) You must provide appropriate assistance to SBA-certified firms,
including providing information pertaining
[[Page 314]]
to the DBE application process, filing locations, required documentation
and status of applications.
[68 FR 35555, June 16, 2003]
Sec. 26.86 What rules govern recipients' denials of initial requests
for certification?
(a) When you deny a request by a firm, which is not currently
certified with you, to be certified as a DBE, you must provide the firm
a written explanation of the reasons for the denial, specifically
referencing the evidence in the record that supports each reason for the
denial. All documents and other information on which the denial is based
must be made available to the applicant, on request.
(b) When you deny DBE certification to a firm certified by the SBA,
you must notify the SBA in writing. The notification must include the
reason for denial.
(c) When a firm is denied certification, you must establish a time
period of no more than twelve months that must elapse before the firm
may reapply to the recipient for certification. You may provide, in your
DBE program, subject to approval by the concerned operating
administration, a shorter waiting period for reapplication. The time
period for reapplication begins to run on the date the explanation
required by paragraph (a) of this section is received by the firm.
(d) When you make an administratively final denial of certification
concerning a firm, the firm may appeal the denial to the Department
under Sec. 26.89.
[64 FR 5126, Feb. 2, 1999. Redesignated and amended at 68 FR 35555, June
16, 2003]
Sec. 26.87 What procedures does a recipient use to remove a DBE's
eligibility?
(a) Ineligibility complaints. (1) Any person may file with you a
written complaint alleging that a currently-certified firm is ineligible
and specifying the alleged reasons why the firm is ineligible. You are
not required to accept a general allegation that a firm is ineligible or
an anonymous complaint. The complaint may include any information or
arguments supporting the complainant's assertion that the firm is
ineligible and should not continue to be certified. Confidentiality of
complainants' identities must be protected as provided in Sec.
26.109(b).
(2) You must review your records concerning the firm, any material
provided by the firm and the complainant, and other available
information. You may request additional information from the firm or
conduct any other investigation that you deem necessary.
(3) If you determine, based on this review, that there is reasonable
cause to believe that the firm is ineligible, you must provide written
notice to the firm that you propose to find the firm ineligible, setting
forth the reasons for the proposed determination. If you determine that
such reasonable cause does not exist, you must notify the complainant
and the firm in writing of this determination and the reasons for it.
All statements of reasons for findings on the issue of reasonable cause
must specifically reference the evidence in the record on which each
reason is based.
(b) Recipient-initiated proceedings. If, based on notification by
the firm of a change in its circumstances or other information that
comes to your attention, you determine that there is reasonable cause to
believe that a currently certified firm is ineligible, you must provide
written notice to the firm that you propose to find the firm ineligible,
setting forth the reasons for the proposed determination. The statement
of reasons for the finding of reasonable cause must specifically
reference the evidence in the record on which each reason is based.
(c) DOT directive to initiate proceeding. (1) If the concerned
operating administration determines that information in your
certification records, or other information available to the concerned
operating administration, provides reasonable cause to believe that a
firm you certified does not meet the eligibility criteria of this part,
the concerned operating administration may direct you to initiate a
proceeding to remove the firm's certification.
(2) The concerned operating administration must provide you and the
firm a notice setting forth the reasons for the directive, including any
relevant documentation or other information.
[[Page 315]]
(3) You must immediately commence and prosecute a proceeding to
remove eligibility as provided by paragraph (b) of this section.
(d) Hearing. When you notify a firm that there is reasonable cause
to remove its eligibility, as provided in paragraph (a), (b), or (c) of
this section, you must give the firm an opportunity for an informal
hearing, at which the firm may respond to the reasons for the proposal
to remove its eligibility in person and provide information and
arguments concerning why it should remain certified.
(1) In such a proceeding, you bear the burden of proving, by a
preponderance of the evidence, that the firm does not meet the
certification standards of this part.
(2) You must maintain a complete record of the hearing, by any means
acceptable under state law for the retention of a verbatim record of an
administrative hearing. If there is an appeal to DOT under Sec. 26.89,
you must provide a transcript of the hearing to DOT and, on request, to
the firm. You must retain the original record of the hearing. You may
charge the firm only for the cost of copying the record.
(3) The firm may elect to present information and arguments in
writing, without going to a hearing. In such a situation, you bear the
same burden of proving, by a preponderance of the evidence, that the
firm does not meet the certification standards, as you would during a
hearing.
(e) Separation of functions. You must ensure that the decision in a
proceeding to remove a firm's eligibility is made by an office and
personnel that did not take part in actions leading to or seeking to
implement the proposal to remove the firm's eligibility and are not
subject, with respect to the matter, to direction from the office or
personnel who did take part in these actions.
(1) Your method of implementing this requirement must be made part
of your DBE program.
(2) The decisionmaker must be an individual who is knowledgeable
about the certification requirements of your DBE program and this part.
(3) Before a UCP is operational in its state, a small airport or
small transit authority (i.e., an airport or transit authority serving
an area with less than 250,000 population) is required to meet this
requirement only to the extent feasible.
(f) Grounds for decision. You must not base a decision to remove
eligibility on a reinterpretation or changed opinion of information
available to the recipient at the time of its certification of the firm.
You may base such a decision only on one or more of the following:
(1) Changes in the firm's circumstances since the certification of
the firm by the recipient that render the firm unable to meet the
eligibility standards of this part;
(2) Information or evidence not available to you at the time the
firm was certified;
(3) Information that was concealed or misrepresented by the firm in
previous certification actions by a recipient;
(4) A change in the certification standards or requirements of the
Department since you certified the firm; or
(5) A documented finding that your determination to certify the firm
was factually erroneous.
(g) Notice of decision. Following your decision, you must provide
the firm written notice of the decision and the reasons for it,
including specific references to the evidence in the record that
supports each reason for the decision. The notice must inform the firm
of the consequences of your decision and of the availability of an
appeal to the Department of Transportation under Sec. 26.89. You must
send copies of the notice to the complainant in an ineligibility
complaint or the concerned operating administration that had directed
you to initiate the proceeding.
(h) When you decertify a DBE firm certified by the SBA, you must
notify the SBA in writing. The notification must include the reason for
denial.
(i) Status of firm during proceeding. (1) A firm remains an eligible
DBE during the pendancy of your proceeding to remove its eligibility.
(2) The firm does not become ineligible until the issuance of the
notice provided for in paragraph (g) of this section.
[[Page 316]]
(j) Effects of removal of eligibility. When you remove a firm's
eligibility, you must take the following action:
(1) When a prime contractor has made a commitment to using the
ineligible firm, or you have made a commitment to using a DBE prime
contractor, but a subcontract or contract has not been executed before
you issue the decertification notice provided for in paragraph (g) of
this section, the ineligible firm does not count toward the contract
goal or overall goal. You must direct the prime contractor to meet the
contract goal with an eligible DBE firm or demonstrate to you that it
has made a good faith effort to do so.
(2) If a prime contractor has executed a subcontract with the firm
before you have notified the firm of its ineligibility, the prime
contractor may continue to use the firm on the contract and may continue
to receive credit toward its DBE goal for the firm's work. In this case,
or in a case where you have let a prime contract to the DBE that was
later ruled ineligible, the portion of the ineligible firm's performance
of the contract remaining after you issued the notice of its
ineligibility shall not count toward your overall goal, but may count
toward the contract goal.
(3) Exception: If the DBE's ineligibility is caused solely by its
having exceeded the size standard during the performance of the
contract, you may continue to count its participation on that contract
toward overall and contract goals.
(k) Availability of appeal. When you make an administratively final
removal of a firm's eligibility under this section, the firm may appeal
the removal to the Department under Sec. 26.89.
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35556, June 16, 2003]
Sec. 26.89 What is the process for certification appeals to the
Department of Transportation?
(a)(1) If you are a firm that is denied certification or whose
eligibility is removed by a recipient, including SBA-certified firms
applying pursuant to the DOT/SBA MOU, you may make an administrative
appeal to the Department.
(2) If you are a complainant in an ineligibility complaint to a
recipient (including the concerned operating administration in the
circumstances provided in Sec. 26.87(c)), you may appeal to the
Department if the recipient does not find reasonable cause to propose
removing the firm's eligibility or, following a removal of eligibility
proceeding, determines that the firm is eligible.
(3) Send appeals to the following address: Department of
Transportation, Office of Civil Rights, 400 7th Street, SW, Room 5414,
Washington, DC 20590.
(b) Pending the Department's decision in the matter, the recipient's
decision remains in effect. The Department does not stay the effect of
the recipient's decision while it is considering an appeal.
(c) If you want to file an appeal, you must send a letter to the
Department within 90 days of the date of the recipient's final decision,
including information and arguments concerning why the recipient's
decision should be reversed. The Department may accept an appeal filed
later than 90 days after the date of the decision if the Department
determines that there was good cause for the late filing of the appeal.
(1) If you are an appellant who is a firm which has been denied
certification, whose certification has been removed, whose owner is
determined not to be a member of a designated disadvantaged group, or
concerning whose owner the presumption of disadvantage has been
rebutted, your letter must state the name and address of any other
recipient which currently certifies the firm, which has rejected an
application for certification from the firm or removed the firm's
eligibility within one year prior to the date of the appeal, or before
which an application for certification or a removal of eligibility is
pending. Failure to provide this information may be deemed a failure to
cooperate under Sec. 26.109(c).
(2) If you are an appellant other than one described in paragraph
(c)(1) of this section, the Department will request, and the firm whose
certification has been questioned shall promptly provide, the
information called for in paragraph (c)(1) of this section. Failure to
provide this information may be
[[Page 317]]
deemed a failure to cooperate under Sec. 26.109(c).
(d) When it receives an appeal, the Department requests a copy of
the recipient's complete administrative record in the matter. If you are
the recipient, you must provide the administrative record, including a
hearing transcript, within 20 days of the Department's request. The
Department may extend this time period on the basis of a recipient's
showing of good cause. To facilitate the Department's review of a
recipient's decision, you must ensure that such administrative records
are well organized, indexed, and paginated. Records that do not comport
with these requirements are not acceptable and will be returned to you
to be corrected immediately. If an appeal is brought concerning one
recipient's certification decision concerning a firm, and that recipient
relied on the decision and/or administrative record of another
recipient, this requirement applies to both recipients involved.
(e) The Department makes its decision based solely on the entire
administrative record. The Department does not make a de novo review of
the matter and does not conduct a hearing. The Department may supplement
the administrative record by adding relevant information made available
by the DOT Office of Inspector General; Federal, state, or local law
enforcement authorities; officials of a DOT operating administration or
other appropriate DOT office; a recipient; or a firm or other private
party.
(f) As a recipient, when you provide supplementary information to
the Department, you shall also make this information available to the
firm and any third-party complainant involved, consistent with Federal
or applicable state laws concerning freedom of information and privacy.
The Department makes available, on request by the firm and any third-
party complainant involved, any supplementary information it receives
from any source.
(1) The Department affirms your decision unless it determines, based
on the entire administrative record, that your decision is unsupported
by substantial evidence or inconsistent with the substantive or
procedural provisions of this part concerning certification.
(2) If the Department determines, after reviewing the entire
administrative record, that your decision was unsupported by substantial
evidence or inconsistent with the substantive or procedural provisions
of this part concerning certification, the Department reverses your
decision and directs you to certify the firm or remove its eligibility,
as appropriate. You must take the action directed by the Department's
decision immediately upon receiving written notice of it.
(3) The Department is not required to reverse your decision if the
Department determines that a procedural error did not result in
fundamental unfairness to the appellant or substantially prejudice the
opportunity of the appellant to present its case.
(4) If it appears that the record is incomplete or unclear with
respect to matters likely to have a significant impact on the outcome of
the case, the Department may remand the record to you with instructions
seeking clarification or augmentation of the record before making a
finding. The Department may also remand a case to you for further
proceedings consistent with Department instructions concerning the
proper application of the provisions of this part.
(5) The Department does not uphold your decision based on grounds
not specified in your decision.
(6) The Department's decision is based on the status and
circumstances of the firm as of the date of the decision being appealed.
(7) The Department provides written notice of its decision to you,
the firm, and the complainant in an ineligibility complaint. A copy of
the notice is also sent to any other recipient whose administrative
record or decision has been involved in the proceeding (see paragraph
(d) of this section). The Department will also notify the SBA in writing
when DOT takes an action on an appeal that results in or confirms a loss
of eligibility to any SBA-certified firm. The notice includes the
reasons for the Department's decision, including specific references to
the evidence in the record that supports each reason for the decision.
[[Page 318]]
(8) The Department's policy is to make its decision within 180 days
of receiving the complete administrative record. If the Department does
not make its decision within this period, the Department provides
written notice to concerned parties, including a statement of the reason
for the delay and a date by which the appeal decision will be made.
(g) All decisions under this section are administratively final, and
are not subject to petitions for reconsideration.
[64 FR 5126, Feb. 2, 1999, as amended at 65 FR 68951, Nov. 15, 2000; 68
FR 35556, June 16, 2003]
Sec. 26.91 What actions do recipients take following DOT certification
appeal decisions?
(a) If you are the recipient from whose action an appeal under Sec.
26.89 is taken, the decision is binding. It is not binding on other
recipients.
(b) If you are a recipient to which a DOT determination under Sec.
26.89 is applicable, you must take the following action:
(1) If the Department determines that you erroneously certified a
firm, you must remove the firm's eligibility on receipt of the
determination, without further proceedings on your part. Effective on
the date of your receipt of the Department's determination, the
consequences of a removal of eligibility set forth in Sec. 26.87(i)
take effect.
(2) If the Department determines that you erroneously failed to find
reasonable cause to remove the firm's eligibility, you must
expeditiously commence a proceeding to determine whether the firm's
eligibility should be removed, as provided in Sec. 26.87.
(3) If the Department determines that you erroneously declined to
certify or removed the eligibility of the firm, you must certify the
firm, effective on the date of your receipt of the written notice of
Department's determination.
(4) If the Department determines that you erroneously determined
that the presumption of social and economic disadvantage either should
or should not be deemed rebutted, you must take appropriate corrective
action as determined by the Department.
(5) If the Department affirms your determination, no further action
is necessary.
(c) Where DOT has upheld your denial of certification to or removal
of eligibility from a firm, or directed the removal of a firm's
eligibility, other recipients with whom the firm is certified may
commence a proceeding to remove the firm's eligibility under Sec.
26.87. Such recipients must not remove the firm's eligibility absent
such a proceeding. Where DOT has reversed your denial of certification
to or removal of eligibility from a firm, other recipients must take the
DOT action into account in any certification action involving the firm.
However, other recipients are not required to certify the firm based on
the DOT decision.
Subpart F_Compliance and Enforcement
Sec. 26.101 What compliance procedures apply to recipients?
(a) If you fail to comply with any requirement of this part, you may
be subject to formal enforcement action under Sec. 26.103 or Sec.
26.105 or appropriate program sanctions by the concerned operating
administration, such as the suspension or termination of Federal funds,
or refusal to approve projects, grants or contracts until deficiencies
are remedied. Program sanctions may include, in the case of the FHWA
program, actions provided for under 23 CFR 1.36; in the case of the FAA
program, actions consistent with 49 U.S.C. 47106(d), 47111(d), and
47122; and in the case of the FTA program, any actions permitted under
49 U.S.C. chapter 53 or applicable FTA program requirements.
(b) As provided in statute, you will not be subject to compliance
actions or sanctions for failing to carry out any requirement of this
part because you have been prevented from complying because a Federal
court has issued a final order in which the court found that the
requirement is unconstitutional.
Sec. 26.103 What enforcement actions apply in FHWA and FTA programs?
The provisions of this section apply to enforcement actions under
FHWA and FTA programs:
[[Page 319]]
(a) Noncompliance complaints. Any person who believes that a
recipient has failed to comply with its obligations under this part may
file a written complaint with the concerned operating administration's
Office of Civil Rights. If you want to file a complaint, you must do so
no later than 180 days after the date of the alleged violation or the
date on which you learned of a continuing course of conduct in violation
of this part. In response to your written request, the Office of Civil
Rights may extend the time for filing in the interest of justice,
specifying in writing the reason for so doing. The Office of Civil
Rights may protect the confidentiality of your identity as provided in
Sec. 26.109(b). Complaints under this part are limited to allegations
of violation of the provisions of this part.
(b) Compliance reviews. The concerned operating administration may
review the recipient's compliance with this part at any time, including
reviews of paperwork and on-site reviews, as appropriate. The Office of
Civil Rights may direct the operating administration to initiate a
compliance review based on complaints received.
(c) Reasonable cause notice. If it appears, from the investigation
of a complaint or the results of a compliance review, that you, as a
recipient, are in noncompliance with this part, the appropriate DOT
office promptly sends you, return receipt requested, a written notice
advising you that there is reasonable cause to find you in
noncompliance. The notice states the reasons for this finding and
directs you to reply within 30 days concerning whether you wish to begin
conciliation.
(d) Conciliation. (1) If you request conciliation, the appropriate
DOT office shall pursue conciliation for at least 30, but not more than
120, days from the date of your request. The appropriate DOT office may
extend the conciliation period for up to 30 days for good cause,
consistent with applicable statutes.
(2) If you and the appropriate DOT office sign a conciliation
agreement, then the matter is regarded as closed and you are regarded as
being in compliance. The conciliation agreement sets forth the measures
you have taken or will take to ensure compliance. While a conciliation
agreement is in effect, you remain eligible for FHWA or FTA financial
assistance.
(3) The concerned operating administration shall monitor your
implementation of the conciliation agreement and ensure that its terms
are complied with. If you fail to carry out the terms of a conciliation
agreement, you are in noncompliance.
(4) If you do not request conciliation, or a conciliation agreement
is not signed within the time provided in paragraph (d)(1) of this
section, then enforcement proceedings begin.
(e) Enforcement actions. (1) Enforcement actions are taken as
provided in this subpart.
(2) Applicable findings in enforcement proceedings are binding on
all DOT offices.
Sec. 26.105 What enforcement actions apply in FAA programs?
(a) Compliance with all requirements of this part by airport
sponsors and other recipients of FAA financial assistance is enforced
through the procedures of Title 49 of the United States Code, including
49 U.S.C. 47106(d), 47111(d), and 47122, and regulations implementing
them.
(b) The provisions of Sec. 26.103(b) and this section apply to
enforcement actions in FAA programs.
(c) Any person who knows of a violation of this part by a recipient
of FAA funds may file a complaint under 14 CFR part 16 with the Federal
Aviation Administration Office of Chief Counsel.
Sec. 26.107 What enforcement actions apply to firms participating in
the DBE program?
(a) If you are a firm that does not meet the eligibility criteria of
subpart D of this part and that attempts to participate in a DOT-
assisted program as a DBE on the basis of false, fraudulent, or
deceitful statements or representations or under circumstances
indicating a serious lack of business integrity or honesty, the
Department may initiate suspension or debarment proceedings against you
under 49 CFR part 29.
(b) If you are a firm that, in order to meet DBE contract goals or
other DBE program requirements, uses or attempts to use, on the basis of
false,
[[Page 320]]
fraudulent or deceitful statements or representations or under
circumstances indicating a serious lack of business integrity or
honesty, another firm that does not meet the eligibility criteria of
subpart D of this part, the Department may initiate suspension or
debarment proceedings against you under 49 CFR part 29.
(c) In a suspension or debarment proceeding brought under paragraph
(a) or (b) of this section, the concerned operating administration may
consider the fact that a purported DBE has been certified by a
recipient. Such certification does not preclude the Department from
determining that the purported DBE, or another firm that has used or
attempted to use it to meet DBE goals, should be suspended or debarred.
(d) The Department may take enforcement action under 49 CFR Part 31,
Program Fraud and Civil Remedies, against any participant in the DBE
program whose conduct is subject to such action under 49 CFR part 31.
(e) The Department may refer to the Department of Justice, for
prosecution under 18 U.S.C. 1001 or other applicable provisions of law,
any person who makes a false or fraudulent statement in connection with
participation of a DBE in any DOT-assisted program or otherwise violates
applicable Federal statutes.
Sec. 26.109 What are the rules governing information, confidentiality,
cooperation, and intimidation or retaliation?
(a) Availability of records. (1) In responding to requests for
information concerning any aspect of the DBE program, the Department
complies with provisions of the Federal Freedom of Information and
Privacy Acts (5 U.S.C. 552 and 552a). The Department may make available
to the public any information concerning the DBE program release of
which is not prohibited by Federal law.
(2) Notwithstanding any provision of Federal or state law, you must
not release information that may be reasonably be construed as
confidential business information to any third party without the written
consent of the firm that submitted the information. This includes
applications for DBE certification and supporting documentation.
However, you must transmit this information to DOT in any certification
appeal proceeding under Sec. 26.89 in which the disadvantaged status of
the individual is in question.
(b) Confidentiality of information on complainants. Notwithstanding
the provisions of paragraph (a) of this section, the identity of
complainants shall be kept confidential, at their election. If such
confidentiality will hinder the investigation, proceeding or hearing, or
result in a denial of appropriate administrative due process to other
parties, the complainant must be advised for the purpose of waiving the
privilege. Complainants are advised that, in some circumstances, failure
to waive the privilege may result in the closure of the investigation or
dismissal of the proceeding or hearing. FAA follows the procedures of 14
CFR part 16 with respect to confidentiality of information in
complaints.
(c) Cooperation. All participants in the Department's DBE program
(including, but not limited to, recipients, DBE firms and applicants for
DBE certification, complainants and appellants, and contractors using
DBE firms to meet contract goals) are required to cooperate fully and
promptly with DOT and recipient compliance reviews, certification
reviews, investigations, and other requests for information. Failure to
do so shall be a ground for appropriate action against the party
involved (e.g., with respect to recipients, a finding of noncompliance;
with respect to DBE firms, denial of certification or removal of
eligibility and/or suspension and debarment; with respect to a
complainant or appellant, dismissal of the complaint or appeal; with
respect to a contractor which uses DBE firms to meet goals, findings of
non-responsibility for future contracts and/or suspension and
debarment).
(d) Intimidation and retaliation. If you are a recipient,
contractor, or any other participant in the program, you must not
intimidate, threaten, coerce, or discriminate against any individual or
firm for the purpose of interfering with any right or privilege secured
by this part or because the individual or firm has made a complaint,
testified,
[[Page 321]]
assisted, or participated in any manner in an investigation, proceeding,
or hearing under this part. If you violate this prohibition, you are in
noncompliance with this part.
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35556, June 16, 2003]
Appendix A to Part 26--Guidance Concerning Good Faith Efforts
I. When, as a recipient, you establish a contract goal on a DOT-
assisted contract, a bidder must, in order to be responsible and/or
responsive, make good faith efforts to meet the goal. The bidder can
meet this requirement in either of two ways. First, the bidder can meet
the goal, documenting commitments for participation by DBE firms
sufficient for this purpose. Second, even if it doesn't meet the goal,
the bidder can document adequate good faith efforts. This means that the
bidder must show that it took all necessary and reasonable steps to
achieve a DBE goal or other requirement of this part which, by their
scope, intensity, and appropriateness to the objective, could reasonably
be expected to obtain sufficient DBE participation, even if they were
not fully successful.
II. In any situation in which you have established a contract goal,
part 26 requires you to use the good faith efforts mechanism of this
part. As a recipient, it is up to you to make a fair and reasonable
judgment whether a bidder that did not meet the goal made adequate good
faith efforts. It is important for you to consider the quality,
quantity, and intensity of the different kinds of efforts that the
bidder has made. The efforts employed by the bidder should be those that
one could reasonably expect a bidder to take if the bidder were actively
and aggressively trying to obtain DBE participation sufficient to meet
the DBE contract goal. Mere pro forma efforts are not good faith efforts
to meet the DBE contract requirements. We emphasize, however, that your
determination concerning the sufficiency of the firm's good faith
efforts is a judgment call: meeting quantitative formulas is not
required.
III. The Department also strongly cautions you against requiring
that a bidder meet a contract goal (i.e., obtain a specified amount of
DBE participation) in order to be awarded a contract, even though the
bidder makes an adequate good faith efforts showing. This rule
specifically prohibits you from ignoring bona fide good faith efforts.
IV. The following is a list of types of actions which you should
consider as part of the bidder's good faith efforts to obtain DBE
participation. It is not intended to be a mandatory checklist, nor is it
intended to be exclusive or exhaustive. Other factors or types of
efforts may be relevant in appropriate cases.
A. Soliciting through all reasonable and available means (e.g.
attendance at pre-bid meetings, advertising and/or written notices) the
interest of all certified DBEs who have the capability to perform the
work of the contract. The bidder must solicit this interest within
sufficient time to allow the DBEs to respond to the solicitation. The
bidder must determine with certainty if the DBEs are interested by
taking appropriate steps to follow up initial solicitations.
B. Selecting portions of the work to be performed by DBEs in order
to increase the likelihood that the DBE goals will be achieved. This
includes, where appropriate, breaking out contract work items into
economically feasible units to facilitate DBE participation, even when
the prime contractor might otherwise prefer to perform these work items
with its own forces.
C. Providing interested DBEs with adequate information about the
plans, specifications, and requirements of the contract in a timely
manner to assist them in responding to a solicitation.
D. (1) Negotiating in good faith with interested DBEs. It is the
bidder's responsibility to make a portion of the work available to DBE
subcontractors and suppliers and to select those portions of the work or
material needs consistent with the available DBE subcontractors and
suppliers, so as to facilitate DBE participation. Evidence of such
negotiation includes the names, addresses, and telephone numbers of DBEs
that were considered; a description of the information provided
regarding the plans and specifications for the work selected for
subcontracting; and evidence as to why additional agreements could not
be reached for DBEs to perform the work.
(2) A bidder using good business judgment would consider a number of
factors in negotiating with subcontractors, including DBE
subcontractors, and would take a firm's price and capabilities as well
as contract goals into consideration. However, the fact that there may
be some additional costs involved in finding and using DBEs is not in
itself sufficient reason for a bidder's failure to meet the contract DBE
goal, as long as such costs are reasonable. Also, the ability or desire
of a prime contractor to perform the work of a contract with its own
organization does not relieve the bidder of the responsibility to make
good faith efforts. Prime contractors are not, however, required to
accept higher quotes from DBEs if the price difference is excessive or
unreasonable.
E. Not rejecting DBEs as being unqualified without sound reasons
based on a thorough investigation of their capabilities. The
contractor's standing within its industry, membership in specific
groups, organizations, or
[[Page 322]]
associations and political or social affiliations (for example union vs.
non-union employee status) are not legitimate causes for the rejection
or non-solicitation of bids in the contractor's efforts to meet the
project goal.
F. Making efforts to assist interested DBEs in obtaining bonding,
lines of credit, or insurance as required by the recipient or
contractor.
G. Making efforts to assist interested DBEs in obtaining necessary
equipment, supplies, materials, or related assistance or services.
H. Effectively using the services of available minority/women
community organizations; minority/women contractors' groups; local,
state, and Federal minority/women business assistance offices; and other
organizations as allowed on a case-by-case basis to provide assistance
in the recruitment and placement of DBEs.
V. In determining whether a bidder has made good faith efforts, you
may take into account the performance of other bidders in meeting the
contract. For example, when the apparent successful bidder fails to meet
the contract goal, but others meet it, you may reasonably raise the
question of whether, with additional reasonable efforts, the apparent
successful bidder could have met the goal. If the apparent successful
bidder fails to meet the goal, but meets or exceeds the average DBE
participation obtained by other bidders, you may view this, in
conjunction with other factors, as evidence of the apparent successful
bidder having made good faith efforts.
[[Page 323]]
Appendix B to Part 26--Uniform Report of DBE Awards or Commitments and
Payments Form
[GRAPHIC] [TIFF OMITTED] TR16JN03.051
[[Page 324]]
[GRAPHIC] [TIFF OMITTED] TR16JN03.052
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35556, June 16, 2003]
Appendix C to Part 26--DBE Business Development Program Guidelines
The purpose of this program element is to further the development of
DBEs, including but not limited to assisting them to move into non-
traditional areas of work and/or compete in the marketplace outside the
DBE program, via the provision of training and assistance from the
recipient.
(A) Each firm that participates in a recipient's business
development program (BDP) program is subject to a program term
determined by the recipient. The term should consist of two stages; a
developmental stage and a transitional stage.
[[Page 325]]
(B) In order for a firm to remain eligible for program
participation, it must continue to meet all eligibility criteria
contained in part 26.
(C) By no later than 6 months of program entry, the participant
should develop and submit to the recipient a comprehensive business plan
setting forth the participant's business targets, objectives and goals.
The participant will not be eligible for program benefits until such
business plan is submitted and approved by the recipient. The approved
business plan will constitute the participant's short and long term
goals and the strategy for developmental growth to the point of economic
viability in non-traditional areas of work and/or work outside the DBE
program.
(D) The business plan should contain at least the following:
(1) An analysis of market potential, competitive environment and
other business analyses estimating the program participant's prospects
for profitable operation during the term of program participation and
after graduation from the program.
(2) An analysis of the firm's strengths and weaknesses, with
particular attention paid to the means of correcting any financial,
managerial, technical, or labor conditions which could impede the
participant from receiving contracts other than those in traditional
areas of DBE participation.
(3) Specific targets, objectives, and goals for the business
development of the participant during the next two years, utilizing the
results of the analysis conducted pursuant to paragraphs (C) and (D)(1)
of this appendix;
(4) Estimates of contract awards from the DBE program and from other
sources which are needed to meet the objectives and goals for the years
covered by the business plan; and
(5) Such other information as the recipient may require.
(E) Each participant should annually review its currently approved
business plan with the recipient and modify the plan as may be
appropriate to account for any changes in the firm's structure and
redefined needs. The currently approved plan should be considered the
applicable plan for all program purposes until the recipient approves in
writing a modified plan. The recipient should establish an anniversary
date for review of the participant's business plan and contract
forecasts.
(F) Each participant should annually forecast in writing its need
for contract awards for the next program year and the succeeding program
year during the review of its business plan conducted under paragraph
(E) of this appendix. Such forecast should be included in the
participant's business plan. The forecast should include:
(1) The aggregate dollar value of contracts to be sought under the
DBE program, reflecting compliance with the business plan;
(2) The aggregate dollar value of contracts to be sought in areas
other than traditional areas of DBE participation;
(3) The types of contract opportunities being sought, based on the
firm's primary line of business; and
(4) Such other information as may be requested by the recipient to
aid in providing effective business development assistance to the
participant.
(G) Program participation is divided into two stages; (1) a
developmental stage and (2) a transitional stage. The developmental
stage is designed to assist participants to overcome their social and
economic disadvantage by providing such assistance as may be necessary
and appropriate to enable them to access relevant markets and strengthen
their financial and managerial skills. The transitional stage of program
participation follows the developmental stage and is designed to assist
participants to overcome, insofar as practical, their social and
economic disadvantage and to prepare the participant for leaving the
program.
(H) The length of service in the program term should not be a pre-
set time frame for either the developmental or transitional stages but
should be figured on the number of years considered necessary in normal
progression of achieving the firm's established goals and objectives.
The setting of such time could be factored on such items as, but not
limited to, the number of contracts, aggregate amount of the contract
received, years in business, growth potential, etc.
(I) Beginning in the first year of the transitional stage of program
participation, each participant should annually submit for inclusion in
its business plan a transition management plan outlining specific steps
to promote profitable business operations in areas other than
traditional areas of DBE participation after graduation from the
program. The transition management plan should be submitted to the
recipient at the same time other modifications are submitted pursuant to
the annual review under paragraph (E) of this section. The plan should
set forth the same information as required under paragraph (F) of steps
the participant will take to continue its business development after the
expiration of its program term.
(J) When a participant is recognized as successfully completing the
program by substantially achieving the targets, objectives and goals set
forth in its program term, and has demonstrated the ability to compete
in the marketplace, its further participation within the program may be
determined by the recipient.
[[Page 326]]
(K) In determining whether a concern has substantially achieved the
goals and objectives of its business plan, the following factors, among
others, should be considered by the recipient:
(1) Profitability;
(2) Sales, including improved ratio of non-traditional contracts to
traditional-type contracts;
(3) Net worth, financial ratios, working capital, capitalization,
access to credit and capital;
(4) Ability to obtain bonding;
(5) A positive comparison of the DBE's business and financial
profile with profiles of non-DBE businesses in the same area or similar
business category; and
(6) Good management capacity and capability.
(L) Upon determination by the recipient that the participant should
be graduated from the developmental program, the recipient should notify
the participant in writing of its intent to graduate the firm in a
letter of notification. The letter of notification should set forth
findings, based on the facts, for every material issue relating to the
basis of the program graduation with specific reasons for each finding.
The letter of notification should also provide the participant 45 days
from the date of service of the letter to submit in writing information
that would explain why the proposed basis of graduation is not
warranted.
(M) Participation of a DBE firm in the program may be discontinued
by the recipient prior to expiration of the firm's program term for good
cause due to the failure of the firm to engage in business practices
that will promote its competitiveness within a reasonable period of time
as evidenced by, among other indicators, a pattern of inadequate
performance or unjustified delinquent performance. Also, the recipient
can discontinue the participation of a firm that does not actively
pursue and bid on contracts, and a firm that, without justification,
regularly fails to respond to solicitations in the type of work it is
qualified for and in the geographical areas where it has indicated
availability under its approved business plan. The recipient should take
such action if over a 2-year period a DBE firm exhibits such a pattern.
Appendix D to Part 26--Mentor-Prot[eacute]g[eacute] Program Guidelines
(A) The purpose of this program element is to further the
development of DBEs, including but not limited to assisting them to move
into non-traditional areas of work and/or compete in the marketplace
outside the DBE program, via the provision of training and assistance
from other firms. To operate a mentor-prot[eacute]g[eacute] program, a
recipient must obtain the approval of the concerned operating
administration.
(B)(1) Any mentor-prot[eacute]g[eacute] relationship shall be based
on a written development plan, approved by the recipient, which clearly
sets forth the objectives of the parties and their respective roles, the
duration of the arrangement and the services and resources to be
provided by the mentor to the prot[eacute]g[eacute]. The formal mentor-
prot[eacute]g[eacute] agreement may set a fee schedule to cover the
direct and indirect cost for such services rendered by the mentor for
specific training and assistance to the prot[eacute]g[eacute] through
the life of the agreement. Services provided by the mentor may be
reimbursable under the FTA, FHWA, and FAA programs.
(2) To be eligible for reimbursement, the mentor's services provided
and associated costs must be directly attributable and properly
allowable to specific individual contracts. The recipient may establish
a line item for the mentor to quote the portion of the fee schedule
expected to be provided during the life of the contract. The amount
claimed shall be verified by the recipient and paid on an incremental
basis representing the time the prot[eacute]g[eacute] is working on the
contract. The total individual contract figures accumulated over the
life of the agreement shall not exceed the amount stipulated in the
original mentor/prot[eacute]g[eacute] agreement.
(C) DBEs involved in a mentor-prot[eacute]g[eacute] agreement must
be independent business entities which meet the requirements for
certification as defined in subpart D of this part. A
prot[eacute]g[eacute] firm must be certified before it begins
participation in a mentor-prot[eacute]g[eacute] arrangement. If the
recipient chooses to recognize mentor/prot[eacute]g[eacute] agreements,
it should establish formal general program guidelines. These guidelines
must be submitted to the operating administration for approval prior to
the recipient executing an individual contractor/ subcontractor mentor-
prot[eacute]g[eacute] agreement.
Appendix E to Part 26--Individual Determinations of Social and Economic
Disadvantage
The following guidance is adapted, with minor modifications, from
SBA regulations concerning social and economic disadvantage
determinations (see 13 CFR 124.103(c) and 124.104).
Social Disadvantage
I. Socially disadvantaged individuals are those who have been
subjected to racial or ethnic prejudice or cultural bias within American
society because of their identities as members of groups and without
regard to their individual qualities. Social disadvantage must stem from
circumstances beyond their control. Evidence of individual social
disadvantage must include the following elements:
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(A) At least one objective distinguishing feature that has
contributed to social disadvantage, such as race, ethnic origin, gender,
disability, long-term residence in an environment isolated from the
mainstream of American society, or other similar causes not common to
individuals who are not socially disadvantaged;
(B) Personal experiences of substantial and chronic social
disadvantage in American society, not in other countries; and
(C) Negative impact on entry into or advancement in the business
world because of the disadvantage. Recipients will consider any relevant
evidence in assessing this element. In every case, however, recipients
will consider education, employment and business history, where
applicable, to see if the totality of circumstances shows disadvantage
in entering into or advancing in the business world.
(1) Education. Recipients will consider such factors as denial of
equal access to institutions of higher education and vocational
training, exclusion from social and professional association with
students or teachers, denial of educational honors rightfully earned,
and social patterns or pressures which discouraged the individual from
pursuing a professional or business education.
(2) Employment. Recipients will consider such factors as unequal
treatment in hiring, promotions and other aspects of professional
advancement, pay and fringe benefits, and other terms and conditions of
employment; retaliatory or discriminatory behavior by an employer or
labor union; and social patterns or pressures which have channeled the
individual into non-professional or non-business fields.
(3) Business history. The recipient will consider such factors as
unequal access to credit or capital, acquisition of credit or capital
under commercially unfavorable circumstances, unequal treatment in
opportunities for government contracts or other work, unequal treatment
by potential customers and business associates, and exclusion from
business or professional organizations.
II. With respect to paragraph I.(A) of this appendix, the Department
notes that people with disabilities have disproportionately low incomes
and high rates of unemployment. Many physical and attitudinal barriers
remain to their full participation in education, employment, and
business opportunities available to the general public. The Americans
with Disabilities Act (ADA) was passed in recognition of the
discrimination faced by people with disabilities. It is plausible that
many individuals with disabilities--especially persons with severe
disabilities (e.g., significant mobility, vision, or hearing
impairments)--may be socially and economically disadvantaged.
III. Under the laws concerning social and economic disadvantage,
people with disabilities are not a group presumed to be disadvantaged.
Nevertheless, recipients should look carefully at individual showings of
disadvantage by individuals with disabilities, making a case-by-case
judgment about whether such an individual meets the criteria of this
appendix. As public entities subject to Title II of the ADA, recipients
must also ensure their DBE programs are accessible to individuals with
disabilities. For example, physical barriers or the lack of application
and information materials in accessible formats cannot be permitted to
thwart the access of potential applicants to the certification process
or other services made available to DBEs and applicants.
Economic Disadvantage
(A) General. Economically disadvantaged individuals are socially
disadvantaged individuals whose ability to compete in the free
enterprise system has been impaired due to diminished capital and credit
opportunities as compared to others in the same or similar line of
business who are not socially disadvantaged.
(B) Submission of narrative and financial information.
(1) Each individual claiming economic disadvantage must describe the
conditions which are the basis for the claim in a narrative statement,
and must submit personal financial information.
(2) [Reserved]
(C) Factors to be considered. In considering diminished capital and
credit opportunities, recipients will examine factors relating to the
personal financial condition of any individual claiming disadvantaged
status, including personal income for the past two years (including
bonuses and the value of company stock given in lieu of cash), personal
net worth, and the fair market value of all assets, whether encumbered
or not. Recipients will also consider the financial condition of the
applicant compared to the financial profiles of small businesses in the
same primary industry classification, or, if not available, in similar
lines of business, which are not owned and controlled by socially and
economically disadvantaged individuals in evaluating the individual's
access to credit and capital. The financial profiles that recipients
will compare include total assets, net sales, pre-tax profit, sales/
working capital ratio, and net worth.
(D) Transfers within two years.
(1) Except as set forth in paragraph (D)(2) of this appendix,
recipients will attribute to an individual claiming disadvantaged status
any assets which that individual has transferred to an immediate family
member, or to
[[Page 328]]
a trust, a beneficiary of which is an immediate family member, for less
than fair market value, within two years prior to a concern's
application for participation in the DBE program, unless the individual
claiming disadvantaged status can demonstrate that the transfer is to or
on behalf of an immediate family member for that individual's education,
medical expenses, or some other form of essential support.
(2) Recipients will not attribute to an individual claiming
disadvantaged status any assets transferred by that individual to an
immediate family member that are consistent with the customary
recognition of special occasions, such as birthdays, graduations,
anniversaries, and retirements.
(3) In determining an individual's access to capital and credit,
recipients may consider any assets that the individual transferred
within such two-year period described by paragraph (D)(1) of this
appendix that are not considered in evaluating the individual's assets
and net worth (e.g., transfers to charities).
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35559, June 16, 2003]
[[Page 329]]
Appendix F to Part 26--Uniform Certification Application Form
[GRAPHICS OMITTED]
[[Pages 330-342]]
[68 FR 35559, June 16, 2003]
[[Page 343]]
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