News

DOT Issues DBE Rule Changes

The U.S. Department of Transportation (DOT) issued a number of changes to the Disadvantaged Business Enterprise (DBE) regulations that will impact contractors working on FHWA, FAA and FTA funded contracts. AGC participated in a number of meetings with DOT and stakeholder groups over the past several years in an attempt to bring about changes in the DBE program administration and its enforcement. Most of AGC’s concerns and recommendations were not reflected in the regulatory changes. DOT used this rulemaking as an opportunity to tighten down on how states are implementing DBE requirements. The significant changes are as follows: Counting Purchases from Prime Contractors- DOT left unchanged its current regulations that allow prime contractors to count towards meeting their DBE contract goal material purchased by a DBE from a non-DBE source. However, the regulation does not allow the prime to count the cost of the material if it is purchased from the prime. AGC urged the broader interpretation because in parts of some states, on asphalt paving contracts, a prime contractor may be the only material source in a given area and meeting the contract goal necessitates counting the material purchased. Termination of DBE Firms- DOT clarified in its regulations that the prime contractor can terminate a DBE contract only for good cause – not simply for the convenience of the prime – and with the written consent of the state DOT (or other owner). The regulation spells out what constitutes “good cause” including failure of the DBE to comply with contract terms. AGC urged that the prime contractor should have sole discretion for terminating a contract with a DBE subcontractor that is not performing its contact in an acceptable manner, is having financial difficulties that threaten contract completion or are found to not be performing what DOT would define as a commercially useful function. Personal Net Worth- DOT increased the personal net worth cap for the DBE owner to still remain eligible for the program from $750,000 to $1.31 million. The original cap was established in 1989 and has not been raised since. The new cap is intended to reflect inflation. Interstate Certification- DOT has amended its regulation to make it easier for DBEs certified in one state to have their certification adopted by other states. DBEs have complained about the burdensome nature of the certification process and the additional burdens encountered when attempting to work in more than one state. AGC supported making certification less burdensome so that the pool of available DBEs is increased. States are not required to comply with these certification amendments until January 1, 2012. Accountability on Goal Achievement- DOT amended the regulations to require that should a state fail to achieve its annual goal that it must justify the failure and devise a strategy for correcting the failure in the future. Program Oversight- DOT amended the regulations to require states to more closely monitor contract goal implementation. The new requirements require states to closely examine actual DBE participation on jobs by increasing their scrutiny of paperwork submissioins and by site visits.DOT suggests that states combine vists at job sites to monitor work progress and adherence to specifications to include DBE compliance reviews. Small Business Provisions- DOT altered the regulations to make programs that foster small business participation in state DOT contracts an integral part of the state’s DBE program. DOT states that increased involvement by small businesses in general will lead to increased DBE participation. Examples of small business programs include: setting aside contracts for exclusive bidding by small businesses, requiring the prime contractor on contracts that do not have DBE goal requirements to offer subcontracting opportunities in packages of a size that would encourage small business participation and ensuring that a reasonable number of contracts going out for bid are of a size that would favor small businesses. Joint Checks- AGC had requested clarification of DOTs policy regarding the use of joint checks. In the rulemaking, DOT responded that it thinks its joint check guidance is sufficient and does not need to be codified by actually appearing in the regulation. Future Rulemaking- DOT indicated that it plans on issuing additional regulatory changes to address additional implementation issues.