NOTE: New Q&A has been added to address how recipients administer their DBE programs in the context of increases in the American Recovery and Reinvestment Act. 26.45, 26.47, 26.51, 26.53 Updated February 19, 2009

The General Counsel of the Department of Transportation has reviewed these questions and answers and approved them as consistent with the language and intent of 49 CFR Part 26. These questions and answers therefore represent the institutional position of the Department of Transportation.

These questions and answers provide guidance and information for compliance with the provisions under 49 CFR part 26, pertaining to the implementation of the Department's disadvantaged business enterprise program. Like all guidance material, these questions and answers are not, in themselves, legally binding or mandatory, and do not constitute regulations. They are issued to provide an acceptable means, but not the only means, of compliance with Part 26. While these questions and answers are not mandatory, they are derived from extensive DOT, recipient, and contractor experience and input concerning the determination of compliance with Part 26.

Download the Questions and Answers in Word Format.

• Section 26

• HOW DO I CONTACT DOT FOR ADDITIONAL INFORMATION ON THIS RULE? (Posted - 4/12/99 - Edited 12/7/01)
  

  The Civil Rights Offices and individuals listed below are responsible for their respective Office or Operating Administration's (OA) Disadvantaged Business Enterprise (DBE) program.

  ·    For general information about the DBE regulations/rule: Office of the General Counsel, 202-366-9310 (Bob Ashby)

  ·    For information on DBE certification appeals: Departmental Office of Civil Rights, 202-366-5992 (Joe Austin).

  ·  For information on programs to assist small and disadvantaged business: Office of Small and Disadvantaged Business Utilization, (OSDBU), (800) 532-1169 ext. 61930 or 202-366-1930 (Jerry Franco or Art Jackson)

  ·  For information on the DBE program in specific operating administrations:

  ·    Federal Highway Administration (FHWA) Office of Civil Rights - 720-963-3243 (Bernetta L. Collins) or Office of Chief Counsel 202-366-0740 (JoAnne Robinson)

  ·   Federal Transit Administration (FTA) Office of Civil Rights 202-366-0808 (Nick Coates) or 202-493-0318 (Anita Heard); or Office of Chief Counsel, 202-366-4011 (Scheryl Portee)

  ·   Federal Aviation Administration (FAA) Office of Civil Rights - 202-267-3259 (Michael Freilich) or Office of Chief Counsel 202-267-7713 ext. 3199 (Elizabeth Newman).

  ·   You may also contact the FTA, FAA, or FHWA field office that serves your area.

  If you want to report an allegation of fraud, waste, abuse, or mismanagement Contact the Office of Inspector General (OIG) Hot Line 1-800-424- 9071 (toll free) or 202-366-1461 (toll).

  Section 26.3
  
  IF ANOTHER FEDERAL AGENCY ADMINISTERS A FEDERAL-AID CONTRACT OR UNDERTAKES A FEDERAL-AID PROJECT AT THE REQUEST OF A RECIPIENT, IS THE OTHER FEDERAL AGENCY SUBJECT TO THE REQUIREMENTS OF TITLE 49 CFR PART 26? (Posted - 9/1/05)

  ANSWER:

  • No. The USDOT DBE program requirements apply to the activities of non-Federal recipients of DOT financial assistance specified in 49 C.F.R. § 26.3. The purpose of the USDOT DBE program is to ensure that Federal funds distributed to state, local, and regional authorities are not used to engage in discriminatory conduct or to perpetuate the past effects of discrimination by denying contracting opportunities to small disadvantaged businesses.
  • Similarly, it is the policy of the Federal government to ensure that small disadvantaged businesses have the maximum practicable opportunity to participate in the performance of contracts let by Federal agencies. Establishing and implementing a DBE program consistent with the requirements of Title 49 part 26 is a condition the Federal government places on the receipt of Federal funds by non-Federal authorities. It is not a condition that Congress intended to impose on Federal agencies through Federal assistance programs created to support state, local, and regional authorities. Federal agency conduct in this regard is governed by different statutory and regulatory requirements.
  • Most Federal agencies have programs analogous to the DBE program aimed at ensuring equal opportunity for minority and women owned businesses to participate in Federal contracting. If another Federal agency is authorized to administer a Federal-aid contract or project on behalf or at the request of a recipient of USDOT financial assistance, the other Federal agency and the recipient should agree on how the other Federal agency will contribute to the recipient’s achievement of its annual overall DBE goal. The other Federal agency must be willing to report to the recipient its DBE achievements on DOT assisted contracts for inclusion in the reports made by the recipient to the appropriate operating administration.
  • The Federal Acquisition Regulations would govern the procurement activities undertaken by the other Federal agency.

  Section 26.5

  ARE SERVICE-CONNECTED DISABLED VETERAN BUSINESSES ELIGIBLE TO PARTICIPATE IN THE DBE PROGRAM? (Posted - 9/1/05)

  ANSWER:

  • Executive order 13360 requires Federal agencies to set goals for and otherwise give special consideration to service-connected disabled veteran businesses in direct Federal contracting. This Executive Order concerns only direct Federal procurement by Federal agencies themselves.
  • The Department’s DBE program concerns only contracts let by state and local agencies in which DOT financial assistance participates. The Executive Order
    does not have the effect of creating a presumption that service-connected disabled veterans are socially and economically disadvantaged for purposes of the DBE program or establishing a goal for the use of firms owned by such veterans in state and local contracts receiving DOT financial assistance.
  • The Department of Transportation encourages service-connected disabled veterans, as well as other individuals with disabilities, to apply for participation in the DBE program.
  • A service connected disabled veteran who is a member of one of the groups presumed in the DBE program to be socially and economically disadvantaged can apply for DBE certification.
  • Individuals with disabilities, including service-connected disabled veterans, can also apply for DBE certification on an individual basis, even if they are not members of groups presumed to be socially and economically disadvantaged for purposes of DBE program.
  • Appendix E to Part 26 explains how an individual who is not a member of one of the groups presumed to be disadvantaged can show that he is disadvantaged on an individual basis. The discussion in this Appendix specifically provides that individuals with disabilities are among those who can use this approach to enter the DBE program.
    
• Section 26 (b)

• QUESTIONS AND ANSWERS CONCERNING RESPONSE TO WESTERN STATES PAVING COMPANY V. WASHINGTON STATE DEPARTMENT OF TRANSPORTATION
  
  
  • These questions and answers apply only to recipients of Federal financial assistance from the Federal Highway Administration (FHWA), Federal Transit Administration (FTA), and Federal Aviation Administration (FAA) located in the states comprising the 9th Federal Judicial Circuit. These states are California, Oregon, Washington, Alaska, Arizona, Idaho, Montana, Nevada, and Hawaii.
  • These questions and answers do not apply to recipients in other states.

  These questions and answers apply only to the disadvantaged business enterprise programs (DBE) of recipients of Federal financial assistance governed by 49 CFR Part 26.

• WHAT DID THE COURT SAY IN WESTERN STATES? (Posted - 1/12/06)
  
  
  Like other Federal courts that have reviewed the Department of Transportation’s DBE program, the 9th Circuit panel held that 49 CFR Part 26 and the authorizing statute for the DBE program in TEA-21 were constitutional. The court affirmed that Congress had determined that there was a compelling need for the DBE program and the Part 26 was narrowly tailored.

  The court agreed that Washington State did not need to establish a compelling need for its DBE program, independent of the determinations that Congress made on a national basis.

  However, the court said that race conscious elements of a national program, to be narrowly tailored as applied, must be limited to those parts of the country where its race-based measures are demonstrably needed.

  Whether race-based measures are needed depends on the presence or absence of discrimination or its effects in a state’s transportation contracting industry. In addition, even when discrimination is present in a state, a program is narrowly tailored only if its application is limited to those specific groups that have actually suffered discrimination or its effects.

  The court concluded that Washington State DOT’s DBE program was not narrowly tailored because the evidence of discrimination supporting its application was inadequate. The court mentioned several ways in which the state’s evidence was insufficient:

  Washington State DOT had not conducted statistical studies to establish the existence of discrimination in the highway contracting industry that were completed or valid.

  • Washington State DOT’s calculation of the capacity of DBEs to do work was flawed because it failed to take into account the effects of past race-conscious programs on current DBE participation.
  • The disparity between DBE participation on contracts with and without affirmative action components did not provide any evidence of discrimination.
  • A small disparity between the proportion of DBE firms in the state and the percentage of funds awarded to DBEs in race-neutral contracts (2.7% in the case of Washington State DOT) was entitled to little weight as evidence of discrimination, because it did not account for other factors that may affect the relative capacity of DBEs to undertake contracting work.
  • This small statistical disparity is not enough, standing alone, to demonstrate the existence of discrimination. To demonstrate discrimination, a larger disparity would be needed.
  • Washington State DOT did not present any anecdotal evidence of discrimination.
  • The affidavits required by 49 CFR 26.67(a), in which DBEs certify that they are socially and economically disadvantaged, are not evidence of the presence of discrimination.
  • Consequently, the court found that the Washington State DOT DBE program was unconstitutional as applied.

  The court cited the 8th Circuit’s decision in Sherbrooke Turf v. Minnesota Department of Transportation. In that case, the court said, Minnesota and Nebraska had hired outside consulting firms to conduct statistical analyses of the availability and capacity of DBEs in their local markets, which the 8th Circuit had relied on in holding that the two states’ DBE programs were constitutional as applied.

• WHAT ACTION SHOULD RECIPIENTS TAKE WITH RESPECT TO SUBMITTING THEIR OVERALL GOALS FOR FY 2006? (Posted - 1/12/06)
  
  
  • Recipients should examine the evidence they have on hand of discrimination and its effects. Does this evidence appear to address successfully the problems the 9 th Circuit’s decision articulated concerning the Washington State DOT DBE program?
  • If the recipient currently has sufficient evidence of discrimination or its effects, the recipient should go ahead and submit race- and gender-conscious goals where appropriate, as provided in Part 26. (This submission would include the normal race conscious/race-neutral “split” in overall goals.)
  • If the evidence of discrimination and its effects pertains to some, but not all, of the groups that Part 26 presumes to be socially and economically disadvantaged, then these race- and gender-conscious goals should apply only to the group or groups for which the evidence is adequate.
  • If necessary, the Department may entertain program waivers of Part 26’s prohibition of group-specific goals in this situation.
  • If the recipient does not currently have sufficient evidence of discrimination or its effects, then the recipient would submit an all-race neutral overall goal for FY 2006. The recipient’s submission would include a statement concerning the absence of adequate evidence of discrimination and its effects.
  • A race-neutral submission of this kind should include a description of plans to conduct a study or other appropriate evidence-gathering process to determine the existence of discrimination or its effects in the recipient’s market. An action plan describing the study and time lines for its completion should also be included.
  • The Department’s operating administrations are willing, in response to recipients’ requests, to extend the time for submitting FY2006 goals for a time sufficient to allow recipients to evaluate the adequacy of their current evidence of discrimination or its effects.
  • Operating administrations will review recipients’ annual goal submissions to determine whether recipients have provided evidence of discrimination or its effects.

• SHOULD RECIPIENTS WHO WILL BE SUBMITTING ALL RACE-NEUTRAL OVERALL GOALS FOR FY2006 BECAUSE THEY DO NOT HAVE SUFFICIENT EVIDENCE OF DISCRIMINATION OR ITS EFFECTS MAKE ANY CHANGES TO CONTRACTS ISSUED DURING FY2005 OR EARLIER? (Posted - 1/12/06)
  
  
  • No. Even where FY 2005 contracts used race-conscious contract goals, we do not believe it is appropriate to attempt to revise or reform those contracts.

• IF RECIPIENTS WILL BE OPERATING AN ALL-RACE NEUTRAL DBE PROGRAM IN FY2006 OR SUBSEQUENT YEARS, WHAT SHOULD SUCH A PROGRAM INCLUDE? (Posted - 1/12/06)
  
  
  • With few exceptions, generally there is no difference in how the DBE program regulations apply to a race- and gender-neutral program (hereafter race-neutral) as compared to a race- and gender-conscious program (hereafter race-conscious).
  • In a wholly race- neutral program (e.g., the annual overall DBE goal has been approved with no portion of it projected to be attained by using race- and gender-conscious means) the recipient does not set contract goals on any of its US DOT-assisted contracts for which DBE subcontracting possibilities exist. Recipients having an all race-neutral program are not required to establish contract goals to meet any portion of their overall goal.
  • Recipients should take affirmative steps to use as many of the race-neutral means of achieving DBE participation identified at 49 CFR 26.51(b) as possible to meet the overall goal and to demonstrate that you are administering your program in good faith. The Department expects that recipients using all race-neutral programs will use methods such as unbundling of contracts, technical assistance, capital and bonding assistance, business development programs, etc., rather than waiting passively for DBEs to participate.
  • The good faith efforts requirements in 49 CFR 26.53 that apply when DBE contract goals are set have no required application to recipients implementing a race-neutral program. However, recipients must continue to collect the data required to be reported in the Uniform Report of DBE Awards or Commitments and Payments Form (see §26.11) and to monitor compliance with the commercially useful function requirements.
  • The prompt payment and retainage requirements of 49 CFR 26.29 are race-neutral mechanisms designed to benefit all subcontractors, DBEs and non-DBEs alike. Recipients using all race-neutral programs must continue to implement them.
  • The requirement that DBEs must perform a commercially useful function to receive credit toward the overall goal applies to race neutral programs just as it does to programs that use race-conscious means to meet program objectives.
  • It is helpful for recipients to maintain an effective monitoring and enforcement program to track DBE participation obtained through race neutral means that the recipient claims credit (see 49 CFR 26.37 (b)).

• WHAT MUST RECIPIENTS DO THAT HAVE ALREADY SUBMITTED THEIR FY2006 GOALS TO MODAL ADMINISTRATIONS FOR APPROVAL? (Posted - 1/12/06)
  
  
  • If the appropriate modal administration determines that the FY 2006 DBE goal submission does not contain the kind of information or documentation suggested by this guidance that would comport with the law established by the Ninth Circuit Court of Appeals, the recipient will be directed to revise and resubmit its DBE goal submission consistent with this guidance.

• WILL THE PROCESS USED BY THE MODAL ADMINISTRATIONS TO REVIEW AND APPROVE GOAL SUBMISSIONS MADE BY RECIPIENTS IN THE NINTH CIRCUIT CHANGE? (Posted - 1/12/06)
  
  
  • For FHWA recipients in the 9 th Circuit, FY 2006 DBE goal submissions will require concurrence by the FHWA Office of Civil Rights and the Office of Chief Counsel in Washington, D.C. before approval by the appropriate FHWA division office.
  • FTA’s process will remain the same.
  • For FAA recipients in the 9 th Circuit, FY 2006 DBE goal submissions with a race-conscious component will require concurrence by the FAA Headquarters Office of Civil Rights and a legal sufficiency review by the Office of Chief Counsel in Washington, D.C. before being approved by the appropriate FAA Regional Office of Civil Rights and Office of Chief Counsel. Those with an all race-neutral overall goal will be approved by the Regional Office of Civil Rights.

• IF A RECIPIENT LACKS SUFFICIENT EVIDENCE OF DISCRIMATION OR ITS EFFECTS, WHAT SHOULD IT DO TO REMEDY THE LACK OF INFORMATION? (Posted - 1/12/06)
  
  
  • A recipient in this situation should immediately begin to conduct a rigorous and valid study to determine whether there is evidence of discrimination or its effects
  • The Department expects recipients who submit an all-race neutral goal for FY 2006 because they lack sufficient evidence of discrimination to ensure that this evidence-gathering effort is completed expeditiously.
  • Studies to determine the presence of discrimination or its effects are often referred to as “disparity” or “availability” studies, though there can also be rigorous and scientifically valid studies which may have different names. Whatever label is applied to a study, however, the key point is that it be designed to determine, in a fair and valid way, whether evidence of the kind the 9 th Circuit decision determined was essential to a DBE program including race-conscious elements exists.

• WHAT SHOULD RECIPIENTS' STUDIES INCLUDE? (Posted - 1/12/06)
  
  
  Based on the 9 th Circuit decision, recipients should consider the following points as they design their studies:

  • The study should ascertain the evidence for discrimination and its effects separately for each of the groups presumed by Part 26 to be disadvantaged.
  • The study should include an assessment of any anecdotal and complaint evidence of discrimination.
  • Recipients may consider the kinds of evidence that are used in “Step 2” of the Part 26 goal-setting process, such as evidence of barriers in obtaining bonding and financing, disparities in business formation and earnings.
  • With respect to statistical evidence, the study should rigorously determine the effects of factors other than discrimination that may account for statistical disparities between DBE availability and participation. This is likely to require a multivariate/regression analysis.
  • The study should quantify the magnitude of any differences between DBE availability and participation, or DBE participation in race-neutral and race-conscious contracts. Recipients should exercise caution in drawing conclusions about the presence of discrimination and its effects based on small differences.
  • In calculating availability of DBEs, the study should not rely on numbers that may have been inflated by race-conscious programs that may not have been narrowly tailored.
  • Recipients should consider, as they plan their studies, evidence-gathering efforts that Federal courts have approved in the past. These include the studies by Minnesota and Nebraska cited in Sherbrooke Turf, Inc. v. Minnesota Department of Transportation, 345 F.3d 964 (8 th Cir. 2003), cert. denied 124 S. Ct. 2158 (2004) and the Illinois evidence cited in Northern Contracting, Inc. v.State of Illinois, et al. 2005 WL 2230195, N.D.Ill., September 08, 2005 (No. 00 C 4515)

• CAN THERE BE STATEWIDE OR REGIONAL STUDIES, AS OPPOSED TO A SEPERATE STUDY FOR EACH INDIVIDUAL RECEIPIENT? (Posted - 1/12/06)
  
  
  • If feasible, studies may be undertaken on a regional or statewide basis to reduce the costs that would be involved if each recipient conducted its own separate study.
  • We would expect that each State DOT would conduct a statewide study. Such a study should be conducted in cooperation with transit and airport recipients in the state, so that the study would apply to recipients in all three modes.
  • Larger transit and/or airport recipients may want to conduct their own study, since the demographics of large urban areas may differ from that of the state as a whole.

• WILL FEDERAL FUNDS HELP TO DEFRAY THE COSTS OF RECIPIENTS' STUDIES? (Posted - 1/12/06)
  
  
  • Yes. FHWA, FTA, and FAA have all stated that the costs of conducting disparity studies are reimbursable from Federal program funds, subject to the availability of those funds.
  • Recipients should contact their operating administration for more detailed information.

• CAN A RECIPIENT ASK FOR A PROGRAM WAIVER IN CONJUNCTION WITH ITS REVISED DBE PROGRAM? (Posted - 2/23/99)
  
  

  Yes. If, in revising its DBE program, a recipient decides it wants to pursue an alternative to a requirement of Subparts B or C, then it must apply for a waiver. Subparts B and C concern such subjects as goals, good faith efforts, and program administration.
  
  The waiver request would apply to the features of the program that differed from Subpart B or C requirements.
  
  For example, suppose a mass transit recipient submitted a program that conformed to Subpart B and C for the most part, but proposed to use price credits rather than contract goals as a race-conscious measure. With respect to this issue the recipient would have to meet the procedural requirements of 26.15(b).
  
  In this example, FTA would review the recipient's program in the normal way, except that the portion requiring the waiver request would be forwarded to the Secretary for decision.
  
  In case the program as a whole has been approved, but a decision has not been made on the accompanying waiver request, the recipient would comply with all provisions of Subparts B and C pending the Secetary's decision on the waiver.
  

• ARE RECIPIENTS REQUIRED TO COLLECT ALL BIDDERS' LIST INFORMATION AT THE TIME OF BID? (Posted - 2/17/00)
  
  

  No. The regulation permits recipients to collect bidders' list information in a variety of ways and at various times.
  
  For example, it may be less burdensome on bidders if the recipient permits them to provide the names and addresses of firms a reasonable time after bids are due. The information provided at such a time may also be in a more easily usable form to the recipient.
  
  Not all bidders' list information need necessarily be collected through the bid process. For example, a recipient could conduct a survey of a sample of firms that have bid or quoted on its projects to determine the age and annual gross receipts of the firms on the bidders' list.
  

• CAN SUBRECIPIENTS HAVE THEIR OWN DBE PROGRAMS AND OVERAL GOALS? IF SO, WHO REVIEWS THEM? (Posted - 6/18/08)
  

  * In another Question and Answer, “Must a primary recipient’s DBE program and goals apply to contracts let by subrecipients?” the Department describes how subrecipients could administer contract goals on their contracts under the umbrella of their primary recipient’s DBE program and overall goals.

  *  That Q&A notes that subrecipients are not required to have their own, independent DBE programs and overall goals.  However, a subrecipient may -- only if permitted by the DOT operating administration providing its financial assistance and subject to the approval of the concerned primary recipient -- have its own, independent DBE program and overall goal.  Generally, this is an option that would make sense only for larger subrecipients who are receiving considerable amounts of DOT financial assistance.

  * Following coordination with the primary recipient, the subrecipient would submit its DBE program and overall goals to the appropriate DOT operating administration for review and approval, in the same way that primary recipients submit their program and goals for DOT review and approval.  A written agreement between the primary recipient and subrecipient is desirable. 

  * Subrecipients that have their own DBE programs must participate in their state’s unified certification program (UCP).

  * The amount of DOT financial assistance provided to a subrecipient with its own DBE program via the primary recipient is deleted from the base from which the primary recipient calculates its goals, and the subrecipient’s DBE participation is not counted toward the primary recipient’s DBE participation.

  * If a subrecipient has its own independent DBE program and overall goals, the subrecipient would submit DBE participation reports to both the primary recipient and the DOT operating administration involved, the frequency and content of which would be determined through the subrecipient’s consultation with the primary recipient and DOT operating administration. 

• Section 26.21(c)

• CAN A NEW RECIPIENT BE ELIGIBLE TO RECEIVE FEDERAL FINANCIAL ASSISTANCE IF IT DOES NOT HAVE AN APPROVED DBE PROGRAM? (Posted - 4/12/99 - Edited 12/7/01)
  
  

  Section 26.21(c) provides that "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."
  
  If you are a new recipient (e.g., a transit grantee beginning service for the first time, who has never had an approved DBE program), you must have an approved DBE program before you are eligible to begin receiving Federal financial assistance. This was also true under the old DBE rule.
  
  For example, if you are a new transit grantee, hoping to begin receiving FTA funds in the next fiscal year, you must have an FTA-approved DBE program conforming to part 26 before receiving those funds.
  

• WHAT IMPACT DO STATE ANTI-AFFIRMATIVE ACTION LAWS HAVE ON THE DOT DBE PROGRAM? (Posted - 4/12/99)
  
  
  None. State laws regarding affirmative action do not pre-empt the Federal DBE statues and regulations.
  
  Some states have laws that prohibit the use of race-conscious affirmative action measures on state or locally funded contracts led by public agencies in the state (e.g., California Proposition 209; Washington Initiative 200). Such states must still implement the DOT DBE Program, as a condition of recieving DOT financial assistance.
  State anti-affirmative action laws of this kind typically have provisions that authorize state or local public agencies to comply with Federal affirmative action requirements that are a condition of Federal financial assistance. Consequently, compliance with part 26 does not create any confllict with such state laws.
• Section 26.29(a)

• AT WHAT TIME DOES THE RULE REQUIRE PRIME CONTRACTORS TO RETURN RETAINAGE TO SUBCONTRACTORS? (Posted - 9/20/99)
  
  
  Many recipients hold back a certain percentage of the payment they owe the prime contractor ("retainage") until all the work of the prime contractor has been satisfactorily completed.
  
  In turn, prime contractors (and middle-tier subcontractors) oten withhold a certain precentage of the payment they owe to subcontractors. In many cases, prime contractors' traditional practice has been to hold these funds until the recipient has made final payment to the prime contractor, even though the subcontractor's work may have been satisfactorily completed months or years earlier. The prompt payment provision of the DBE rule is intended to change this practice.
  
  The DBE rule requires recipients to mandate and enforce prompt payment of subcontractors, including the payment of retainage from the prime contractor to the subcontractor, as soon as subcontractor's work has been satisfactorily completed (i.e., all the tasks called for in the subcontract have been accomplished and documented as required by the recipient). The prompt payment provision is intended to apply to subcontractors at all tiers.
  
  For example, suppose ther is a prime contract that will take three years to complete. Subcontractor X satisfactorily completes its work at the end of year one. The prime contractor must pay the retainage it has held to Subcontractor X at the end of year one. The prime contractor cannot wait until the end of year three, when the prime contract has been completed and the recipient has paid its retainage tot he prime contractor, to make this payment to Subcontractor X.
  
  Recipient's DBE programs must include contractual provisons that unambiguously require contractors to make retainage payments to their subcontractors as soon as the subcontractor's work has been satisfactorily completed. This is a race-neutral feature that applies to all subcontractors, not just DBEs. The Department will not approve a DBE program that lacks this feature.
  
  The Department is fully aware that this requirement will cause recipients and many contractors to make changes in the traditional way they have done business. We believe that this change is necessary to remove a significant barrier to DBE participation in DOT-assisted contracts.
• Section 26.29; 26.37(a)

• IN IMPLEMENTING THE REQUIRED PROMPT PAYMENT CLAUSE, MAY RECIPIENTS REQUIRE PRIME CONTRACTORS TO PROVIDE EVIDENCE OF PAYMENT OF RETAINAGE TO SUBCONTRACTORS? (Posted - 4/12/99)
  
  
  Yes. The rule's prompt payment clause requirement specifically applies to retainage (i.e., a portion of the payment owed by the prime contractor to a subcontractor that is held pending completion of the subcontractor's work).
  
  In ensuring compliance with the prompt payment provision, recipients may require prime contractors to provide information concerning payments to subcontractors, including retainage.
• Section 26.29(a), 26.37(a)

• MUST A RECIPIENT ENFORCE THE PROMPT PAYMENT CLAUSE REQUIRED BY THE RULE? (Posted - 2/17/00)
  
  
  Yes. Under 26.29(a), recipients are required to include a prompt payment clause in DOT-assisted contracts. This clause must require prime contractors to pay subcontractors and return any retainage within a certain number of days of satisfactory completion of the subcontractors' work. This provision is a race-neutral requirement applying to DBE and non-DBE subcontractors alike.
  
  As 26.37(a) provides, recipients must implement appropriate mechanisms to ensure compliance with Part 26 requirements - including prompt payment - by all program participants. To do so, recipients must use legal and contract remedies available under Federal, state, and local law.
  
  26.29(a) (1) and (2) mention certain mechanisms a recipient may use to implement the prompt payment requirement (i.e., penalties, a requirement for the recipient's written consent for delays). The rule authorizes, but does not require, recipients to use these particular methods.
  
  However, the fact that these two cited methods are not mandatory does not mean that enforcement of the prompt payment clause itself is optional. Under 26.29 and 26.37, recipients must use some effective means or other to ensure compliance with prompt payment requirements. If the recipient does not choose to use the two methods mentioned in 26.29(a) (1) and (2), then it must use other effective methods.
  
• Section 26.29, 26.37

• ARE THERE WAYS THAT RECIPIENTS CAN FACILITATE PROMPT PAYMENT OF RETAINAGE TO DBEs AND OTHER SUBCONTRACTORS WHILE LIMITING BURDENS ON PRIME CONTRACTORS? (Posted - 2/17/00 - Edited 12/7/01)
  
  
  The Department's rule requires prime contractors to release retainage to subcontractors when the subcontractor's work on the contract has been satisfactorily completed. This requirement is intended to mitigate a problem that makes it difficult for DBEs and other subcontractors to remain competitive.
  
  Prime contractors have expressed the concern about what they view as burdens that this requirement creates for them.
  
  There are a number of ways that recipients could ease potential burdens on prime contractors while continuing to implement the protections that Part 26 provides for subcontractors. The Department strongly urges recipients to consider the steps mentioned below.
  
  Not every recipient has a retainage requirement. Given present-day bonding requirements for prime contractors, retainage requirements may not be essential to give recipients leverage to ensure that prime contractors complete a contract. Recipients could consider dropping their retainage requirement altogether.
  
  Frequently, recipients calculate retainage by the lesser of a percentage of total contract price or a fixed dollar amount (e.g., 5 percent or $100,000). Recipients could reevaluate these factors with an eye to lowering the thresholds.
  
  Recipients could review experience with retainage under different types of contracts and contract values and eliminate retainage for types of contracts or contract values where experience reflects a lower risk of non-performance.
  
  Recipients could approve/accept work at intervals throughout the life of a contract, rather than waiting until the end of the entire project to do so.
  
  Recipients could pay retainage to prime contractors on a pro-rated basis throughout the life of the contract, as portions of the work were completed, rather than waiting until the end of the entire project to pay the entire retainage amount.
  

• DOES THE DEPARTMENT OF TRANSPORTATION ENCOURAGE RECIPIENTS TO ESTABLISH MENTOR-PROTÉGÉ PROGRAMS? (Posted - 2/17/00 - Edited 12/7/01)
  
  
  Yes. A well-run mentor-protégé program can be an important asset to a recipient's efforts to ensure equal opportunities for DBEs.
  
  Besides providing important experience and training to emerging companies, such a program may be an additional source of race-neutral DBE participation to the recipient.
  
  For the first time in the history of the Department's DBE regulations, Part 26 explicitly authorizes recipients to establish mentor-protégé programs as a part of their DBE programs.
  
  Under this authority, recipients may cooperate with private-sector mentor-protégé plans that are consistent with the safeguards against fronts and frauds established in Part 26.
• Section 26.3

• IF ANOTHER FEDERAL AGENCY ADMINISTERS A FEDERAL-AID CONTRACT OR UNDERTAKES A FEDERAL-AID PROJECT AT THE REQUEST OF A RECIPIENT, IS THE OTHER FEDERAL AGENCY SUBJECT TO THE REQUIREMENTS OF TITLE 49 CFR PART 26?
  
  
  No. The USDOT DBE program requirements apply to the activities of non-Federal recipients of DOT financial assistance specified in 49 C.F.R. § 26.3. The purpose of the USDOT DBE program is to ensure that Federal funds distributed to state, local, and regional authorities are not used to engage in discriminatory conduct or to perpetuate the past effects of discrimination by denying contracting opportunities to small disadvantaged businesses.

  Similarly, it is the policy of the Federal government to ensure that small disadvantaged businesses have the maximum practicable opportunity to participate in the performance of contracts let by Federal agencies. Establishing and implementing a DBE program consistent with the requirements of Title 49 part 26 is a condition the Federal government places on the receipt of Federal funds by non-Federal authorities. It is not a condition that Congress intended to impose on Federal agencies through Federal assistance programs created to support state, local, and regional authorities. Federal agency conduct in this regard is governed by different statutory and regulatory requirements.

  Most Federal agencies have programs analogous to the DBE program aimed at ensuring equal opportunity for minority and women owned businesses to participate in Federal contracting. If another Federal agency is authorized to administer a Federal-aid contract or project on behalf or at the request of a recipient of USDOT financial assistance, the other Federal agency and the recipient should agree on how the other Federal agency will contribute to the recipient’s achievement of its annual overall DBE goal. The other Federal agency must be willing to report to the recipient its DBE achievements on DOT assisted contracts for inclusion in the reports made by the recipient to the appropriate operating administration.

  The Federal Acquisition Regulations would govern the procurement activities undertaken by the other Federal agency.

• Section 26.37(b), 26.55(g)

• SHOULD RECIPIENTS KEEP TRACK OF DBE "COMMITMENTS," "ACHIEVEMENTS," OR BOTH? (Posted - 2/17/00)
  
  
  Both. Section 26.37(b) requires recipients to have a mechanism to verify that the work committed to DBEs at contract award is actually performed by the DBEs. Obviously, recipients need to track both commitments and actual achievements in order to perform this task.
  
  Final information on actual achievements will often not be available in the same year in which contracts are let. Recipients will often have to rely on commitments information in order to administer their programs (e.g., make needed adjustments with respect to the use of race-neutral and race-conscious measures).
  
  On the other hand, keeping track of actual achievements is crucial to evaluating the operation of recipients' programs. As 26.55(g) provides, actual achievements are not counted toward goals until DBEs receive payment for their work. If the actual achievements of particular contractors, or a recipient's program in general, falls short of commitments, this is an indication that corrective action should be taken to improve program performance.
• Section 26.43

• DOES THE RULE'S LIMITATION ON THE USE OF SET-ASIDES APPLY TO RACE-NEUTRAL SMALL BUSINESS SET-ASIDES? (Posted - 2/23/99)
  
  
  The DBE rule defines a set-aside as "a contracting practice restricting eligibility for the competitive award of a contract solely to DBE firms." (26.5)
  
  The rule limits set-asides, defined in this way, to "limited and extreme circumstances, when no other method could be reasonably expected to remedy egregious instances of discrimination." (26.43(b))
  
  A race-neutral small business set-aside (i.e., in which a recipient sets aside certain contracts for competition only among small businesses, regardless of race or gender) does not restrict contract eligibility solely to DBEs.
  
  For this reason, the rule's limit on DBE set-asides does not apply to a race-neutral small business set-aside.
  
  If it will help achieve the objective of the DBE program, a recipient may use a small business set-aside as one of its race-neutral measures.
  
• Section 26.45(c)(1)

• HOW DOES A RECIPIENT OBTAIN CENSUS BUREAU DATA TO USE IN CALCULATING ITS OVERALL GOAL? (Posted - 4/12/99 - Edited 12/7/01)
  
  
  The regulation's first example of how a recipient can do Step 1 of the overall goal process involves using data from the Census Bureau's County Business Pattern (CBP) database.
  
  The Department intends to create a web site that will provide ready access to this information. We hope this site will be up and running in plenty of time to be of use to recipients as they prepare to submit their FY 2000 overall goal.
  
  Meanwhile, you can obtain this data from the Census Bureau web site. All of the data is available, however their web site does not have the features we intend to provide to make it easier to search, compile and retrieve the particular data you need.
  
  To access the data, go to http://www.census.gov
  
  There are at least 2 areas of the site that have relevant CBP data.
  
  You can access them by going to the "Subjects A to Z" listing and:
  
  1) Click on "C": then, under "County", click on "County Business Patterns", or paste the following URL into your web browser:
  
  http://www.census.gov/epcd/cbp/view/cbpview.html
  
  2) Click on "B"; then, under "Business", click on "Statistics of United States Businesses (Tabulations by Size and Metropolitan Area)", or paste the following URL into your web browser:
  
  http://www.census.gov/csd/susb/susb.htm
  
  Both pages offer ways to select particular data (i.e. state or county) and different compilations of useful CBP data, some of which can be downloaded for easy use in spreadsheet format.
  

• Section 26.45(g)

• WHAT STEPS ARE RECIPIENTS EXPECTED TO TAKE TO SATISFY THE CONSULTATION COMPONENT OF THE PUBLIC PARTICIPATION REQUIRED FOR GOAL SETTING? (Posted - 6/18/08)
  
  • The goal setting process used by recipients to establish their annual overall goal submitted to the operating administrations for approval must include “consultation with minority, women’s and general contractor groups, community organizations, and other officials or organizations” which could be expected to have information concerning the availability of DBEs and non-DBEs.  This consultation process is also intended to gather information concerning the effects of discrimination on opportunities for DBEs, if present,- and establishing a level playing field for the participation of DBEs.
  • By definition, the process of consultation involves a scheduled face-to-face conference or meeting of some kind with individuals or groups of interested persons for the purpose of developing and/or assessing a proposed goal and methodology and seeking information or advice before a decision is made.  Publication of the proposed goal to the general public is not synonymous with, or a substitute for, consultation with interested or affected groups. 
  • Recipients should identify groups within their contracting market that are likely to have information relevant to the goal setting process or that have a stake in the outcome of the process.  Those groups should be contacted and invited to participate in a face-to-face exchange (which may occur at a public meeting) aimed at obtaining the kind of information set out in the regulation regarding establishing the overall DBE goal.  Efforts should be made to engage in a dialogue with as many interested stakeholders as possible.  An advisory committee may be one method of consultation (but not the exclusive method, since this could lead to a recipient talking only to the same people all the time).  A description of the consultation process and its purpose should be provided to all invitees.
  • Consultation is expected to occur before the proposed goal is established and prior to publication of the proposed overall goal for inspection and comment by the general public.
  • The consultation process must be documented in the recipient’s annual goal submission.

• Section 26.3(a), 26.55

• WHAT TYPES OF CONTRACTS CAN BE COUNTED TOWARD DBE GOALS? (Posted - 4/12/99)
  
  
  DBE participation can be counted toward goals for any contract let by the recipient in which Federal funds listed in 26.3(a) participate.
  
  If a recipient lets a contract to any type of contractor, and Federal funds listed in 26.3 participate in that contract, then the DBE's participation would count toward the recipient's DBE goals.
  
  Part 26 does not limit the type of contractors who can participate in the DBE program or the types of contracts appropriate for DBE participation. All DOT-assisted contracts, whether construction or non-construction (e.g., professional services, consulting, supplies) can be used for DBE participation.
  
  Recipients should be aware that there may be some types of contracts that are not eligible for the Federal assistance specified in 26.3 (e.g., contracts supporting transit operations for some FTA recipients). Participation by DBEs in such contracts does not count toward goals in the DBE program. Recipients should contact the concerned operating administration for further information about DBE participation in a particular contract or type of contract.
• section 26.45(f)(4); 26.51(c), (e)(3)

• AS A RECIPIENT, DO YOU HAVE TO WAIT FOR DOT APPROVAL OF YOUR OVERALL GOAL BEFORE STARTING TO USE IT IN THE NEXT FISCAL YEAR? (Posted - 2/17/00 - Edited 12/7/01)
  
  
  No. Prior concurrence of a DOT operating administration with your overall goal for the next fiscal year is not required.
  
  However, if we determine that there are problems with the goal (e.g., it was not calculated properly, the method used to calculate it was inadequate), we will work with you to fix the problems and, if necessary, adjust the goal.
  
  Note that your projections of your expected use of race-conscious and race-neutral measures to meet goals are subject to our approval (26.51(c)).
  
  DOT operating administrations may review and approve or disapprove your contract goals, even if review of your overall goal is not complete.
  
  For example, suppose you submit your overall goal for the next fiscal year to FHWA on August 1. FHWA identifies concerns about the overall goal itself or your projection of participation to be obtained by race-neutral and race-conscious means, respectively. You and FHWA are continuing to discuss the goal as the new fiscal year begins. If you are letting a contract during October, after the new fiscal year has begun, you could use the submitted overall goal as a reference point for setting a contract goal, but FHWA retains the discretion to review and approve or disapprove your contract goal.
• Section 26.45(f2); 26.53(e)

• CAN A RECIPIENT OR RECIPIENTS SET A PROJECT OVERALL GOAL (e.g., FOR A LARGE, MULTI-YEAR PROJECT)? HOW DOES SUCH A PROJECT GOAL RELATE TO ANNUAL OVERALL GOALS? CAN SUCH A PROJECT GOAL CUT ACROSS MODAL LINES?(Posted - 2/12/02)
  
  
  A recipient of DOT funds - whether from FAA, FTA, or FHWA - may set a project overall goal for a particular project. Typically, such a goal would be used for a large multi-year project.
  
  The recipient's overall project goal for the project would be separate from the recipient's annual overall goal for the rest of its DOT-assisted contracting activities.
  
  The recipient's submission of the overall project goal would have to meet the same requirements as for any other overall goal (see 26.45(f)(3)), specifically including breakout of the participation anticipated through race-neutral and race-conscious means. DOT would review the goal submission just as it does in other cases.
  
  With respect to its other DOT-assisted contracting activities, the recipient would also submit its regular annual overall goal for review. In so doing, the recipient, in calculating the annual overall goal for a given fiscal year, would not consider funds or contracting opportunities attributable to the project covered by the separate project goal.
  
  For example, suppose a recipient will expend $150 million on Project X in Years 1-3. The recipient will also expend $40 million on other projects in each year during the same period. The recipient could submit a single project overall goal for Project X, based on the $150 million to be expended over the life of the project. The recipient would also submit an overall goal each year for its other DOT-assisted contracting activities in Year 1, Year 2, and Year 3, based on the $40 million the recipient was expending in each of those years.
  
  A project overall goal can be used for a multi-modal project. For example, suppose FHWA Recipient W and FTA Recipient Z are cooperating on a project, which involves the expenditure of $500 million between them. Recipients W and Z can jointly submit a single overall project goal for the project. W and Z would also each submit regular annual overall goals for their other activities during the time that the project was under way.
  
  Many large projects on which it could be useful to establish a project overall goal may be design-build projects. The overall project goal, in such a case, would serve as the goal for the master contractor. The master contractor would then establish contract goals on the contracts it is letting at a level appropriate to meet the race-conscious portion of the project overall goal.
  
  Currently Part 26 explicitly authorizes the use of project goals in FAA and FTA projects. While nothing in the rule precludes the use of project goals in FHWA projects, the rule does not explicitly mention FHWA projects in this context. However, it is the Department's view that recipients of funds from all three operating administrations can make use of project goals.
  
• 26.45, 26.47, 26.51, 26.53

• HOW SHOULD RECIPIENTS ADMINISTER THEIR DBE PROGRAMS IN THE CONTEXT OF POTENTIALLY LARGE INCREASES IN FUNDING THAT MAY BECOME AVAILABLE AS THE RESULT OF THE PROPOSED ECONOMIC RECOVERY PACKAGE? (Posted - 1/26/09)
  
  
  * The Department anticipates that the DBE program and regulations will apply to Federally-assisted contracts receiving funds from the proposed recovery package. All of a recipient’s funds – whether derived from SAFETEA-LU or the recovery package – should be viewed as part of a single, combined funding base to which DBE goals apply.

  * Given the flexibility built into the DBE regulations, recipients can successfully administer their DBE programs under these rules in the context of funding increases provided by the recovery legislation. Particularly because a major purpose of the proposed legislation is to increase opportunities for businesses and workers in a challenging economic climate, the Department expects recipients to do so.

  * The Department is aware of concerns expressed by recipients that there may not be sufficient availability of certified DBEs to meet existing overall goals, as applied to recipients’ expanded programs.

  * To help address such concerns, recipients should begin, as soon as possible, outreach to affected persons. This outreach should include dialogue with representatives of the contracting industry and the DBE community to begin to understand recipient-specific issues. This outreach will allow recipients and DOT operating administrations to be better prepared to react to Congressional direction in new legislation.

  * Recipients should make use of race-neutral measures, such as small business programs, owner-provided insurance, technical and financial assistance, and unbundling of contracts to increase the ability and capacity of DBEs and other small businesses to perform contracts receiving recovery package funding. The Department of Transportation’s Office of Small and Disadvantaged Business Utilization also operates a short-term lending program, which can help to increase DBE capacity.

  * Recipients should take steps to mobilize underutilized DBE capacity:

  • Recipients should reach out to firms that may potentially be eligible for DBE certification, but are not yet part of the program, urging them to apply.
  • Recipients should expedite the processing of applications for certification.
  • In many cases, there are substantial numbers of certified firms that are seldom used on contracts. This can be an additional source of DBE capacity. Recipients should make vigorous efforts to work with such firms and prime contractors to take advantage of this resource.
  • Recipients and prime contractors should be as inclusive as possible in utilizing all available DBE firms, not ruling certified firms out based on preconceptions about their competence to do a particular job.

  * Recipients should use existing regulatory tools to address concerns about capacity:

  • Recipients can take the projected availability of DBEs for any particular contract into consideration in determining the contract goal for that contract. This is consistent with the existing regulation (see 49 CFR 26.51(e)(2)).
  • If a bidder on a prime contract cannot find sufficient certified DBE participation to meet a contract goal (e.g., because all DBE capacity for the types of work involved is absorbed by other projects), the bidder can meet DBE requirements by documenting its good faith efforts to find DBE participation. This is also consistent with the existing regulation (see 49 CFR 26.53(a)(2)).
  • The Department believes that modifications to overall goals will be needed rarely, if at all, to deal with administration of recovery package funds. It is important to remember that recipients are not penalized for failing to “hit the number” with respect to overall goals, as long as they are operating their programs in good faith (see 49 CFR 26.47). However, if a recipient believes it necessary to adjust an overall goal, it could propose such an adjustment to the relevant DOT operating administration. The requirements of 49 CFR 26.45 would apply to such an adjustment.

  * Recipients should communicate regularly with DOT agencies concerning operating their DBE programs in context of recovery package funding. If a recipient believes that is has problems or issues that are not addressed by the DOT regulations or program guidance, the recipient should contact the relevant operating administration to discuss the matter.
• Section 26.5

• ARE SERVICE-CONNECTED DISABLED VETERAN BUSINESSES ELIGIBLE TO PARTICIPATE IN THE DBE PROGRAM? (Posted - 9/1/05)
  
  
  Executive order 13360 requires Federal agencies to set goals for and otherwise give special consideration to service-connected disabled veteran businesses in direct Federal contracting. This Executive Order concerns only direct Federal procurement by Federal agencies themselves.
  
  The Department’s DBE program concerns only contracts let by state and local agencies in which DOT financial assistance participates. The Executive Order does not have the effect of creating a presumption that service-connected disabled veterans are socially and economically disadvantaged for purposes of the DBE program or establishing a goal for the use of firms owned by such veterans in state and local contracts receiving DOT financial assistance.
  
  The Department of Transportation encourages service-connected disabled veterans, as well as other individuals with disabilities, to apply for participation in the DBE program.
  
  A service connected disabled veteran who is a member of one of the groups presumed in the DBE program to be socially and economically disadvantaged can apply for DBE certification.
  
  Individuals with disabilities, including service-connected disabled veterans, can also apply for DBE certification on an individual basis, even if they are not members of groups presumed to be socially and economically disadvantaged for purposes of DBE program.
  
  Appendix E to Part 26 explains how an individual who is not a member of one of the groups presumed to be disadvantaged can show that he is disadvantaged on an individual basis. The discussion in this Appendix specifically provides that individuals with disabilities are among those who can use this approach to enter the DBE program.
• Section 26.5, 26.65

• WHAT INFORMATION MAY A UCP APPROPRIATELY CONSIDER IN DETERMINING WHETHER A FIRM MEETS SMALL BUSINESS SIZE STANDARDS BASED ON GROSS RECEIPTS?
  
  
  Part 26 refers to Small Business Administration (SBA) regulations (13 CFR Part 121) for the definitions of what constitutes a small business for purposes of the DBE program.

  Many of the SBA business size standards, as well as the statutory cap on participation in the DBE program, are defined in terms of the gross receipts of businesses. If a firm’s gross receipts, averaged over three years, exceed a certain amount, the firm is ineligible to participate as a DBE.

  The basic SBA definition of “receipts, ” in 13 CFR §121.104(c), is “total income” (“gross income” in the case of a single proprietorship) of the business, “as these terms are defined or reported on Internal Revenue Service (IRS) Federal tax return forms,” such as Form 1120 for corporations.

  For this reason, the first resource to which recipients should refer in determining a firm’s receipts is the firm’s tax returns.

  The most recent SBA interpretation of §121.104 makes clear that it is appropriate to consider evidence beyond a firm’s tax returns, when the other information provides a reason to believe that the tax return information is false. “False,” in this context, is not limited to meaning fraudulent, provided with actual knowledge that it is incorrect, or provided with reckless indifference to the actual facts. If the information from the tax returns is false in the commonly understood sense of the word (i.e., incorrect, erroneous, not corresponding to reality), then it is appropriate to use other information to construct a more accurate picture of the firm’s receipts.

  DOT’s position on all certification matters is that UCPs should focus on the substance and reality of a firm’s circumstances, not merely on the form of its arrangements or what is shown on paper (cf. §26.69(c)).

  Consequently, if information available to the recipient (e.g., from a company’s books, from financial records provided by other recipients) shows that the picture of a firm’s receipts painted by a tax return does not correspond to the firm’s financial reality, or is misleading (even without any intent to deceive on the firm’s part), the recipient is entitled to consider this information in making a size determination.

  The fact that information extrinsic to the firm’s tax returns may be considered does not mean that this information necessarily has controlling significance. As in all certification matters, the UCP must take into account all the evidence and all of the firm’s circumstances, weigh the credibility of the information, and make an informed, balanced judgment concerning whether a firm meets the rule’s small business size criteria.

• Section 26.51

• WOULD THE PROVISIONS OF PLANS OR SPECIFICATIONS FOR A PROJECT AT NO CHARGE TO DBEs, WHEN OTHER FIRMS ARE CHARGED A FEE FOR THIS INFORMATION, BE CONSIDERED A RACE-NEUTRAL MEASURE? (Posted - 4/12/99)
  
  
  If plans and specifications are provided to DBEs without charge, but other firms are charged a fee for the same service, this would not be a race-neutral measure. This is because the DBE status of a firm determines whether or not the firm has to pay a fee for the information.
  
  On the other hand, if such plans and specifications are provided free to all small businesses, or a subcategory of "smaller" small businesses, or to all new businesses (e.g., that have been in operation less than three years), or to all businesses in a particular field, etc., then no distinction is being made on the basis of DBE status. Such an approach would be race-neutral.
  
  While this question concerns a measure that we view as race-conscious, there may be other measures used to facilitate increased DBE participation that we would consider to be race-neutral. For example, outreach or technical assistance measures aimed primarily at DBEs may be viewed as race-neutral.
  
• WHAT REQUIREMENTS APPLY TO RECIPIENTS' USE OF CONTRACT GOALS? (Posted - 2/17/00)
  
  
  The most important regulatory requirements for recipients to consider in making decisions about using contract goals are the following:
  
  Recipients must meet as much as possible of their overall goals through race-neutral measures (26.51(a)).
  
  Recipients must project how much of their overall goals they can meet through race-neutral and race-conscious measures, respectively. Recipients must submit this projection and the basis for it to DOT along with their overall goals (26.51(c)).
  
  Recipients "must establish contract goals to meet any portion of [their] overall goal [they] do not project being able to meet using race-neutral means" (26.51(d)).
  
  Recipients are not required to set contract goals on every DOT-assisted contract, but must set contract goals that will cumulatively result in meeting any portion of overall goals recipients do not project meeting through the use of race-neutral means (26.51(d)(2)).
  
  Decisions concerning the use of contract goals must be based on sound analysis. This analysis forms the basis for the projection of the portion of goals the recipient expects to meet through race-neutral or race-conscious means.
• Section 26.51(a) - (d)

• HOW DO RECIPIENTS PROJECT WHAT PORTION OF THEIR OVERALL GOAL THEY WILL MEET THROUGH RACE-NEUTRAL MEANS? (Posted - 2/17/00)
  
  
  It is important to keep in mind that a recipient must not only submit its projections to DOT, but also its basis for the projection. This consists of a sound analysis of the recipient's market and the race-neutral measures it employs, on the basis of which the recipient realistically can project attaining a certain amount of DBE particpation without the use of contract goals or other race-conscious measures.
  
  The analysis cannot be simply guesswork or based on a hope or policy preference. It must rest on information about the real world of contracting in the recipient's contracting area.
  
  Recipients know their own markets and the types of contracts most likely to be let. In determining the level of participation to be achieved through race-neutral means, the recipient should use its experience concerning the availability of DBEs in particular types of contracts in their market.
  
  Here are some examples of questions recipients could ask in making this analysis:
  
  What is the participation of DBEs in the recipient's contracts that do not have contract goals?
  
  There may be information about state, local, or private contracting in analogous areas where contract goals are not used (e.g, in situations where a prior state/local affirmative action program was ended). What is the extent of participation of minority or women's businesses in programs without goals?
  
  What is the extent of race neutral efforts that the recipient will have in place for the next fiscal year?
  
  Are there firm, written, detailed commitments in place from contractors to take concrete steps sufficient to generate a certain amount of DBE participation through race-neutral means?
  
  To what extent have DBE primes participated in the recipient's programs in the past?
  
  To what extent has the recipient oversubscribed its DBE goals in the past?
  
  Where there is not systematic data in existence, recipients could conduct quick, informal surveys and use the results as part of the basis for their projections.
  
  Recipients should closely monitor DBE participation relative to their projections to determine whether mid-course corrections are needed.
• Section 26.53 Appendix A

• MAY A RECIPIENT CONSIDER A BIDDER'S "TRACK RECORD" IN USING DBEs AS IT EVALUATES THE FIRM'S GOOD FAITH EFFORTS? (Posted - 2/17/00)
  
  
  The factors cited in Appendix A, section IV, concerning good faith efforts are not an exclusive list of the things a recipient may consider in determining whether a bidder has made good faith efforts on a contract.
  
  It is permissible for a recipient, in evaluating the good faith of a bidder's efforts to meet a contract goal, to look at the "track record" of the firm in using DBEs in other situations.
  
  For example, suppose that Contractor X has a long, documented history of making good, and frequent, use of DBEs not only on DOT-assisted contracts but on non-Federally-assisted contracts as well. Contractor Y does not have such a positive track record.
  
  In evaluating the efforts Contractor X has made to meet a particular contract goal, a recipient might conclude that the credibility of its efforts is improved by its history of DBE utilization.
  
  In a similar situation, the recipient might decide that the less positive history of DBE utilization by Contractor Y did not provide the same degree of credibility of its efforts to meet the goal.
• Section 26.53(g)

• HOW DO RECIPIENTS DETERMINE WHETHER A DBE PRIME CONTRACTOR HAS MET A CONTRACT GOAL? (Posted - 2/17/00)
  
  
  When a certified DBE firm bids on a contract that contains a contract goal, the DBE firm is responsible for meeting the goal or making good faith efforts to meet the goal, just like any other bidder.
  
  However, recipients count toward DBE goals the value of work actually performed by DBEs (see 26.55(a)).
  
  In most cases, this means that a DBE bidder on a prime contract will meet the contract goal by virtue of the work it performs on the prime contract with its own forces.
  
  For example, suppose DBE Firm X is the apparent low bidder on a prime contract with a 10 percent contract goal. Firm X will perform 30 percent of the work on the contract with its own forces (the minimum possible if a DBE is to perform a commercially useful function, see 26.55(c)(3)). This means that 30 percent of the contract amount counts toward the DBE contract goal. This exceeds the 10 percent contract goal. Therefore, Firm X meets the contract goal. (In this example, the entire 30 percent DBE participation on the contract would be counted as race-neutral participation, since Firm X obtained the contract solely on the basis of its low bid.)
  
  There could be unusual situations in which a DBE prime contractor would have to provide some additional DBE participation through subcontracting. In the example above, suppose the contract goal is 35 percent instead of 10 percent. Firm X is credited with 30 percent DBE participation on the basis of the work it does with its own forces. This leaves the firm 5 percent short of meeting the contract goal. Firm X would have to seek an additional 5 percent DBE participation through subcontracting with another DBE or document the good faith efforts it made in attempting to secure this additional participation.
  
  It is appropriate to ask any prime contractor who has met its obligations to continue to make outreach efforts to additional DBEs. However, once a DBE prime contractor has met a contract goal through the work it performs with its own forces, recipients should not require the DBE prime to obtain additional DBE participation through use of DBE subcontractors or to document good faith efforts. DBE prime contractors are required to document good faith efforts only in situations, like those in the previous paragraph, where they do not fully meet contract goals through the work they perform with their own forces.
  
  When any prime contractor who has met its contract goal obligations provides work to additional DBE subcontractors, the prime contractor is contractually obligated to meet its commitments to those firms. In this case, because the participation of the additional DBE subcontractors is over and above what is needed to meet the goal, the recipient would count it as race-neutral participation.
• Section 26.53(f)

• DO RECIPIENTS APPLY POST-AWARD GOOD FAITH EFFORTS REQUIREMENTS TO CONTRACTS ON WHICH THERE IS NO CONTRACT GOAL? (Posted - 2/12/02)
  
  
  No. The post-award good faith efforts requirements of ?26.53(f) apply only to contracts in which there is a contract goal.
  
  These requirements (1) prohibit prime contractors from terminating a DBE for convenience and then substituting the prime contractor's own forces, and (2) require the prime contractor to make good faith efforts to replace a DBE firm that could not complete its contract with another DBE firm, to the extent needed to meet the contract goal.
  
  These provisions are premised on there having been a contract goal that the prime contractor has committed itself to make good faith efforts to meet. When there is a contract goal, the provisions of ?26.53(f) are necessary to prevent a prime contractor from circumventing its good faith efforts obligation after the contract has been awarded.
  
  Where there is no contract goal (i.e., a race-neutral procurement), these provisions are not relevant.

• Section 26.55(c)(1); 26.71(b)

• HOW DOES THE USE OF JOINT CHECKS AFFECT COUNTING OF CREDIT FOR DBE PARTICIPATION AND THE ELIGIBILITY OF DBE FIRMS FOR CERTIFICATION? (Posted - 6/18/08)
  

  By a joint check, we mean a check issued by a prime contractor to a DBE subcontractor and to a material supplier or another third party for items or services to be incorporated into a project.  (This Q&A does not discuss checks issued by a recipient to two or more parties.)

  *  The text of the DBE rule does not mention the use of joint checks.  Consequently, the rule does not prohibit prime contractors and subcontractors from using joint checks.  

  * The preamble to the Department’s 1999 DBE final rule had the following to say about this subject:

  A commenter suggested that the use of two-party checks by a DBE and another firm should not automatically preclude there being a CUF. While we do not believe it is necessary to include rule text language on this point, we agree with the commenter. As long as the other party acts solely as a guarantor, and the funds do not come from the other party, we do not object to this practice where it is a commonly-recognized way of doing business. Recipients who accept this practice should monitor its use closely to avoid abuse.  (64 FR 5116, February 2, 1999)

  * The Department understands that prime contractors, subcontractors and suppliers may wish to use joint check arrangements for a variety of legitimate reasons, such as assuring that timely payment will be made for the supplier’s items or dealing with situations in which it is difficult for a subcontractor to obtain bonding at a competitive rate. Consequently, recipients and UCPs should not assume that the use of joint checks is illegitimate. 

  * However, the Department also understands that the use of joint checks can raise questions about whether it is proper to count DBE credit for the items purchased using the joint check and about whether the DBE firm’s relationship with the prime contractor compromises the independence required for certification as a DBE.   Consequently, recipients and UCPs may properly view the use of joint checks as a “red flag” calling for further scrutiny.

  * As with other parts of the relationship among prime contractors and DBEs, openness and transparency are keys to using joint checks in an appropriate way.   Historically, what has led to problems is not so much the use of joint checks in itself, but concealment or a lack of honesty concerning their use.  

  COUNTING DBE CREDIT IN JOINT CHECK SITUATIONS

  *  To receive DBE credit for performing a commercially useful function with respect to obtaining materials and supplies, a DBE must “be responsible for negotiating price, determining quality and quantity, ordering the material, and installing (where applicable) and paying for the material itself” (emphasis added; 49 CFR 26.55(c)(1)).  Only when a DBE meets all requirements of this provision should DBE credit be counted for the procurement of items by the DBE.

  * By paying for the material itself, the regulation means that the DBE’s own funds are used to pay for the material.  As the preamble passage quoted above notes, it is not appropriate for  the funds to come “from the other party” (e.g., the prime contractor).  The use of joint checks can raise the question of whether the DBE’s own funds, as distinct from those of the prime contractor, are really being used to pay for the material.

  * To answer this question, a prime contractor and DBE should provide documentation to the recipient showing that the funds used to pay a supplier in fact came from the DBE’s own funds.  Accounts receivable to the DBE from the prime contractor for the costs of items procured by the DBE from the supplier generally may be regarded as representing the DBE’s own funds. If a DBE which has received a joint check from the prime contractor documents that it has been in control of the funds provided in the check and has determined when the supplier or other third party has fulfilled its responsibilities under the contract, the recipient may conclude, absent evidence to the contrary, that the DBE is paying the third party with its own funds. The recipient should review this documentation before deciding whether to give DBE credit for the items in question.

  * As part of the recipient’s oversight of contracts on which joint checks are used, it is important to determine whether the requirements of 26.55(c)(1) other than payment from the DBE’s own funds are being met. If the other requirements of 26.55(c)(1) are not met, then it is not appropriate to award DBE credit for the use of the items in question.

  + Insistence by a prime contractor that a DBE must use a particular supplier or pay a specific price for an item is likely to be inconsistent with these requirements. 

  + If there is a significant disparity with respect to quantity or cost of items a DBE procures using a joint check arrangement, compared to the size of the contract and the expected ability of the DBE to obtain the items, the recipient should look carefully to ensure that commercially useful function requirements for counting DBE credit are being met. 

  + A DBE obtaining items for a construction contract normally should install them as well.  If the DBE obtains the items but the prime contractor or another party installs them, the DBE credit awarded may be limited to the fee or commission obtained by the DBE (see 26.55(e)(3)).  

  DBE INDEPENDENCE IN JOINT CHECK SITUATIONS

  * In answering questions about independence, recipients should determine whether or not there is a pattern of close, pervasive ties between a DBE and other firms.  If it appears that, absent its ties to a prime contractor, a DBE firm is not viable, it should not be regarded as independent.

  * Ties between DBEs and other firms that may be legitimate aspects of a business relationship, considered individually, can form part of a pattern of pervasive ties that compromises the independence of a DBE firm.  Joint checks are one of the ties between DBEs and other firms that recipients should examine in determining whether such a pattern exists. 

  SAFEGUARDS

  * The Department strongly recommends that recipients put into place a series of safeguards to prevent the use of joint checks in ways that would result in the denial of DBE credit for items obtained from suppliers or would compromise the independence of a DBE firm.

  * Recommended safeguards include the following steps by recipients:

  + Require prime contractors and DBEs wishing to use joint check arrangements to obtain prior approval from the recipient.

  + Require a written joint check agreement among the parties (including the suppliers concerned) providing full and prompt disclosure of the expected use of joint checks.  The agreement should contain all information concerning the parties’ obligations and consequences or remedies if the agreement is not fulfilled or a breach occurs.

  + Make sure there is a well-established monitoring process having oversight mechanisms such as review of invoices, cancelled checks and/or certification statements of payment.

  + Examine related financial transactions in which an alternative to the use of a joint check is used that may indicate a similar relationship between the prime contractor and a DBE subcontractor, such as the use of a cashier’s check or bank check presented to the supplier by the DBE.  In this type of situation, recipients should examine whether it was the prime contractor, and not the DBE subcontractor, that funded the transaction.

  + Caution prime contractors and DBE subcontractors to avoid exclusive relationships between one prime contractor and one DBE concerning the use of joint checks.  If a prime contractor makes joint checks available to one (e.g., a DBE) subcontractor, the service should be made available to all subcontractors (DBEs and non-DBEs).

  + Emphasize to prime contractors and DBE subcontractors that the use of joint checks should be focused on accomplishing the procurement of materials needed for a particular purpose at a particular time.  Long-term or open-ended joint checking arrangements can suggest a lack of independence for the DBE involved, and are a basis for further scrutiny by the recipient.  Recipients may establish reasonable durational limits on joint checking arrangements that are subject to periodic review and renewal to ensure that the arrangement is not operating in a way that compromises the independence of the DBE.

  + Review the relationship between the prime contractor and DBE to ensure the DBE has retained final decision-making responsibility concerning the procurement of materials and supplies, even when joint checks are involved.  That is, the relationship between the DBE and its suppliers should be established independently of and without interference by the prime contractor.  The rights of parties to a joint check arrangement to terminate the arrangement should be consistent:  for example, if the prime contractor has the right to terminate the arrangement unilaterally, so should a DBE subcontractor.

  + Ensure that joint checks issued by the prime contractor be delivered or mailed to the DBE for presentment and payment to the DBE’s suppliers.  The prime contractor should not make payment directly to the supplier.

  . 

• Section 26.55(c)(3)

• HOW DOES THE PART 26 REQUIREMENT THAT A DBE FIRM MUST DO 30 PERCENT OF THE WORK OF A CONTRACT WITH ITS OWN FORCES TO PERFORM A COMMERCIALLY USEFUL FUNCTION RELATE TO SOME RECIPIENTS' REQUIREMENTS THAT ALL FIRMS PERFORM A GREATER PERCENTAGE (e.g., 50 PERCENT) OF THE WORK ON ALL CONTRACTS? (Posted - 4/12/99)
  
  
  A requirement that all firms perform at least 50 percent of the work of a contract with their own forces is a matter of recipient procurement policy that does not conflict with the DOT DBE rules.
  
  For a recipient who has such a requirement, all contractors will necessarily perform more than 30 percent of the work of their contracts with their own forces.
  
  Consequently, all DBE firms subject to this requirement will automatically meet the 30 percent requirement for performing a commercially useful function, since they have to be performing more than that amount of work with their own forces to get a contract in the first place.
• Section 26.55(d), 26.73(a)(1)

• MAY A RECIPIENT REQUIRE THAT A DBE TRUCKING FIRM OWN MORE THAN ONE TRUCK IN ORDER TO BE REGARDED AS PERFORMING A COMMERCIALLY USEFUL FUNCTION? (Posted - 4/12/99)
  
  
  Section 26.55(d) provides that, to be regarded as performing a commercially useful function, a DBE trucking company must own at least one truck of its own (which is insured and operable).
  
  Consequently, it would be inconsistent with part 26 for a recipient to require DBE trucking companies to own two or more trucks in order to be regarded as performing a commercially useful function.
  
  This issue, like all issues involving the "commercially useful function" concept, focuses solely on counting DBE participation toward goals, and does not enter into certification decisions (see 26.73(a)(1)).
• Section 26.55(e), (g); 26.53(f)(2)

• WHAT SHOULD A RECIPIENT DO IN THE CASE OF A DBE MANUFACTURER WHO, PARTWAY THROUGH A MULTI-YEAR CONTRACT, BECOMES A BROKER? (Posted - 4/12/99)
  
  
  • Under part 26 counting rules, 100 percent of the cost of the goods provided by a DBE manufacturer counts toward DBE goals. For "brokers," only the DBE's fee or commission, and no part of the cost of the goods, count toward DBE goals.
  • Suppose that a prime contractor relied on goods from a DBE manufacturer to meet a portion of its contract goal. Halfway through the contract, the DBE ceases manufacturing the goods and begins to act as a broker who procures the goods from a non-DBE manufacturer and passes them on to the prime contractor. (For purposes of this hypothetical, we will assume that the DBE is not acting as a regular dealer.)
  • From the point where the DBE's role changed from that of a manufacturer to that of a broker, DBE credit that the recipient and prime contractor can claim is much reduced, since only its fees or commissions, rather than 100 percent of the cost of the goods, could count from that point forward.
  • This places the recipient and contractor in a position analogous to the situation where a DBE is decertified or drops out of the contract.
    • The recipient cannot count the "lost" DBE participation toward its overall goal.
    • The prime contractor would make good faith efforts to obtain DBE participation to make up for the "lost" participation from the former manufacturer, to the extent needed to continue meeting the contract goal (see 26.53(f)(2)).
• Section 26.55(e)(2)(ii)(B)

• THE COUNTING RULES SAY THAT TO BE A REGULAR DEALER, A SUPPLIER OF BULK GOODS WHO SUPPLEMENTS ITS OWN DISTRIBUTION EQUIPMENT MUST DO SO BY A LONG-TERM LEASE. HOW LONG IS LONG-TERM? (Posted - 4/12/99)
  
  
  The key point is that a lease for trucks or other distribution equipment cannot be an ad hoc deal specific to the particular contract or distribution task.
  
  The leased equipment should be used over an extended period of time to serve a variety of customers and/or contracts.
  
  There is not a specific number of months or years that the Department believes it is useful to rely on in all cases. The scrutiny that a recipient gives a lease arrangement should become stricter the shorter the period of the lease is.

• Section 26.55(f); 26.81(c)

• IF A DBE FIRM IS CERTIFIED AFTER THE EXECUTION OF A PRIME CONTRACT, ARE THERE ANY CIRCUMSTANCES IN WHICH ITS USE ON THE CONTRACT CAN BE COUNTED TOWARD DBE GOALS? (Posted - 6/18/08)
  

  * Section 26.55(f) provides that if “a firm is not currently certified as a DBE…at the time of the execution of the contract, do not count the firm’s participation toward any DBE goals…”

  * To receive DBE credit toward meeting a contract goal in the context of the prime contract award process, a DBE firm must be certified before the due date for bids or offers on the prime contract.  49 CFR 26.81(c).  

  * There may be situations after the award of the prime contract, however, in which it is appropriate to count DBE credit for the use of a DBE subcontractor certified after the prime contract is executed.  To be eligible to obtain DBE credit, a DBE subcontractor must be certified before the subcontract on which it is working is executed.

  *  EXAMPLE 1:  A year after the award and execution of the prime contract, the prime contractor hires a certified DBE subcontractor to perform work on the contract beyond the DBE participation to which the prime contractor committed as part of the contract award process.  The DBE was certified after the prime contract was executed but before this new subcontract is executed.  The DBE’s work should be counted toward the prime contractor’s overall DBE achievements and toward the race-neutral portion of the recipient’s overall goal.

  * EXAMPLE 2:  As part of the contract award process and in response to a race-conscious contract goal, a prime contractor has committed to the use of DBE Subcontractor X.  Halfway through performance of its work on the subcontract, X goes out of business.  The prime contractor hires DBE Subcontractor Y to finish the work that was originally committed to X.  DBE Y was certified after the execution of the prime contract but before the execution of Y’s subcontract.  Y’s participation should be counted toward the prime contractor’s fulfillment of its commitment to meet the contract goal and to the race-conscious portion of the recipient’s overall goal.

• Section 26.65

• HAVE SIZE STANDARDS CHANGED FOR ARCHITECTURE AND ENGINEERING FIRMS? (Posted - 2/17/00)
  
  
  Yes. On May 14, 1999, the Small Business Administration (SBA) issued a final rule raising the size standard for these firms from $2.5 million to $4.0 million. The SBA rule went into effect June 14, 1999.
  
  Since the DOT DBE program uses SBA size standards, DOT recipients must use the new standard in evaluating the eligibility of A & E firms.
• Section 26.65(a)

• HOW DO RECIPIENTS DETERMINE THE SIZE OF A FIRM THAT PERFORMS DIFFERENT TYPES OF WORK?(Posted - 2/12/02)
  
  
  In the DBE program, a firm may perform more than one type of work. For example, it may work as a general contractor on one project and a specialty subcontractor on another. For another example, a firm may perform one contract as an architect/engineer and another as an electrical subcontractor.
  
  The Department's DBE rule provides that, as a recipient, you must apply current SBA size standards "appropriate to the type(s) of work the firm seeks to perform in DOT-assisted contracts" (?26.65(a)).
  
  Suppose the size of Firm X (e.g., determined through looking at the firm's gross receipts) is $5 million, and X is seeking certification as a DBE in classification codes yyyy and zzzz. The SBA small business size standards for these classifications are $3.5 and $7 million, respectively. Firm X would be a small business that could be certified as a DBE, and that could receive DBE credit toward goals, in code zzzz but not in code yyyy.
  
  Likewise, suppose that the SBA size standard for a specialty subcontractor in a particular field is $4 million. Firm Y sometimes performs work in that field, but other times acts as a general contractor. The SBA size standard for general contractors is in excess of the Department's $17.42 million dollar statutory size cap. Firm Y's gross annual receipts are $10 million. Firm Y can be certified as a DBE and receive DBE credit toward goals in its capacity as a general contractor. It cannot be certified as a DBE, and cannot receive DBE credit toward goals, in its capacity as a specialty contractor.
  
  It is important for recipients to make these distinctions. It is not appropriate for a recipient to decline to certify a firm for all purposes when the firm meets SBA size standards with respect to some of its activities. However, recipients must be careful to award DBE credit to a firm only in those areas in which it does meet size standards.
• Section 26.65; 26.67(b);26.85(b)

• AFTER A FIRM LOSES ELIGIBILITY FOR EXCEEDING SIZE LIMITS, OR AN INDIVIDUAL'S PRESUMPTION OF SOCIAL AND ECONOMIC DISADVANTAGE IS REBUTTED FOR EXCEEDING THE PERSONAL NET WORTH CAP, CAN THE INDIVIDUAL OR BUSINESS EVER PARTICIPATE IN THE DBE PROGRAM IN THE FUTURE?(Posted - 2/12/02)
  
  
  When a firm is denied certification, the recipient must establish a waiting period of 12 months or less for reapplication. Once this waiting period has expired, the firm can reapply for certification.
  
  This provision applies regardless of the basis for the denial of certification. A denial based on business size or personal net worth grounds is no different, for this purpose, from a denial based on ownership or control grounds.
  
  For example, suppose a firm is denied certification in Year 1 because it exceeds the business size standard, or because its owner has a personal net worth that exceeds $750,000. In Year 2, after the recipient's reapplication waiting period expires, the firm applies for certification again. If the size of the business in Year 2 is under the applicable standard, or the personal net worth of the owner has fallen below $750,000, respectively, then the recipient would certify the firm, assuming it met all other certification requirements.
• Section 26.67 (a)

• DOES A RECIPIENT SIMPLY ACCEPT AN OWNER'S PNW STATEMENT? SHOULD THE RECIPIENT INVESTIGATE? (Posted - 4/12/99)
  
  
  A PNW statement is a signed representation to a DOT recipient that the information presented is true. Falsification can lead to criminal prosecution.
  
  Recipients should first review a PNW statement to determine whether the individual's PNW is more than $750,000.
  
  In addition, recipients should review each PNW statement to determine if there are any obvious mistakes, omissions, or suspicious information. Where the recipient has a reasonable basis to believe that the PNW statement is incomplete or inaccurate, the recipient may "look behind" it, by seeking further information or conducting an investigation to clear up the issues. Recipients have discretion to devise procedures to obtain needed information in these cases.
  
  The Department emphasizes that recipients are prohibited from using requests for additional information concerning PNW issues as a way of targeting, punishing, harassing, or discriminating against specific firms or classes of firms. We regard such misconduct as noncompliance with part 26 (see 26.7(b), 26.109(d)).
  
  If there is a credible allegation that an owner has falsified a PNW statement, the recipient should investigate and/or refer the matter to the Department of Transportation's Office of Inspector General.
• Section 26.67. 26.109(a)(2)

• HOW SHOULD A RECIPIENT RESPOND TO A REQUEST, UNDER A STATE FREEDOM OF INFORMATION OR OPEN RECORDS LAW, FOR CONFIDENTIAL BUSINESS INFORMATION SUBMITTED BY A DBE? (Posted - 4/12/99 - Edited 12/7/01)
  
  
  Particularly in the certification process, firms provide recipients with much financial and other information that applicants may wish to safeguard from disclosure.
  
  26.109((a)(2) directs recipients, as a general matter, to "safeguard from disclosure to unauthorized persons information that may reasonably be considered to be confidential business information, consistent with Federal, state, and local law."
  
  26.67(a)(2)(ii) provides that, with respect to personal financial information submitted in response to the personal net worth statement requirement of 26.67, part 26 specifically intends to pre-empt disclosure under state law. Recipients may not release these records to a third party (other than DOT in some circumstances) without the consent of the submitter.
  
  In summary, the effects of part 26 on disclosure of information submitted by applicants for certification and DBEs are the following:
  
  Notwithstanding any contrary provision of state law, recipients are prohibited from releasing personal financial information submitted in response to the personal net worth statement requirement of 26.67(a)(2).
  
  With respect to other information, the recipient must comply with a state freedom of information or open records law, even if it results in the disclosure of confidential business information about DBEs and applicants.
  
  It should be noted that such laws themselves often contain exceptions for certain kinds of confidential business information. Recipients should use such exceptions to the fullest extent permitted by state law to protect from disclosure confidential business information submitted by DBEs or applicants for certification.
  
  The Federal Freedom of Information Act and Privacy Act apply only with respect to records in the possession of DOT and other Federal agencies (see 26.109(a)(1)), not records in the possession of state or local government agencies who receive Federal financial assistance.
  
  If any provision of Federal law prohibits recipients from disclosing certain records in their possession, then that law would control.

• Section 26.67, 26.109(a)(2) and 23.11

• ARE RECIPIENTS AND UCP REQUIRED TO KEEP CONFIDENTIAL DOCUMENTS OR COMMUNICATIONS PRODUCED IN THE COURSE OF A CERTIFICATION PROCEEDING? (Posted - 6/18/08)
  

  * Under the DOT DBE regulation, a recipient or UCP is prohibited from disclosing to any third party, without the submitter’s written consent, a personal net worth statement or supporting documentation.  Recipients and UCPs are likewise prohibited from disclosing confidential business information, including applications for DBE certification and supporting information.  These prohibitions apply even in the face of a request under a state freedom of information or open records law. 

   * In the course of reviewing an application or otherwise considering the eligibility of a firm, the recipient or UCP and its staff may produce documents (e.g., memoranda, evaluations, records, notes, other working papers) that reproduce or refer to the information subject to the disclosure prohibitions of the DOT rule.

  * Any information found in these “work product” documents that reproduces, refers to, or cites information required to be kept confidential by DOT rules is likewise protected from disclosure.

  * In some cases, it could be possible for a recipient or UCP to carefully redact a document so that all references or citations to protected information were blacked out prior to the release of the documents.  In other cases, references to protected information may be so pervasive in the document that the entire document cannot be released.
  * Personal information, including PNW or confidential business information that is submitted to a UCP or recipient for DBE program purposes, is protected from disclosure, even if it is simultaneously submitted to the UCP or recipient for another purpose, such as certification in a local minority or women’s business program.  The information does not lose its character as protected information under the DBE rules just because it may also be used for another purpose. 

• Section 26.67(a)(1)

• WHEN SHOULD RECIPIENTS REQUIRE OWNERS OF A DBE FIRM CERTIFIED UNDER PART 23 TO SUBMIT A STATEMENT OF DISADVANTAGE? (Posted - 4/12/99)
  
  
  A "statement of disadvantage" is a signed, notarized certification by each presumptively disadvantaged owner of a firm that he or she meets part 26 standards for social and economic disadvantage.
  
  This certification of disadvantage is a separate requirement from the requirement of 26.67(a)(2) for a statement of personal net worth.
  
  When a recipient certifies or recertifies the eligibility of a DBE firm (including the review of a firm certified under part 23 to make sure it meets part 26 standards), 27.67(a)(1) requires recipients to obtain a certification of disadvantage each disadvantaged owner of the firm.
  
  
  By signing such a statement, the owner certifies that his or her net worth does not exceed $750,000.
  
  Unlike the separate personal net worth statement, part 26 does not require owners to submit any supporting documentation with the statement of disadvantage. Therefore, it would be contrary to the rule for a recipient to require DBE owners to submit a narrative supporting their certification as it applies to social disadvantage.
• Section 26.67(a)(2)

• WHEN SHOULD RECIPIENTS REQUIRE OWNERS OF DBE FIRMS CERTIFIED UNDER PART 23 TO SUBMIT A PERSONAL NET WORTH (PNW) STATEMENT? (Posted - 4/12/99)
  
  
  This guidance replaces a previous question and answer we have withdrawn. The withdrawn guidance said that recipients should obtain PNW statements from currently certified firms no later than September 1, 1999, or in the meantime when a firm was about to be awarded a contract. We withdrew the previous guidance in response to concerns from recipients and contractors that it was too burdensome to obtain this information from all currently certified firms during March - September 1999 transition period, as recipients work to implement new part 26 requirements.
  
  
  Ensuring that the owners of DBE firms certified under former part 23 are socially and economically disadvantaged individuals is very important to maintaining the integrity of a narrowly-tailored DBE program.
  
  The rule requires each disadvantaged owner of a firm applying for DBE eligibility to submit a statement of personal net worth and appropriate supporting documentation (26.67(a)(2)) as part of the certification process.
  
  When recipients review DBE firms certified under part 23 to make sure they are eligible under part 26 standards, they must require disadvantaged owners of the firms to submit the PNW statement mandated by 26.67(a)(2).
  
  Recipients are not precluded from seeking PNW statements from currently certified firms before they review the firms' eligibility under part 26 standards. However, recipients may not summarily decertify a firm or deny it eligibility to compete for contracts because the firm has not yet responded to such a request.
  
  However, a recipient could commence a 26.87 ineligibility proceeding on the grounds of a failure to cooperate (see 26.109(c)) if a firm unreasonably delayed its response to the recipient's request for PNW information.
• Section 26.67(a)(2) and (b)(1); 26.87

• WHEN A RECIPIENT DETERMINES THAT AN OWNER OF A CERTIFIED DBE FIRM EXCEEDS THE $ 750,000 PERSONAL NET WORTH CAP, WHAT HAPPENS? MUST THE FIRM BE DECERTIFIED? IF SO, MUST THE RECIPIENT USE THE PROCEDURES OF 26.87 TO DECERTIFY THE FIRM? (Posted - 4/12/99)
  
  
  The PNW cap concerns the issue of whether a particular individual owner of a DBE firm is a socially and economically disadvantaged individual.
  
  Under 26.67(b)(1), when an individual's PNW shows that his or her PNW exceeds $750,000, it is not necessary to have a proceeding under 26.87 to conclusively rebut his or her presumption of economic disadvantage. No other hearing or proceeding is called for (see 64 FR 5118, February 2, 1999).
  
  Therefore, when the owner does not dispute that his or her owner's net worth, as shown in the PNW statement, exceeds $750,000, the recipient need not hold further proceedings under 26.87 before determining that the owner is not a disadvantaged individual.
  
  However, if there is dispute about the facts of a case (e.g., the individual owner challenges the recipient's determination that his or her PNW exceeds $750,000), then a 26.87 proceeding is necessary to remove the disadvantaged status of the individual.
  
  In any case in which the recipient determines that a DBE firm's owner is not a disadvantaged individual because his or her net worth exceeds $750,000, the recipient must then determine whether the individual's loss of disadvantaged status causes the firm's ownership by disadvantaged individuals to fall below 51 percent.
  
  For example, suppose that a DBE firm is owned by presumptively disadvantaged individuals X, Y, and Z, who respectively own 40 percent, 15 percent, and 20 percent of the company.
  
  If either Y or Z exceeds the PNW cap, but the other two owners do not, the firm can still be certified, assuming that control and other requirements continue to be met, because the ownership interest of the other two disadvantaged owners combined is more than 51 percent.
  
  On the other hand, if either X or both Y and Z exceed the $750,000 cap, then the firm cannot remain certified, because ownership by disadvantaged individuals will fall below 51 percent.
  
  When the disadvantaged ownership of a DBE falls below 51 percent as the result of an owner losing his or her status as a disadvantaged individual, the recipient should decertify the firm. If the firm does not dispute that its disadvantaged ownership has fallen below 51 percent, the recipient should decertify the firm without a 26.87 proceeding. If the firm contends that its disadvantaged ownership is still at or above 51 percent, then the recipient would conduct a 26.87 proceeding.
  
  If there were disputes both as to the PNW of an owner and the percentage of ownership remaining in the hands of disadvantaged owners, these issues could be decided in the same 26.87 proceeding. Two separate proceedings would not be necessary.
• Section 26.67(b)

• IN CALCULATING PERSONAL NET WORTH, HOW SHOULD ASSETS HELD BY SPOUSES IN JOINT OR COMMUNITY PROPERTY BE COUNTED? (Posted - 2/17/00 - Edited 12/7/01)
  
  
  The Department is aware that there have been many questions about how to calculate personal net worth (PNW), of which this is one. The Department has asked for comment on potential changes to the rule on this subject. Meanwhile, we offer the following suggestions concerning marital assets.
  The basic principle in counting assets in the personal net worth calculation is to count the present value of assets attributable to the individual.
  If an asset is held as community property, or jointly (including a tenancy by the entireties) between two people, 50 percent of the value of the asset is normally attributed to each person.
  For example, suppose a woman owner of a firm applying for DBE certification has, with her husband, a $100,000 joint savings account. Half of this asset -- $50,000 -- would be counted toward her personal net worth. The recipient to which her firm applied would not count the full $100,000 toward her personal net worth.
  A legal instrument valid under state law can alter this normal attribution of assets between owners.
• IN CALCULATING PERSONAL NET WORTH, HOW SHOULD RETIREMENT SAVINGS BE COUNTED? (Posted - 2/17/00 - Edited 12/7/01)
  
  
  The Department is aware that there have been many questions about how to calculate personal net worth (PNW), of which this is one. The Department has asked for comment on potential changes to the rule on this subject. Meanwhile, we offer the following suggestions concerning retirement savings.
  
  The basic principle in counting assets in the personal net worth calculation is to count the present value of assets attributable to the individual.
  
  Retirement savings or investment devices (e.g., a pension plan, IRA, 401(k)) do, at this time, count toward calculations of an individual's personal net worth. This is because these assets, even though generally not readily available as sources of financing for business operations, are part of an individual's overall wealth.
  
  Recipients should count only the present value of a retirement savings or investment device toward the personal net worth calculation. That is, the recipient needs to determine how much the asset is actually worth today, not what its face value is or what the individual's return on it may be at some point in the future.
  
  In making this present value determination, the recipient would subtract the interest or tax losses the individual would incur if he or she liquidated the asset today.
• Section 26.67(c)

• HOW DO RECIPIENTS RESPOND TO APPLICANTS FOR CERTIFICATION WHO ARE CERTIFIED FOR SBA PROGRAMS? (Posted - 4/12/99 - Edited 12/7/01)
  
  
  Recipients may sometimes receive applications from firms who have already been certified by the U.S. Small Business Administration (SBA) under the 8(a) or small and disadvantaged business (SBD) program.
  
  The certification criteria for these programs, which concern only procurement by Federal agencies, are similar - though not identical - to the certification standards for the DOT DBE program.
  
  Recipients have discretion concerning how they treat SBA-certified firms. This discretion is similar to the discretion recipients can exercise with respect to firms certified by another DOT recipient (see 26.83(e))..
  
  Recipients can accept an SBA certification for a firm, just as they can accept a certification by another DOT recipient.
  
  The recipient must ensure that an SBA-certified firm meets the DOT $17.4 million annual average gross receipts cap.
  If the SBA firm has not been the subject of an on-site review, the DOT recipient must perform and evaluate the results of such a review before completing the certification. The recipient may also obtain additional information from the firm for administrative purposes.
  
  On the other hand, the recipient can require the firm to follow the recipient's normal application process, even though SBA (or another DOT recipient) has already certified it.
  
  DOT has sought comment on proposal changes to its rules to implement a November 1999 Memorandum of Understanding (MOU) with SBA. The purpose of the MOU is to facilitate certification of DBEs by SBA and 8(a)/SDB firms by DOT recipients. Until these rules are made final, the guidance in this Q&A continues to apply.

• Section 26.71(e), (f), (n); 49 CFR 23.31, 23.37(h)

• IF A FIRM IS CERTIFIED AS A DBE OR ACDBE IN ONE TYPE OF BUSINESS, UNDER WHAT CIRCUMSTANCES CAN IT BE CERTIFIED FOR ANOTHER TYPE OF BUSINESS? (Posted - 6/18/08)
  

  * When a firm is certified for one type of business, it cannot work as a DBE or ACDBE in another type of business – whether individually or as part of a joint venture – unless it becomes certified for the additional type of concession.

  *   Section 26.71(n) provides as follows:

  (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.

  These requirements apply to ACDBEs under Part 23 (see 23.31)  as well as to DBEs under Part 26.

  * The disadvantaged owners of a DBE or ACDBE can delegate some management and other functions to other persons.  However, this does not eliminate the need of the disadvantaged owners to possess the requisite experience and expertise to control the overall business decisions and daily operations of the business seeking certification.   See 26.71(e) and (f).

  * For example, suppose an ACDBE is certified as the operator of a news/gift store.  The firm wants to become part of a joint venture that will operate a restaurant.   The ACDBE would first have to be certified as a restaurant operator, in accordance with 26.71(n) (which applies to certifications of ACDBEs under Part 23 as well as to those of DBEs under Part 26) before any ACDBE credit could be counted for its work with the restaurant joint venture.

  * To certify the ACDBE as a restaurant operator in this example, the certifying agency would have to conclude that the firm carried its burden of proof that its disadvantaged owners can control the firm’s operations in the restaurant business.

  * In making its decision, the certifying agency should consider the general management experience of the disadvantaged owners in other types of business as a factor in determining whether the firm meets its burden of proof under 26.71(n).  There is no presumption that management experience in another business necessarily provides everything that the owner must demonstrate in order to meet this burden, however.  

  * In considering what constitutes a “specific type of work” for purposes of 26.71(n), certifying agencies should look beyond the NAICS code applicable to the business.  Some NAICS codes may be too broad for certification purposes.
  For example, the NAICS code for engineering services can encompass all types of engineering firms.  An electrical engineer may not necessarily have the knowledge and experience to control the day-to-day operations of a firm engaged in civil engineering. 

  * There may be situations in which moving into an additional type of work does not require significantly different expertise.  A firm may be able to move from one type of construction to another (e.g., sewer construction to demolition) simply by obtaining additional equipment.  On the other hand, there can also be types of construction that it is more difficult to move into (e.g., sewer construction to asphalt paving) without significant additional expertise.  Certifying agencies should try to distinguish between these types of situations and make certification judgments accordingly. 

• Section 26.73

• CAN A NOT-FOR-PROFIT FIRM BE CERTIFIED AS A DBE? (Posted - 2/23/99)
  
  
  No. Only a for-profit firm may be certified as a DBE.
  
  However, a firm owned by an Indian tribe or Alaska Native Corporation as an entity may be certified as a DBE.
• Section 26.73 (h)

• HOW DO RECIPIENTS DETERMINE THE ELIGBILITY OF FIRMS OWNED BY AN INDIAN TRIBE?(Posted 2/12/02)
  
  
  Any Indian Tribe may own a DBE firm as an entity. It is not necessary, in these cases, that disadvantaged individuals (i.e., natural persons) own the firm.
  
  However, the firm must be controlled by socially and economically disadvantaged individuals (see 26.71). For example, suppose the CEO of a firm owned by an Indian Tribe is a non-disadvantaged white male, or that such persons effectively control the day-to-day business operations of the firm. The firm would not be an eligible DBE, because it is not controlled by socially and economically disadvantaged individuals.
  
  The disadvantaged individuals who control the firm need not necessarily be members of the Tribe that owns the business. For example, the CEO of a tribally-owned business could be Hispanic.
  
  One implication of the control requirement is that disadvantaged individuals involved in controlling the firm must meet personal net worth (PNW) standards (see ?26.67(a)(2); (b)). Not every member of the Indian Tribe has to meet these standards or complete a PNW statement. Only the disadvantaged officers, board members, CEO, etc. who actually control the firm must do so. These individuals would also be responsible for submitting the certification of disadvantage required by 26.67(a)(1).
  
  Recipients would look to these same disadvantaged individuals who must submit PNW statements to determine whether the persons claiming to control the firm meet other requirements of 26.71 (e.g., with respect to expertise).
  
  The firm must also meet the regulation's size standards (see ?26.65). These standards provide that the firm - including its affiliates -- must meet SBA size standards and the statutory DBE size cap.
  
  Affiliation is an important concept in the DBE program. It does apply to firms owned by Indian Tribes. If it did not, then these firms could enjoy a significant competitive advantage over other DBE firms, because they could have access to the sometimes plentiful resources of their affiliates. At the same time, the Department recognizes that Indian Tribes often own a variety of businesses that could be considered affiliates because of common ownership by the entity. Literal application of the affiliation rule might therefore result in precluding firms owned by Indian Tribes from participating in the DBE program.
  
  Consequently, the Department interprets its rule to treat firms owned by Indian Tribes as entities as not being affiliated with other businesses owned by the entities if there is a firewall (i.e., a legally binding mechanism) in place to prevent the firms from accessing the resources of the entities' other businesses. For example, suppose an Indian Tribe owns a small construction company that is seeking DBE certification. The Tribe also owns several non-transportation related businesses. To avoid being considered an affiliate of the other businesses, the construction company would have to be subject to a legally binding provision precluding it from receiving any funds or other resources, directly or indirectly, from the other businesses.
• Section 26.81

• WOULD IT BE ACCEPTABLE FOR A UNIFIED CERTIFICATION PROGRAM (UCP) TO BE FORMED BY ALL RECIPIENTS IN A STATE OR REGION AGREEING TO ONE FORM, PROCESS, AND PROCEDURE THAT ALL RECIPIENTS WOULD USE, AND DBE FIRMS WOULD ONLY NEED TO APPLY TO ONE OF THE RECIPIENTS INVOLVED? (Posted - 4/12/99)
  
  
  The DOT DBE rule does not prescribe the particular form a UCP must take.
  
  If all recipients in a state or region agreed to use the same form, process, and procedure, and a firm certified by one recipient was accepted by all, that would satisfy the "one-stop shopping" requirement of part 26. There could also be other ways of meeting this requirement.
  
  The Department will work with recipients in each state to facilitate their consideration of the best form of UCP for them.

• WHAT POINTS SHOULD UCP MEMBERS EMPHASIZE IN WORKING TOGETHER TO MAKE CERTIFICATIONS DECISIONS? (Posted - 6/18/08)
  

  *  Recipients of DOT financial assistance are required to establish a unified certification program (UCP) to provide a one-stop shopping service to DBE program applicants and participants.  Most recipients have formed or joined a UCP as required.  All UCP participants operate under a “UCP agreement” and must comply with all provisions of the regulation concerning certification and non-discrimination.
  * Each UCP member is to follow the procedures listed in the UCP agreement, including the division of tasks assigned to particular members.  According to §26.81(b)(1), all certification decisions by the UCP shall be binding on all DOT recipients within the state.   
  * In the event of a disagreement— (e.g., one or more UCP members believe a firm should not be certified and others believe the firm is eligible) UCP members should work through their differences.  UCP agreements should always include a dispute-resolution mechanism.

  + One possible way of resolving a disagreement is to use another certification officer from a neighboring UCP to serve as an arbitrator, and all parties agree to the decision made by the arbitrator.  

  + Another solution may be to request that another certification officer from a nearby state’s UCP offer an opinion after conducting a site visit to the firm or after reviewing the administrative record used by the UCP in making its decision. 

  * UCP members should be treated as co-equals in the decision-making process.  That is, a larger recipient (e.g., a State DOT) should not be presumed to have a stronger voice in making decisions than a smaller recipient (e.g., a city transit authority or airport). 

  * To achieve the goal of one-stop shopping, UCP members should coordinate their actions closely.  For example, it is inconsistent with the purpose and structure of a UCP for one member to take action (e.g., certifying a firm) contrary to the action of another member or on its own, without following the UCP process.

  * UCPs should evaluate a firm once it is notified of changes in the ownership of a DBE or ACDBE firm and advise the firm of its decision within ninety (90) days of the notification.

  * UCPs are encouraged to update on-site reviews.  Any on-site review over 3 years old should be updated to reflect current status.

  * UCPs should promptly respond to requests from other UCPs for information needed for the certification process (e.g., a request from another state for an on-site review report).
  * The decision of the UCP about a firm’s eligibility is binding on all UCP members and staff.  It is not appropriate for one UCP member, or the staff of a UCP member, to file a certification appeal with DOT because of disagreement with the UCP’s decision. The Department’s Office of Civil Rights will not consider such a complaint. 

  * UCPs should ensure that any state-level appeal process from certification decisions available to firms calls for appeals to be heard and decided by experienced, professional employees very familiar with DOT DBE program certification standards and procedures.  The individuals making decisions on appeal should, to the maximum extent possible, be insulated from political pressure (e.g., by firewalls prohibiting contact with them by state or local elected or appointed officials concerning the merits or outcome of a case).  In DOT’s experience, a flawed state appeal process can be worse than none at all. 

• Section 26.81(a)

• DO ALL RECIPIENTS HAVE TO PARTICIPATE IN UNIFIED CERTIFICATION PROGRAMS (UCPs)?(Posted - 2/12/02)
  
  
  Section 26.81(a) of the DBE regulation says to recipients that "you and all other recipients in your state must enter into in a Unified Certification Program (UCP)" (emphasis added).
  
  The purpose of this provision is to ensure that DBEs and applicants (including airport concessionaires) will have "one stop shopping" on certification matters with respect to every recipient in the state. This is not possible unless all recipients with certification responsibilities are part of the UCP.
  
  Recipients who are not required to have DBE programs do not have certification responsibilities. Therefore, they do not need to participate in a UCP.
  
  All state DOTs must participate in the UCP. However, subrecipients of state DOTs do not have to be involved in the UCP formation process or sign the UCP agreement on their own. The state DOT is responsible for ensuring (e.g., through subgrant agreements) that its subrecipients comply with all provisions of the UCP (e.g., that they accept as DBEs firms that the UCP has certified).
  
  Airports and transit properties that receive funds directly from FAA or FTA must also participate in the UCP. Since these recipients must participate in the UCP, it is vital that they have the opportunity to be involved in the discussions leading up to its formation (e.g., that they get notice of meetings and working drafts of documents). No direct recipient who wishes to be involved in the work of developing the UCP may be excluded.
  
  All parties who must participate in a UCP (i.e., state DOTs and airports and transit properties that receive funds directly from FAA or FTA) must commit in writing to participate.
  
  We recognize that UCP negotiations involving a large number of recipients may be complex and difficult. That is why the Department allowed three years from the effective date of the rule for recipients to agree on a UCP.
  
  The Department supports efforts by recipients to make this process as simple as possible. Here are a few ideas that we have heard:
  
  A steering committee of recipients in the state, representing all three modes, could take the lead on accomplishing the substantive work of drafting a UCP agreement. Other recipients would then receive and comment on drafts. The steering committee would respond to comments before obtaining written commitments from the other recipients.
  
  An organization (e.g., a state transit association) could negotiate on behalf of small grantees with individual larger grantees from its own and other modes.
  
  Where a single state agency or steering committee is taking the lead on developing the UCP, it could create a web site that permits recipients from around the state to view and participate in the ongoing work of drafting the UCP agreement.
  
  Creating a UCP is a "One DOT" project at the state level. We urge staffs from all highway, transit, and airport agencies to work cooperatively to make this effort succeed. The Department stands ready to assist the parties to UCP negotiations in achieving their objective.

• Section 26.81(b); Appendix F; 26.35

• WHAT, AND HOW MUCH, ASSISTANCE IS IT APPROPRIATE FOR A PRIME CONTRACTOR TO PROVIDE TO A DBE? (Posted - 6/18/08)
  

  * A DBE must be independent to be eligible for certification.  In thinking about the assistance that prime contractors may properly provide to DBEs, recipients should determine whether there is a pattern of close, pervasive ties between a DBE and the prime contractor.  If it appears that, absent its ties to a prime contractor, a DBE firm is not viable, it should not be regarded as independent.  A firm must be independent to be eligible for DBE certification.

  * In Appendix A, the Department mentions that it is appropriate for prime contractors to provide assistance to DBEs in a variety of areas, such as bonding, credit, insurance, equipment, materials and supplies.

  * In providing such assistance, a prime contractor should be careful not to provide so much assistance to a particular DBE in so many areas that a reasonable recipient or UCP would conclude that the DBE is not viable without the relationship to the prime contractor.  It makes sense for a prime contractor to pick and choose ways of assisting a DBE that do not become so pervasive as to create independence issues.  This assistance should be transparent and arms-length.

  * As part of their contract performance oversight functions, recipients should continue to scrutinize the independence of DBEs as they work on projects.  Recipients may require prime and subcontractors to report any contract performance issues that could call a DBE’s independence into question.

  * One situation that has been brought to the Department’s attention concerns the use of cranes.  Often, according to stakeholders, a crane provided by a prime contractor may be used jointly on a project by the prime contractor and subcontractors, including DBEs, as it is not practical or economically feasible for each contractor to have its own crane. 

  + In this situation, the Department believes that, as long as such arrangements are consistent with normal industry practice in a given jurisdiction, the joint use of a prime contractor’s crane by a DBE should not cause the DBE to be regarded as failing to meet independence requirements for certification. 

  + We note, however, that as provided in 26.55(a)(1), the cost of equipment purchased or leased by a DBE from a prime contractor does not count for DBE credit.  Consequently, if a charge for the use of a prime contractor’s crane (as distinct from the DBE’s labor in operating the crane) is part of the cost OF THE DBE’s contract, it would be subtracted from the DBE credit allowed for the contract. 

  * There may be occasional short-term or emergency circumstances in which a DBE uses a prime contractor’s equipment, supplies, etc. to a limited degree (e.g., the DBE’s backhoe breaks down, and the DBE uses the prime contractor’s backhoe for the rest of the day).  Such short-term, limited use, as distinct from a pattern or practice of such use, would not usually result in a DBE being regarded as having lost the independence needed for certification and would not result in a subtraction from the DBE credit allowed for the DBE’s work on the contract.

  * It is possible that a group of prime contractors, or a state or local prime contractor’s association, could join efforts to provide various kinds of assistance to a considerable number of DBEs in the jurisdiction in a way that would not create a dependent relationship between any given DBE and a particular prime contractor.

  * Prime contractors with questions about the appropriateness of their assistance relationships with DBEs should consult in advance with recipients or the state’s UCP, who should be prepared to provide advice about whether the relationship or some aspects of it may be problematic.   If a recipient provides an opinion about the appropriateness of a relationship, the recipient should make clear that, even if the relationship appears appropriate on its face, dealings between the prime contractor and the DBE during the implementation of the contract could still run contrary to the independence requirements of the DBE rule.

  * Mentor-protégé programs meeting the requirements of 26.35, which contain safeguards for the independence of DBE protégés, are another method through which prime contractors can assist DBEs without creating independence issues.  Note that only a firm that the recipient has already certified as a DBE (necessarily including a determination that the firm is independent) can participate as a protégé. 

• Section 26.81; 26.84, Appendix F

• WHAT STEPS SHOULD RECIPIENTS AND UCPs TAKE TO REDUCE CERTIFICATION BURDENS ON APPLICANTS WHO ARE CERTIFIED IN OTHER STATES OR CERTIFIED BY SBA? (Posted - 6/18/08)
  

  * It is the policy of the Department of Transportation that unified certification programs (UCPs) should, to the maximum extent feasible, reduce burdens on firms which are certified as DBEs in their home state and which seek certification in other states.  Unnecessary barriers to certification across the country are contrary to the purpose of a national program like the DBE/ACDBE program.

  * In particular, recipients and UCPs should not unnecessarily require the preparation of duplicative certification application packages.

  * We remind recipients and UCPs that the Uniform Certification Application Form in Appendix F to part 26 MUST be used for all certifications.  The rules do not permit anyone to alter this form or to use a different form for DBE certification purposes.

  * The Department strongly encourages the formation of regional certification consortia, in which UCPs in one state provide reciprocal certification to firms certified by other members of the consortium.   Consortium members should meet and/or speak with each other frequently to discuss eligibility concerns and approaches to common issues, to conduct training, and for other purposes.  Generally, these consortia should be established among states that are located in proximity to one another.

  *  The Department will closely monitor the efforts of UCPs to reduce burdens on  firms applying for certification outside their home states.  The Department will determine at a later time whether additional regulatory action is appropriate to prevent unnecessary certification burdens.

  Certifications from Other States

  *  For situations in which a firm certified in State A applies for certification in State B, we suggest the following model.  Other approaches are also possible, but the Department believes strongly that all states should put into place procedures to avoid having firms certified in one state start the application process from scratch in another state.

  + Request that the applicant provide a copy of the full and complete application package on the basis of which State A certified the firm.  State B should require an affidavit from the firm stating, under penalty of perjury, that the documentation is identical to that provided to State A.  It is important that all this material be legible, so that State B can review the package as if it were the original.  

  + To ensure that information is reasonably contemporary, State B could have a provision limiting this expedited process to application packages filed with State A within three years of the application to State B.

  + State B should instruct the applicant to provide any updates needed to make the application material current (e.g., changes in personal net worth of the owner, more recent tax returns, changes affecting ownership and control). 

  + State B should request State A’s on-site review report and any accompanying memoranda or evaluations.  State A should promptly provide this material.

  + State B should certify the firm unless changes in circumstances or facts not available to State A justify a different result, or unless State B can articulate a strong reason for coming to a different result from State A on the same facts.

  Certifications of SBA-certified Firms

  * When an applicant firm has a current, valid Small Business Administration (SBA) 8(a) or Small Disadvantaged Business (SDB) certification, the UCP must follow the requirements of section 26.84, in place of requiring a new application from the firm.   

  + While the memorandum of understanding between DOT and SBA that led to the creation of section 26.84 has expired, the regulatory requirements of this section remain in effect. 

  + Note that the process for considering applications from SBA-certified firms required by section 26.84 differs in some respects from the recommended process for considering applications from firms certified in other states.

  * This expedited process applies to an SBA-certified firm whose home state is the state in which the UCP operates.  For an SBA-certified firm whose home state is another state, the “home state first” provision of sections 26.81(d) and 26.84(e) applies .

  * The following are the elements of the process for considering applications from SBA-certified firms:

  + Request that the applicant provide a copy of the full and complete application package on the basis of which SBA certified the firm.  The UCP should require an affidavit from the firm stating, under penalty of perjury, that the documentation is identical to that provided SBA. 

  + To ensure that information is reasonably contemporary, the UCP may have a provision limiting this expedited process to application packages filed with SBA within three years of the application to the UCP.

  + The UCP should direct the  applicant to provide to the UCP any updates needed to make the SBA application material current (e.g., changes in Personal Net worth of the owner, more recent tax returns, changes affecting ownership and control)

  + Conduct an on-site review of the firm.

  + Where there are differences between SBA programs and DOT requirements, ensure that the firm meets DOT requirements.  For example, an SBA-certified firm participating in an SBA-approved mentor-protégé or joint venture program may have difficulty in meeting DOT independence and control requirements.

  + The UCP should certify the firm unless changes in circumstances or facts not available to the SBA (e.g., discovered as part of the on-site review) justify a different result.  It is not appropriate to refuse to certify an SBA-certified firm solely because of a difference in judgment between SBA and the UCP (e.g., about whether the same facts warrant a finding that the disadvantaged owners control the firm). 

   

• Section 26.83

• HOW DO RECIPIENTS RESPOND TO APPLICANTS FOR CERTIFICATION WHO ARE CERTIFIED BY ANOTHER DOT RECIPIENT? (Posted - 2/23/99)
  
  
  You have the discretion to handle this situation in any of the following ways.
  
  You can certify the firm in reliance on the certification decision of the other recipient.
  
  You can make your own certification decision based on documentation provided by the other recipient.
  
  You can require the applicant to go through your own certification process, without regard to the actions of the other recipient.
• Section 26.83(c)1)

• IS AN ON-SITE REVIEW OF A FIRM NECESSARY TO CERTIFY A FIRM? TO DENY CERTIFICATION TO THE FIRM?(Posted - 2/12/02)
  
  
  As a recipient, you are not permitted to certify a firm as an eligible DBE unless there has been an on-site review of its eligibility that you take into account in making your decision.
  
  However, there are some situations in which you may deny certification to a firm without an on-site review.
  
  Generally, these situations are ones in which the information contained in the firm's application, viewed in the light most favorable to the firm, precludes it from being certified.
  
  Here are examples of these situations:
  
  The personal net worth statement of the sole owner of a firm exceeds the $750,000 limit
  
  The firm exceeds the $17.42 million cap on gross annual receipts, averaged over three years, or exceeds the applicable SBA business size standard
  
  The applicant fails to cooperate with the recipient's information requests (e.g., an owner refuses to supply necessary personal net worth information)
  
  It is clear from the application that disadvantaged individuals do not own or control the firm (e.g., that non-disadvantaged individuals own 60 percent of the stock, or that white males make all day-to-day business decisions of the company)
  
  In other situations, there must be an on-site review before you deny a firm's application for certification.
• Section 26.83(h)

• MUST RECIPIENTS RECERTIFY FIRMS EVERY THREE YEARS? (Posted - 4/12/99)
  
  
  No. The rule does not say that recipients must recertify firms every three years. It says that recipients cannot require a firm to go through a recertification process (i.e., involving a reapplication for certification) more frequently than once every three years.
  
  Once recipients have determined that a firm is eligible under part 26 standards (i.e., through an initial certification under part 26 or an eligibility review of a firm certified under former part 23), the rule states that it remains certified for a period of at least three years, unless its eligibility has been removed through 26.87 procedures.
  
  DBEs' "no change" affidavits and notices of change are intended to keep recipients current on the status of certified firms in the meanwhile. If the facts on which the firm's certification was based change, the recipient can take action, such as a 26.87 proceeding to remove eligibility.
  
  Of course, a recipient can investigate a firm if there is reason to believe that its current information is incorrect or outdated, or that there are problems with the firm's status as an eligible DBE.
• WHEN IS IT APPROPRIATE FOR A RECIPIENT TO REQUIRE A FIRM CERTIFIED UNDER FORMER PART 23 TO REAPPLY FOR CERTIFICATION? (Posted - 9/22/00)
  
  
  The provision of 26.83(h) that firms may not be required to reapply for certification more than every three years applies to firms certified under former Part 23 as well as to those certified for the first time under Part 26. For example, if a firm was most recently certified in December 1998, it would not be appropriate for the recipient to ask it to reapply for certification before December 2001.
  
  
  
• WHAT ACTIONS DOES A RECIPIENT TAKE AFTER IT REQUESTS A CURRENTLY CERTIFIED FIRM TO REAPPLY FOR CERTIFICATION? (Posted - 9/22/00)
  
  
  When a recipient requires a currently certified firm to reapply for certification, the recipient should not treat the firm as though it were a new applicant.
  
  That is, while the firm must provide all requested information, the firm does not bear the burden of proving its eligibility, as it would upon initial application.
  
  If the recipient determines, based on the information in the reapplication for certification, that there is reasonable cause to believe that the firm is no longer an eligible DBE, the recipient would begin a 26.87 proceeding to remove the firm's eligibility.
  
  If the firm does not provide the requested information in a timely manner, the recipient could begin a 26.87 proceeding to remove the firm's eligibility on the ground of failure to cooperate (see 26.109(c)).
• Section 26.83(i)

• WHAT IS A "NOTICE OF CHANGE" AND WHEN SHOULD RECIPIENTS REQUIRE DBE FIRMS TO SUBMIT ONE? (Posted - 4/12/99)
  
  
  A "notice of change" is a written affidavit that DBE firms must provide to the recipient within 30 days of any change in their circumstances affecting their ability to meet part 26 eligibility standards regarding size, disadvantage, ownership and control.
  
  A notice of change must include documentation describing the change in detail.
  
  The notice of change requirement became effective March 4, 1999.
  
  Recipients should ensure that all currently certified DBEs are aware of their obligation to submit notices of change.
  
  For purposes of this notice requirement, a "change" in the firm's circumstances includes a change in the regulation (e.g., from former part 23 to part 26) that affects the firm's eligibility. For example, part 26 includes a $750,000 personal net worth cap that was not included in former part 23. A disadvantaged owner whose net worth exceeds this amount is obligated to file a notice of change.
• Section 26.83(j)

• WHAT IS A "NO CHANGE" AFFIDAVIT AND WHEN SHOULD RECIPIENTS REQUIRE DBE FIRMS TO SUBMIT ONE? (Posted - 4/12/99 - Edited 12/7/01)
  
  
  A "no change" affidavit is an affidavit each DBE firm must provide to the recipient annually on the anniversary date of the firm's certification. The affidavit affirms that there have been no changes in the firm's circumstances affecting its ability to meet part 26 size, disadvantage, ownership, and control standards (except for changes about which the firm has submitted a "notice of change" to the recipient).
  
  With a "no change" affidavit, the rule requires a firm to submit supporting documentation concerning its size and gross receipts.
  
  The "no change" affidavit requirement became effective March 4, 1999, for all DBE firms.
  
  All firms certified under former part 23 will have a certification anniversary date no later than March 3, 2000. Therefore, recipients should ensure that all such firms have submitted their initial "no change" affidavits in that time, each by its own certification anniversary date, and each year thereafter.
  
  For purposes of this notice requirement, "no change" in the firm's circumstances means, among other things, that changes in the regulation (e.g., from former part 23 to part 26) have not affected the firm's eligibility. For example, part 26 includes a $750,000 personal net worth cap that was not included in former part 23. By submitting a "no change" affidavit, the owner of a DBE firm is affirming that his or her personal net worth does not exceed $750,000. Recipients should ensure that currently certified DBEs are aware of this obligation.
• Section 26.83 - 26.89

• MUST A RECIPIENT HAVE AN INTERNAL APPEAL SYSTEM FOR APPLICANTS WHO ARE DENIED CERTIFICATION OR DECERTIFIED? IF THERE IS SUCH A PROCESS, MUST IT INCLUDE PROVIDING A VERBATIM TRANSCRIPT OF THE ORIGINAL PROCEEDING TO THE FIRM FOR PURPOSES OF THE INTERNAL APPEAL? (Posted - 4/12/99)
  
  
  No. There is no requirement for recipients to establish an internal appeal system. Recipients have the discretion to establish such a system, however.
  
  Once a recipient has made an administratively final denial or decertification decision (i.e., one that means the firm cannot participate in the recipient's DOT-assisted contracts as a DBE), the firm may appeal the result to DOT under 26.89.
  
  If a recipient has established an internal appeals system, a firm is not required to exhaust this remedy before appealing an administratively final decision to DOT under 26.89. However, if a firm chooses to appeal through the recipient's internal appeal process, the Department will not act on a 26.89 appeal until completion of the recipient's proceeding.
  
  The details of any internal appeal process a recipient establishes should be part of the recipient's revised DBE program. DOT will look at the process to make sure that it is fair.
  
  A vebatim record is required in decertification actions (see 26.87(d)(2)). For denials of applications for certification, part 26 does not require a verbatim record. Either a verbatim record or another means that gives the appellant the opportunity to review the record of the initial proceeding in detail is permissible. This is important to a fair appeal proceeding, since it gives the appellant the opportunity to make effective arguments about the initial proceeding.
• Section 26.87 - 26.89

• HOW DOES THE DEPARTMENT PROCESS "THIRD PARTY CHALLENGES" THAT WERE FILED UNDER FORMER PART 23? (Posted - 9/20/99)
  
  
  Under the DBE's former DBE regulation, 49 CFR part 23, any party could file a "third-party challenge" with the Departmental Office of Civil Rights (see former 23.55(a)). In such a challenge, the Office of Civil Rights determined whether a recipient had properly certified a firm.
  
  Under the new DBE regulation, there is no provision for such third- party challenges. All proceedings concerning the removal of a DBE's eligibility begin with the recipient (see 26.87).
  
  In a number of instances, the Office of Civil Rights was unable to issue final decisions in third-party challenges filed under Part 23 before Part 26 took effect.
  
  The Department has determined that, in the interest of fairness to parties involved and to make most efficient use of DOT and recipient resources, DOT will continue to process third-party challenges in which it issued a tentative decision before March 4, 1999, when Part 26 took effect. DOT will issue its own decision on the eligibility of firms involved in such cases. Where a tentative decision had not been issued before March 4, 1999, the Department will remand the matter to the recipient involved, who will initiate proceedings under 26.87.
• Subparts D and E

• CAN A RECIPIENT REMOVE THE ELIGIBILITY OF A CURRENTLY CERTIFIED FIRM THROUGH ANY MEANS OTHER THAN THOSE OF 26.87? (Posted - 9/22/00)
  
  
  With one exception, 26.87 is the only means by which a recipient can remove the certification of a currently certified firm.
  
  The exception involves a situation in which there is no dispute that the firm's owners have exceeded the personal net worth limit. (See Q&A entitled "When a recipient determines that an owner of a certified DBE firm exceeds the owner's $750,000 personal net worth cap, what happens? Must the firm be decertified? If so, must the recipient use the procedures of 26.87 to decertify the firm?").
  
  In all other cases in which a recipient questions a currently-certified firm's eligibility, 26.87 applies. This is the case whether the firm was originally certified under Part 26 or former Part 23.
  
  Firms certified under former Part 23 did not automatically lose their eligibility when Part 26 went into effect. When a recipient seeks information from a firm to ensure that it continues to meet Part 26 eligibility criteria or asks it to reapply for certification, the firm does not automatically lose its eligibility even if it fails to make a timely response. In all these cases, firms continue to be eligible unless and until their eligibility is removed through a 26.87 proceeding (e.g., on the ground of noncooperation), unless the firm states in writing that it no longer chooses to participate in the DBE program.
• WHAT ARE RECIPIENTS' RESPONSIBILITIES CONCERNING THE REVIEW OF DBE FIRMS CERTIFIED UNDER PART 23 TO MAKE SURE THEY MEET PART 26 STANDARDS? (Posted - 4/12/99)
  
  
  Recipients are required to ensure that only firms certified as eligible DBEs, consistent with part 26 standards, participate as DBEs in their programs (see 26.83(a)).
  
  Recipients should review the eligibility of each current DBE firm that was certified under former part 23 to make sure that the firm meets all part 26 standards.
  
  Recipients should complete these reviews as soon as possible, but in no case later than three years from the anniversary date of each firm's current certification.
  
  Recipients should prioritize the reviews based on the level of the firm's participation in contracts (i.e., the firms who participate most actively in the recipient's contracts should be reviewed first).
  
  In conducting these reviews, it may or may not be necessary for the recipient to have the firm complete a new application process, including filling out a new application and/or on-site review of the firm. However, if any firm has been certified under part 23 without an on-site review, then the recipient is required by 26.83(c)(1) to conduct an on site-review before concluding that the firm is eligible under part 26.
  
  Obtaining certifications of disadvantage and personal net worth statements from disadvantaged owners of DBE firms is an essential part of these reviews.
  
  If, before the time the recipient would otherwise review a firm's eligibility, information comes to the recipient's attention that suggests the firm may not meet Part 26 standards (e.g., as the result of an ineligibility complaint filed against the firm), the recipient must review the firm's eligibility under Part 26 standards.
• MAY RECIPIENTS THAT HAVE ESTABLISHED THE SAME ANNIVERSARY DATE FOR THE EXPIRATION OF ALL FIRMS' CERTIFICATION STAGGER RECERTIFICATION BY EXTENDING SOME FIRMS' ANNIVERSARY DATE THROUGH A PRIORITY SYSTEM THAT WOULD REQUIRE IMMEDIATE RECERTIFICATION OF THE MOST ACTIVE FIRMS AND PROCEED TO THOSE WITH LITTLE OR NO WORK? (Posted - 4/12/99)
  
  
  The Department's guidance states that by three years from the anniversary date of the certifications of each DBE firm certified under part 23, recipients should complete a review of the firms to make sure it meets part 26 standards concerning size, disadvantage, ownership and control.
  
  If a recipient has a standard anniversary date for all certifications, then the reviews should be completed by three years from the most recent such anniversary date.
  
  It is appropriate for the recipient to establish a priority system of the kind mentioned in the question.