2014 DBE PROGRAM REVISIONS

January 12, 2015Martha Kenley

National DBE Program ManagerDenesha James

Attorney Advisor Federal Highway Administration

martha.kenley@dot.gov denesha.james@dot.gov

Effective Date

• Effective November 3, 2014• Includes use of new forms: • DBE Certification Application; PNW Form;

Uniform Report; MAP-21 Data• The forms can be found on the DOCR

website:https://www.civilrights.dot.gov/disadvantaged-business-enterprise/dbe-guidance

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• Increased from $22.41 million to $23.98 million

• Averaged over 3 year period (last 3 years)

• Gross receipts of firm and affiliates• Size cap for individual firms may be

lower depending on Small Business Size Standard tied to NAICS Code

Size Standard

PNW Form

• Applicants and certifiers must use standard DOT PNW Form without modification

• Each individual whose ownership and control are relied upon for DBE certification must complete the form

• Not required for spouse who is not active in the business or other non-disadvantaged owners

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• List fair market value of all properties and identify source of market valuation

• Equity is fair market value minus amount due on mortgage and any equity line of credit

• Certifying entity will calculate PNW of applicant based upon information provided

PNW Form

• Note asset transfers 2 years prior to date of PNW form

• No “one-size-fits-all” • May ask some applicants for back up

documentation if necessary to serve a useful purpose that addresses a specific question

• Exercise judgment and restraint

PNW Review

• Applicants and certifiers must use standard application form without modification

• Some items removed; some added• Checklist revised, changing some

documents from mandatory to optional

Uniform Certification Application

• Added space for dates of site visits conducted by other States.

• Added space for applicant to describe its primary activities, the products and services it provides and the NAICS codes it thinks are most applicable.

Uniform Certification Application

• DO NOT accept applicant-suggested NAICS codes without verifying applicability or that it is the NAICS Code that most narrowly describes the firm’s proposed activity on federally assisted projects. Appeal rights for NAICS Codes denied

Uniform Certification Application

• Control section asks for information concerning the tasks most commonly performed and how often these tasks are performed to determine the amount of time owners and others devote to specific areas of a firm’s operations

• Tool to assist in onsite review

Uniform Certification Application

• Federal –not State—tax returns• No “one size fits all”• You may request clarification of

information contained in application• Notarized or signed under penalty of

perjury• Request and collect only information

necessary

Uniform Certification Application

• Separate forms for general DBE reports and project reports (only difference is instructions)

• Collects information on minority women-owned DBEs

• Collects information on actual payments to DBEs on ongoing contracts as a response to GAO criticism that actual payments were not matched to commitments in given year

• First report on new form due June 1, 2015

Uniform Report

• Each State DOT must report the number of DBEs (not ACDBES) in their directory controlled by:– White women– Minority or other males– Minority Women

• Convert to percentages• Report firms’ location: either home state

or out of state

MAP-21 Data

• More than 1 owner in category, choose owner “with largest stake” in firm who is also involved in controlling the firm

• State DOT, on behalf of UCP, submits in a letter format to DBE@dot.gov

• Due January 1, 2015, and every year thereafter

MAP-21 Data

• Adds: “To promote DBEs in all types of Federally-assisted contracts and procurement activities conducted by recipients”

Objectives 26.1

• “Spouse” now includes domestic partnership or civil union recognized under State law

• “Social and economically disadvantaged individual:” adds: “who has been subjected to racial or ethnic prejudice or cultural bias within American society because of his or her identity as a member of groups …The social disadvantage must stem from circumstances beyond the individual’s control.”

Definitions

• Removes all references to lapsed SBA Memorandum of Understanding in definitions and Certification Application

• “Native Americans” are presumed disadvantaged if they are enrolled in a federally or State recognized Indian tribe. If not, must show individual disadvantage

• “Immediate family member:” adds sister-in-law; brother-in-law, and domestic partner and civil unions recognized under State law (removal of grandchildren inadvertent)

Definitions 26.5

• The minimum records related to certification that must be kept indefinitely to facilitate interstate certification are– the complete application package for each certified

firm:– the affidavits of no-change submitted by those firms– the notices of change submitted by those firms– on-site reviews

• All other records are to be kept for at least 3 years or for the time period set forth in the grant agreement (whichever is longer)

Record Retention 26.11

• Failure by contractor to carry out these requirements is a material breach. . . which may result in the termination of this contract or other remedy as the recipient deems appropriate, including, but not limited to:– Withholding progress payments– Assessing sanctions– Liquidated damages– Disqualification from future biddings

Assurances 26.13

• FHWA direct primary recipients must have an approved DBE program plan

• FHWA subrecipients are expected to operate under the primary recipient’s FHWA-approved DBE program plan

DBE Program Plan 26.21

• Methodology– Bidder’s List O.K. if includes 3 years of data

of primes and subcontractors, both successful and unsuccessful—if not, must be supplemented with other data sources

– Prequalification and plan holder’s lists must be supplemented with other data sources

Overall Goals 26.45

• Project goals (not contract goals) require recipient to follow same procedures as overall goal (no change)

• In evaluating adequacy of methodology, FHWA will be guided by Departmental guidance (i.e., Tips on Goal Setting)

• FHWA may adjust your overall goal or require the State DOT do so

Overall Goal

• Step 2 Adjustment should not be made if:– Base figure and median past participation

are close– Adjustment perpetuates past

discriminationMust explain why the adjustment is appropriate

Overall Goal

• Advertising or posting for comment is optional. If State chooses to do so, time period is decreased from 45 to 30 days; public comment period will not extend Aug. 1 deadline

• Must post proposed goal on website• Must consult (face-to-face, video conference)

with minority, women and general contractor groups, and other relevant stakeholders before submitting to FHWA for review

Overall Goal

• DBE primes• DBE participation on non-goal contracts• DBE participation beyond goal• Only change is that you cannot count as

race neutral DBE participation on contracts with goals those DBEs that prime says it used-- not because of goal-- but because it has strict low-bid policy

Race-Neutral Participation 26.51

• Bidders must submit names and addresses of DBE firms that will participate

• Description of work to be performed and NAICs Code found on Directory

• Bidder’s commitment to use DBEs listed• Confirmation from DBEs• Documentation of Good Faith Efforts if

goal is not met

Good Faith Efforts 26.53

• May provide as matter of responsiveness with bid

• As a matter of responsibility within 7 days after bid opening (5 days beginning Jan. 1, 2017)

• Negotiated procurement, including design-build, is excluded

• Must use committed DBEs unless receive State’s written consent to remove or replace

• If terminate or replace without consent, prime not entitled to payment for work performed

Good Faith Efforts 26.53(b) and 26.53(f)

• When DBE terminated or replaced –with permission– or fails to perform work, State must require prime to make good faith efforts to find another DBE to perform at least the same amount of work needed to meet the contract goal (not new)

• If State requests documentation, prime must submit within 7 days (may extend additional 7 days) and recipient shall provide written determination of sufficiency of GFE

Good Faith Efforts Procedures 26.53 (g)

• Prime contract must include a clause (see 26.13(b)) that failure by prime to carry out this part is a material breach, that may result in termination or other remedies as recipient deems appropriate

• Prime contractor awarded the contract must make DBE subcontracts available upon request

Good Faith Efforts 26.53(h) and 26.53(j)

• DBE may get credit for value of trucking services performed by non-DBE firm that leases trucks with drivers—not to exceed value of trucking performed by DBE firm (1:1)

• DBE may get 100% credit if leases trucks without drivers from non-DBE truck leasing company

Counting DBE Trucking 26.55 (d)

• Count credit for regular dealers on a contract-by-contract basis

• Not a change. There is no certification for “regular dealers.” They are usually assigned a wholesaler NAICS Code.

• Must ensure that DBE is performing in a regular dealer capacity to receive credit for 60% of the cost of supplies.

• Not “middle-man” or “transaction facilitator”

Regular Dealers 26.55 (e)

• Certifiers may rebut someone’s claim of economic disadvantage—despite the fact that liabilities bring PNW below $1.32 M— if a reasonable person would consider the owner to be a wealthy individual

• “Ability to accumulate substantial wealth”• Specific factors that certifier may consider• Used as tool for egregious circumstances• Proceeding that follows 26.87 is required and

certifying entity has burden of proof

Certification Social and Economic Disadvantage 26.67 (b) (1)

• May rebut individual’s claim to be socially disadvantaged through proceeding under procedures of 26.87 in which certifying entity has burden of proof

• If rebutted, applicant may make individual showing of disadvantage under Appendix E

Certification 26.67(b)(2)

• Transfers within 2 years• Must count as part of a disadvantaged

individual’s PNW any assets transferred to an immediate family member or to applicant firm for less than fair market value within 2 years of the date of application or annual affidavit

• Unless transfer is for education, medical expenses, recognition of special events

Certification 26.67 (c)

• Emphasizes contribution of capital must be real, substantial, and continuing

• Disadvantaged owners should be entitled to profits and losses proportional to their ownership interest and “any terms or practices that give a non-disadvantaged individual or firm a priority or superior right to a firm’s profits are grounds for denial”

Ownership 26.69

There is rebuttable presumption of control by non-disadvantaged person when:• A firm was formerly owned and controlled

by a non-disadvantaged individual whether or not an immediate family member; and

• Ownership is transferred to disadvantaged individual; and

• Non-disadvantaged individual remains in firm

Control 26.71 (l)

To rebut this presumption, disadvantaged individual must demonstrate by clear and convincing evidence that:• The transfer was made for reasons other

than obtaining DBE certification• The disadvantaged individual actually

controls the firm

Control 25.71 (l) (cont.)

• Onsite reviews are mandatory to principal place of business and jobsites if active

• Must interview principal officers and resumes/work histories

• Interviews with key personnel are discretionary

Certification Procedures 26.83

Specifies what documents to review when analyzing legal structure. Must review:• Documents of legal structure• Lease and loan agreements• Bank signature cards• Payroll records• Work history, contracts received,

completed

Certification Procedures 26.83

• Must request or compile list of equipment• Must request and review relevant

professional licenses • Must review resumes of disadvantaged

owners• Must review Federal income tax returns

for last 3 years (business and personal for disadvantaged owners)

Certification Procedures 26.83

• Removes any reference to “recertification” after 3 years or at any other time

• Certifying entity may not require DBEs to reapply for certification or undergo a recertification process

• State should conduct periodic on-site reviews (include in DBE Program Plan)

• If onsite is due to an investigation, may perform unannounced

Certification 26.83

• Grounds for initiating decertification procedures:• Decision to certify was clearly erroneous

(changed from “factually erroneous”)• Failure to cooperate (Annual Affidavit;

Notification of Material Change)• Exhibited pattern of conduct to subvert

intent or requirements of program

Removal of Eligibility 26.87

• DBE must provide every year in an affidavit form

• Form must merely affirm that there have been no changes in the firm that would affect eligibility

• Only may request Federal tax returns—not new PNW

• Additional requests on case-by-case basis if reasonable

Annual Affidavit 26.83(j)

• Should not include changes to DBE- separate obligation within 30 days of change 26.83(i)

• Failure to provide affidavit can be reason to initiate decertification procedures under 26.87

• Only if fails to respond to reasonable request, not if merely untimely

• Removal proceedings should not continue if DBE provides information

Annual Affidavit 26.83(j)(cont.)

• State can immediately suspend a DBE’s certification without hearing • Disadvantaged owner dies or is in jail• There is adequate evidence of material

change• DBE fails to notify of material change or

fails to timely file an affidavit of no change• Is directed by Operating Administration

(FHWA) (FTA) or (FAA)

Summary Suspension 26.88

• After initiating suspension, the State must immediately notify the DBE by certified mail to last know address

• Suspension occurs when DBE receives or is deemed to have received notice

• State must then expedite 26.87 hearing to determine eligibility

• While suspended, DBE will not be eligible to meet goals on new contracts, but can continue to receive credit on contracts executed before suspension

Summary Suspension 26.88 (cont.)

• When DBE receives notice it may:• Withdraw• Provide information to recipient why it

remains eligible• Recipient must lift the suspension or

begin decertification proceedings within 30 days of receiving information from suspended DBE

Summary Suspension 26.88 (cont.)

• DBE denied certification or whose certification removed may appeal• Must send letter to DOCR within 90 days of

date of final decision• Letter must include specific reasons for

appeal and/or facts recipient did not consider

DBE Appeals 26.89

• DOCR does not make de novo review• DOCR makes decision based solely on

administrative record as supplemented by appeal

• DOCR may also supplement the record by adding relevant information made available to it

• Time it takes for appeal decision does not affect waiting period for DBE to reapply

DBE Appeals 26.89 (cont.)

• Recipient’s determination of good faith efforts is judgment call based upon objective standards and after careful consideration of totality of efforts;

• Should not use quantitative formulas

Appendix A—Good Faith Efforts

Contractors’ Efforts:• Solicit through all reasonable means DBEs

with capability to do work• May include attending pre-bid meetings

and matchmaking events• Posting notices; sending emails• Solicit as early as possible• Unbundling• Establishing flexible timeframes

Appendix A—Good Faith Efforts

• Negotiating in good faith; specifying work considered for DBEs; explaining why agreements could not be reached

• Not rejecting a DBE quote because it was not the lowest received as long as the quote was not unreasonable

Also, a prime contractor may not reject a replacement DBE merely because it’s unable to find a DBE at the original price

Appendix A—Good Faith Efforts

Recipient’s Obligations in Reviewing and Evaluating Good Faith Efforts• Must review performance of other bidders• Must require contractor to submit copies

of each DBE and non-DBE subcontractor quote where a non-DBE was selected over a DBE due to price

• Reach out to DBEs listed to confirm they were actually contacted by prime

Appendix A—Good Faith Efforts

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Questions