Final rule
[Federal Register: June 16, 2003 (Volume 68, Number 115)]
[Rules and Regulations]
[Page 35542-35574]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jn03-11]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Part 26
[Docket OST-2000-7639 & OST-2000-7640]
RIN 2105-AC89
Participation by Disadvantaged Business Enterprises in Department
of Transportation Financial Assistance Programs
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
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SUMMARY: This final rule revises the Department of Transportation's
(DOT or Department) regulations for its Disadvantaged Business
Enterprise (DBE) program. It makes several changes to the DBE program,
concerning such subjects as uniform application and reporting forms;
implementing a memorandum of understanding (MOU) with the Small
Business Administration (SBA); substantive amendments to provisions
concerning personal net worth, retainage, size standard, proof of
ethnicity, confidentiality, proof of economic disadvantage, DBE credit
for trucking firms, and eligibility of firms owned by Alaska Native
Corporations (ANCs); and clarifications concerning multi-year project
goals and the use of the new North American Industrial Classification
System (``NAICS''). In addition, this document addresses comments
received in response to both an interim final rule (IFR) issued in
November 2000 and a notice of proposed rulemaking (NPRM) issued in May
2001 (RIN 2105-AC88).
DATES: This final rule is effective July 16, 2003.
FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant
[[Page 35543]]
General Counsel for Regulation and Enforcement, Department of
Transportation, 400 7th Street, SW., Room 10424, Washington, DC 20590,
phone numbers (202) 366-9310 (voice), (202) 366-9313 (fax), (202) 755-
7687 (TDD), bob.ashby@dot.gov (e-mail).
SUPPLEMENTARY INFORMATION:
Electronic Access: An electronic copy of this document may be
downloaded by using a computer, modem, and suitable communications
software from the Government Printing Office's Electronic Bulletin
Group Service at (202) 512-1661. Internet users may reach the Office of
the Federal Register's home page at: http://www.nara.gov/fedreg and the
Government Printing Office's database at: http://www.access.gpo.gov/nara.
You can also view and download this document by going to the web
page of the Department's Docket Management System at: http://dms.dot.gov/.
On that page, click on ``search.'' On the next page, type
in the four-digit docket number shown on the first page of this
document. Then click on ``search.''
Background
On February 2, 1999, the Department published a final rule revising
its Disadvantaged Business Enterprise (DBE) program. The new
regulations (49 CFR part 26) replaced 49 CFR part 23, except for the
airport concessions regulations. Airport concessions are being
discussed in a separate rule. The NPRM on airport concessions was
issued December 12, 2002 (67 FR 76327). Its final rule is pending. In
drafting the 1999 final rule, the Department considered many sources,
including the results of a government-wide review of affirmative action
programs, requirements set forth in the Supreme Court's decision in
Adarand v. Pena (515 U.S. 200 (1995)), extensive Congressional debate
during the reauthorization of the DBE program, and over 900 comments.
Because of the enormity of the 1999 revisions, there were several
requirements, such as the establishment of a uniform certification
form, that were reserved for a later date. Additionally, after
administering the program since 1999 it is evident that clarification
of some provisions and revisions to other provisions would be useful.
I. Interim Final Rule Regarding Threshold Requirements and Other
Changes
The Department published an IFR in the Federal Register on November
15, 2000 (65 FR 68949). The IFR addressed threshold requirements for
Federal Transit Administration recipients and Federal Aviation
Administration recipients to establish DBE programs and submit overall
goals. In addition, the IFR corrected and clarified misleading language
in 49 CFR part 26. The IFR also provided examples of ways to collect
information required for bidders lists, and clarified that in order to
verify whether a DBE firm actually performed the work they were
committed to, both commitments and attainments must be tracked and
reported. Finally, the IFR corrected potentially misleading language
regarding evidence that must be considered when setting overall goals.
The Department received only four comments on this IFR that are
addressed below.
A. Substantive Changes
DBE Programs
Section 26.21(a)(2) of the rule states that Federal Transit
Administration (FTA) recipients who receive $250,000 or more in a
fiscal year in various forms of FTA assistance must have a DBE program.
Similarly, subsection (a)(3) requires Federal Aviation Administration
(FAA) recipients who receive grants of $250,000 or more in a fiscal
year for airport planning and development to have a DBE program. The
IFR changed the threshold to $250,000 in contracting opportunities. The
change requires FTA recipients who project awarding more than $250,000
in prime contracts in a Federal fiscal year from FTA assistance to have
a DBE program. Similarly, FAA recipients who project awarding more than
$250,000 in prime contracts in a fiscal year from grants for airport
planning and development are required to submit a plan. Prime contracts
include contracts for goods as well as contracts for services.
The Department made these changes to decrease the administrative
burden on transit authorities and small airports. Many of these transit
authorities and small airports receive more than $250,000 in FTA or FAA
funds, but have only a small amount of funding available for actual
contracting opportunities. For example, FAA grants funding for land
acquisition projects. While many of these grants exceed $250,000, the
value of contracting opportunities covered by the DBE program (e.g.,
real estate appraisal and survey) frequently is well below $250,000.
The major portion of grant funds is generally for the land purchase
itself, which is not a ``DOT-assisted contract'' under the definition
of Sec. 26.5.
We only received two comments on this provision, both supporting
the change. It was suggested, however, that DOT monitor the number of
recipients and Federal contracts affected by this change to ensure that
the purpose of the DBE program is not compromised. We believe that this
change will only affect a small number of our recipients and monitoring
the way in which recipients carry out provisions of the rule is a
normal function of FTA and FAA.
One commenter requested that we extend the $250,000 threshold to
transit vehicle manufacturers (TVMs). We do not believe that any TVMs
would benefit from the $250,000 threshold. The cost of just one vehicle
would exceed $250,000; therefore, any change would be meaningless.
Therefore, we are adopting the provisions of the IFR without
change. FTA and FAA recipients who reasonably anticipate awarding
$250,000 or less in prime contracts in a fiscal year are not required
to submit a DBE plan. This change affects new recipients or recipients
who do not have a DBE program. The rule also reduces burdens on
recipients who already have DBE programs. If such a recipient
anticipates awarding $250,000 or less in prime contracts it does not
have to submit a DBE overall goal for that year.
Goal Setting
Section 26.45 requires recipients to submit new goals on August 1
of each year. The IFR revised this section to exempt FTA or FAA
recipients with existing DBE programs from setting updated overall
goals when they do not project awarding prime contracts exceeding
$250,000 (excluding vehicle transit purchases) in the year in which the
updated goal would apply.
Under this provision, if a recipient is administering a DBE
program, but is an FAA or FTA recipient who anticipates awarding
$250,000 or less in prime contracts in a Federal fiscal year, the
recipient is not required to develop overall goals for that fiscal
year. The recipient's existing DBE program must remain in effect,
however, even though they are not required to develop goals. For
example, the recipient is still required to perform certification
functions such as processing applications and obtaining no-change
affidavits. If the recipient expects to award prime contracts exceeding
$250,000 in the following fiscal year, it must timely publish the
proposed goal and submit the goal to the applicable DOT Operating
Administration by August 1. Although not required, a FAA or FTA
recipient who anticipates awarding $250,000 or less in prime contracts
may submit a goal for that fiscal year. If a recipient chooses to
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submit a goal, however, it must meet all the requirements set forth in
Sec. 26.45. Of course, all recipients must still seek to meet the
objectives of Sec. 26.1 of this part.
There were no substantive comments on this section; therefore, we
are not making any changes to this provision.
B. Technical Changes
Clarification Concerning Bidders Lists
Section 26.11(c) requires recipients to create and maintain a
bidders list containing information about DBE and non-DBE contractors
and subcontractors who seek work on a recipient's Federally-assisted
contracts. The Department had received a number of questions regarding
the appropriate method to collect the required information. Recipients
had also expressed concern with collecting the annual gross receipts of
firms, saying that firms sometimes have been reluctant to share this
information.
In discussing this requirement in the DBE final rule, the
Department recognized the difficulty in identifying subcontractors,
particularly non-DBEs and all subcontractors that were unsuccessful in
their attempts to obtain contracts. Consequently, the Department did
not impose any procedural requirements for how the data are collected.
The Department still believes that a recipient's data collection
process should remain flexible. The IFR amended Sec. 26.11(c) to
emphasize the purpose of the bidders list and provide examples of ways
in which recipients may choose to collect the required data.
The IFR amended Sec. 26.11(c)(1) to state that the purpose of
maintaining a bidders list is to provide the most accurate data
possible about the universe of DBE and non-DBE contractors and
subcontractors who seek to perform work under a recipient's Federally-
assisted contracts for use in setting overall goals. The IFR also added
language stating that a recipient may collect the required data from
all bidders, before or after the bid due date. They may also choose to
conduct a survey that will result in a statistically sound estimate of
the universe comprised of DBE and non-DBE contractors and
subcontractors who seek to perform work under the recipient's
Federally-assisted contracts. Additionally, we clarified that the data
need not come from the same source. For example, a recipient may
collect name and address information from all bidders while conducting
a survey with respect to age and gross receipts information. The
Department continues to believe that the approach should remain
flexible so that recipients can choose the least burdensome and
intrusive method.
With regard to a firm's annual gross receipts, the IFR amended the
language in Sec. 26.11(c) to clarify that recipients are not required
to collect exact dollar figures from the bidders. Recipients may ask a
firm to indicate into what gross receipts bracket they fit (e.g., less
than $500,000; $500,000-$1 million; $1-2 million; $2-5 million; etc.)
rather than requesting an exact figure from the firms. We note that
this information on the financial size of a firm, as well as
information collected about the firm's age, should be helpful to
recipients in formulating narrowly tailored overall goals.
A few commenters stated that they do not use a firm's gross
receipts or a firm's age in calculating their goals and therefore
collecting this information should be optional. We believe that this
information is a valuable way to measure the relative availability of
ready, willing, and able DBEs, and we encourage recipients to utilize
this in setting their goals. Use of this information will help
recipients to ensure that their goal setting process is narrowly
tailored. However, although this information is not required in setting
goals, it is information that the Department is asked to provide
periodically to Congress. Consequently, we will continue to require
recipients to collect a firm's gross receipts and age for DBE and non-
DBE contractors and subcontractors who seek to work on Federally-
assisted contracts. This portion of the IFR is also being retained
without change.
Clarification Concerning Monitoring and Counting DBE Participation
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. The language in the final rule states that recipients must
provide for a running tally of actual DBE attainments. The preamble to
the rule states, ``Under the final rule, recipients would keep a
running tally of the extent to which, on each contract, performance had
matched promises.'' Verifying whether a DBE actually performed the work
they were committed to necessarily requires the recipient to track both
commitments and attainments.
The IFR reworded the language in Sec. 26.37(b) to state that a
recipient's DBE program must include a monitoring and enforcement
mechanism to ensure that work committed to DBEs at contract award is
actually performed by DBEs. In addition, it added a new paragraph (c)
to clarify that a recipient's mechanism for providing a running tally
of actual DBE attainments must include a means of comparing the
attainments to commitments. It also clarified that both awards or
commitments and attainments must be contained in a recipient's reports
of DBE participation to the Department.
The few comments we received on this section questioned whether
commitments and attainments could be reported together in a meaningful
way without being misleading. We recognize that in many instances the
awards and commitments reported will not correspond to the attainments
reported on the same form. For example, if a contract is awarded to a
DBE in August 2001, the award would be reflected in the report for that
period, but the contract likely would not be completed for many years.
Therefore, the actual achievements section in that report could not
reflect the achievements on that contract. The Uniform Reporting Form
in Section II of this document contains two separate sections in the
form. The first section reflects contracts awarded or committed during
the reporting period. The second section reflects actual payments on
contracts completed during the reporting period. It is essentially a
``snap-shot'' of a recipient's progress towards the participation of
DBEs in its DBE program, and is not a determinative factor as to
whether or not DBE goals are being met.
One commenter requested that we provide guidance on how to track
actual participation. The Department believes that a recipient's data
collection process should remain flexible, and as such we are reluctant
to tell recipients how to collect the information. As an example, many
recipients track actual participation by obtaining certified statements
from the prime contractor and then verifying the information with the
DBEs.
The IFR also deleted and revised repetitive and misleading
language. Section 26.37(b) requires the mechanism providing for a
running tally of actual DBE attainments to include a provision ensuring
that the DBE participation is credited toward overall or contract goals
only when payments actually are made to DBE firms. Because this
requirement was already stated in Sec. 26.55(h), we have removed it
from Sec. 26.37(b). Furthermore, we believe that the wording of Sec.
26.55(h) was confusing; therefore, we revised it. The point of the
revised language is to emphasize that actual payment of committed funds
to DBEs is a key element in determining whether a prime contractor has
met its contract obligations.
[[Page 35545]]
Clarification Concerning Goal Setting
In setting overall goals, step two requires that recipients examine
all evidence available in the jurisdiction to determine what
adjustment, if any, is needed to the base figure. Section 26.45(d)(1)
specifies information that must be considered when adjusting the base
figure. Section 26.45(d)(2) lists additional information to consider,
but uses the language ``you may also consider.'' This permissive
language may be misleading. A narrowly tailored program requires that
all relevant information be considered. The IFR clarified that if the
information is available, then it must be considered. Therefore, to
avoid misleading language, we changed the wording in Sec. 26.45(d)(2)
to read, ``If available, you must consider evidence from related fields
that affect the opportunities for DBEs to form, grow and compete.''
There were no comments on this provision; therefore, we are not making
any changes to this provision.
II. Notice of Proposed Rulemaking Regarding Memorandum of Understanding
With the Small Business Administration, Uniform Forms, and Other
Provisions
There are three different matters addressed in this section. Part A
addresses uniform forms. In the 1999 final rule, the Department stated
that it would develop a uniform reporting form and a standard DOT
application form for DBE eligibility. The Department did not want to
delay the issuance of the 1999 final rule, so it reserved the date on
which the uniform form requirements would go into effect. This document
addresses both of these forms. Part B addresses the implementation of a
Memorandum of Understanding (MOU) between the DOT and the Small
Business Administration (SBA). The MOU streamlines certification
procedures for participation in SBA's 8(a) Business Development (8(a)
BD) and Small Disadvantaged Business (SDB) programs and DOT's DBE
program. Part C addresses substantive changes to several provisions of
part 26, including personal net worth, retainage, proof of ethnicity,
confidentiality, proof of economic disadvantage, and DBE credit for
trucking firms.
A. Forms
Uniform Reporting Form
In the February 1999 rule, the Department adopted the suggestion of
having a single, uniform, nationwide form that all recipients must use
to report to the DOT its awards or commitments and payments. We
published a proposed format in the NPRM. We received over eighty
comments concerning the format and content of the proposed uniform
reporting form, all of which were considered and addressed in drafting
the final form. Several versions of the form were generated to account
for the various comments and suggestions provided, and the Department
believes that the final form compiles the necessary information needed
by the Department to safeguard the program's integrity and ensure the
goals of the program are met. The Final Form and its instructions are
in Appendix B of this document.
Many commenters made suggestions about the format and style of the
reporting form. The basic formatting remains the same as in the NPRM
because of its brevity and its capacity to capture the required
information sought by the Department in a single page. One particular
goal was to minimize the burden on recipients in compiling the
information, as well as reducing the amount of paperwork required. Some
terms and phrasing used in the form were changed to be consistent with
that used in the current final rule.
The Instructions Sheet that accompanies the reporting form explains
more fully what is required in each field on the form, and instructs
recipients on how to derive specific numbers and percentages that are
required to be provided. It is essential that recipients completing
this form consult the Instructions Sheet.
One commenter questioned the distinction between race conscious and
race neutral goals. These concepts are explained in some detail in part
26, and this rulemaking does not change any of the concepts in the 1999
final rule that established part 26. Another commenter requested
clarification as to the category of ``Other'' in the ethnicity
breakdown portion of the form. Firms may qualify as DBEs on a case-by-
case, individual basis, even though their owners are not members of a
group presumed to be disadvantaged (e.g., a firm owned by a white male
who makes an individual showing of disadvantage). The ``Other''
category would be used to report this type of scenario. We also added
new category for ``Non-Minority Women'' to the final form to account
for women-owned DBEs participating in the program, and to guard against
the potential for double counting women-owned DBEs where the female
owner is also a minority. As a result, the category ``Caucasian'' was
removed from the final form.
Many commenters were concerned that the ``Awards or Commitments
this Reporting Period'' section did not match up with the later section
on ``Actual Payments on Contracts Completed This Reporting Period.''
All dollar amounts are to reflect only the Federal share of such
contracts. The Department realizes that many awards or commitments last
over an extended period of time, and therefore will be likely to extend
over multiple reporting periods. The Departments intends that these
sections would not match up and that the respective numbers would most
likely be different.
The purpose of the Actual Payments section is to capture a ``snap
shot'' of the present reporting period as concerns monies actually paid
to DBEs, as opposed to monies that are only committed or awarded to
DBEs but have not necessarily been paid yet. This data will provide a
more accurate picture of the level of DBE participation that is
completed at any given time. The new categories added to these sections
will depict more fully the level of DBE participation. More
importantly, it should be stressed that while several commenters noted
that the tracking of such information is not currently done, it is
crucial that recipients maintain records of committed DBE goals and
actual payments by contract because this data allows recipients (and
the Department) to determine the recipient's actual success in meeting
contract and overall DBE goals. Failure to track such data would defeat
the purpose of goal-setting and undermine the integrity of the program.
We received twenty-eight comments regarding the reporting
frequency. The Department currently has authority to require quarterly
reporting. While the FHWA and the FTA do require quarterly reporting,
the FAA requires only annual reporting. Not surprisingly, most of the
comments objecting to semi-annual reporting came from airport
authorities, while many State DOTs favored semi-annual reporting.
Although our goal is uniformity we also want to decrease our
recipients' burdens. Therefore, all recipients are required to use the
standard reporting form. Recipients of funds from the FHWA and FTA will
be required to report semi-annually, but FAA recipients will continue
to report annually.
Reports are due to a recipient's operating administration (OA) on
June 1 and December 1 each year. The June 1 report should include
information from October 1 through March 31. The December 1 report
should include information from April 1 through September 30. We
believe that these dates will assist recipients in setting goals, which
are due by August 1 each year. A couple of commenters requested
[[Page 35546]]
alternative reporting deadlines for recipients that use local fiscal
years or calendar years. This will be permitted on a case-by-case basis
if approved by the concerned OA.
The form will be made available electronically in PDF format, but
at this time recipients cannot submit the forms electronically. The
reporting form must be submitted to the OA from which the recipient
received Federal funds. For example, a recipient of Federal Highway
funds must submit a report to the FHWA. If a recipient received funds
from more than one OA, it must submit a report to each OA. TVMs will
continue to report to the recipient and not DOT directly.
Finally, recipients are required to retain information relating to
basic program data for three years.
Uniform Certification Application Form
In the February 1999 final rule the Department said that it planned
to create a single, uniform, nationwide form that all recipients must
use without modification for DBE eligibility. We published a proposed
format in the NPRM. We received over eighty-eight comments concerning
the format and content of the proposed uniform application, all of
which were considered and addressed in drafting the final form. Several
changes were made to the proposed form that the Department believes
makes the form more streamlined and user-friendly, yet comprehensive
enough to supply recipients with the necessary information to make
determinations as to applicants' qualifications for the DBE program.
The Final Form is in Appendix F of this document.
Many commenters made suggestions about the format and style of the
application. These suggestions were considered and incorporated into
the final form to the extent possible. Much of the basic formatting
remains the same because the goal was to keep the form manageable, easy
to read, and easy to follow for applicants who must fill out the form,
while simultaneously being accessible and practical for the multitude
of recipients required to accept the form. Our major concern was
keeping the application within a reasonable limit, regarding both
length and content, in order to prevent the form from becoming too
unwieldy and burdensome.
Other commenters posed questions or sought clarification of certain
terms used in the application or of the applicability of certain
sections of the application to specific groups or types of contractors
and businesses. These questions and queries are addressed in both the
form and in its accompanying Instructions Sheet. The form itself uses
simplified language and the Instructions Sheet explains more fully the
type of information or documents sought in each section of the
application.
Although recipients must use the uniform application form without
modification, we recognize that some recipients have additional
statutory and/or regulatory requirements. Therefore, recipients, with
the written consent of the cognizant OA, may (1) supplement the uniform
application form with a one to two page attachment containing the
additional information collection requirements, and (2) require
applicants to submit additional supporting documents not already listed
in or required by the uniform application. Additionally, with written
consent of the OA, a recipient may translate the forms into a second
language (e.g., Spanish or Chinese) to assist their applicants. We
reiterate that the form should be streamlined, however, and that
additional information should be sought during the on-site review
process rather than during the application process.
B. Memorandum of Understanding
There has been some confusion as to the scope of the Memorandum of
Understanding (MOU) between the Small Business Administration (SBA) and
the DOT. While the intent of the MOU is to streamline the certification
process for firms who apply for the SBA's 8(a) BD or SDB programs and
the DOT's DBE program, absolute reciprocity is impossible. The programs
share many common requirements, but there are some significant
differences. Therefore, we are clarifying that the MOU does not alter
any program requirements; applicant firms must meet the program
requirements for which they are applying. For example, an SBA-certified
firm applying for DBE certification must meet the DOT statutory gross
receipts cap, currently set at $17,420,000 (65 FR 52470 (August 29,
2000)). An SBA-certified firm must also undergo an on-site review
before receiving DBE certification.
Because the SBA is not required to issue regulations prior to
implementing the MOU, it has already established procedures to
implement the agreement. If a DBE firm contacts the SBA requesting to
be certified for SBA's Small and Disadvantaged Business program, the
SBA would follow procedures similar to those set forth in this
document.
Some commenters supported the MOU and the proposed regulations
without change. Others did not object to the MOU in its entirety, but
rather focused on a few main issues. One of the primary issues was the
degree of reciprocity. Under this rule, recipients must accept a firm's
application package submitted to the SBA in lieu of requiring the
applicant firm to fill out the recipient's own application. The
certifying agency may ask the applicant firm for additional information
and an on-site review will be required. If the SBA conducted an on-site
review, the DOT recipient may rely on SBA's report in lieu of
conducting its own on-site review. Several commenters mentioned the
importance of conducting their own on-site review because the
certifying agency can actually see the firm and can ask additional
questions. We agree that the on-site review is important, and that is
why the recipient may accept the SBA's report of the on-site review,
but is not required to do so.
Under the 1999 final rule, a recipient receiving an application
from an SBA-certified firm had three choices. It could (1) accept the
SBA certification decision, subject to the recipient's own on-site
review; (2) use the firm's SBA application package in lieu of requiring
completion of the recipient's own application form (the recipient would
still have to complete an on-site review), but make its own decision;
or (3) disregard the SBA materials and require the recipient to undergo
the recipient's full application process from scratch. The MOU, as
implemented by this rule, removes the third option. Under today's final
rule, recipients will have to choose one of the first two options when
an SBA-certified firm files an application.
If the recipient chooses the second option, it should be aware of
one important constraint on its discretion. If the SBA has looked at an
application package and determined that a firm is a small business
owned and controlled by socially and economically disadvantaged
persons, it would not be appropriate for the DOT recipient to disagree
with the SBA's conclusion in the absence of additional information that
leads to a different conclusion. That is, the recipient could not make
a different decision based solely on a judgment of the same exact
information on which SBA based its decision. Doing so would be contrary
to the language and intent of the MOU. However, if the DOT recipient
(typically in the course of the on-site review) discovers additional
information from which it could reasonably conclude that the SBA-
certified firm is not an eligible DBE, it could decline to certify the
firm.
In any case, Sec. 26.83(k) requires a recipient to make a decision
within ninety days of receiving all the required
[[Page 35547]]
information, including any additional information requested, whether it
is from the applicant or the SBA.
This issue that appears to have caused the most concern is the
requirement that recipients copy and transmit to the SBA a copy of the
applicant firm's application package when a DOT-certified firm applies
to the SBA for certification. A majority of the commenters argued that
the copy requirement would place an administrative and financial burden
on recipients. That is why we are allowing recipients to charge a
reasonable fee (e.g., comparable to what would be charged for a Freedom
of Information Act or open records law request) for the photocopying to
defray some of the costs. A few commenters suggested that it would be
more of a burden to collect the fees. Therefore, whether to impose
copying and transmittal fees will be left entirely up to the recipient.
We do not believe that there will be a large demand from DBE-certified
firms requesting SBA certification, so we do not believe that this
provision will have a significant economic effect. The Department will
monitor the situation and will make future alterations as needed.
A few commenters questioned the definition of ``application
package.'' Two commenters stated that it would be easier to copy and
transmit the entire file rather than the actual application. That way
there would be no need for the SBA to request additional information
from the recipient. We agree. By ``application package'' we mean the
application and any information relied upon in making the certification
decision.
Several commenters also addressed the time limits prescribed in the
NPRM. Some claimed that the time limits were too short, while others
said that they are too long. We believe that while an expedited process
would be desirable, lack of resources will make shorter deadlines
unworkable. We believe that the time frames set forth in the NPRM are
reasonable. Therefore, recipients are required to forward the
application package to the SBA within thirty days after the firm's
request. If additional information is requested, it must be transmitted
within forty-five days after receipt of the request. In implementing
this provision, we intend to provide some flexibility during the first
several months as recipients adjust to the requirement. Again, the
Department will monitor the situation and make changes if warranted.
There is some concern that some application packages are outdated and
unreliable. We agree that transmitting irrelevant and outdated
information would be wasteful; however, if an applicant firm has a
current, valid certification, and then all of the information relied
upon for that certification may be relevant.
There were several comments regarding the notification requirement.
If a recipient denies certification to a firm certified by the SBA, or
if it decertifies a firm it knows to be certified by the SBA, it is
required to notify the SBA in writing. The notification must include
the reason for denial. Two commenters believe that the denial/
decertification letter is sufficient notification to the SBA, and we
agree. A recipient may simply send a copy of the denial or
decertification letter to the SBA. One commenter asked how it would
know whether the firm is SBA certified. Typically, an applicant will
submit this information in an application package or decertification
proceeding. A recipient could also querry an on-line database of firms
the SBA has certified at http://pro-net.sba.gov.
C. Additional Changes
Personal Net Worth
Section 26.67 requires each individual whose ownership and control
are relied upon for DBE certification to submit a signed, notarized
statement of personal net worth (PNW) with appropriate supporting
documentation. The Department received a number of questions about what
documentation is appropriate for recipients to require in ascertaining
the PNW of owners of DBE firms. In the preamble to the final rule
correction (64 FR 34569 (June 28, 1999)), the Department recommended
using the SBA's form as a model. The SBA requires completion of a two-
page form, supported by two years of personal and business tax returns.
The Department wanted to remain flexible while encouraging recipients
to use forms that are not unduly lengthy, burdensome, or intrusive. The
Department did not require recipients to use the SBA form verbatim but
encouraged them to use a form of similar length and content, including
collecting and retaining two years of an individuals' personal and
business tax returns. The Department has not found anything more
appropriate than the SBA form, however. In the interest of uniformity,
this final rule will mandate use of the SBA PNW form in conjunction
with the new uniform application form. A copy is included in Appendix
F.
The final rule explicitly requires that personal financial
information be kept confidential. Nevertheless, the Department has
continued to receive comments concerning the intrusiveness of
collecting personal tax returns. In the 2001 NPRM, the Department
proposed an alternative option with regard to the necessary supporting
documentation to prove PNW in order to address these concerns. The
proposal still called for recipients to require individuals whose
ownership and control are relied upon for DBE certification to certify
that he or she has a PNW not exceeding $750,000 by allowing applicants
to submit a signed, notarized statement of PNW with appropriate
documentation. In the alternative, the proposed option was to allow the
applicant to submit a signed, notarized statement from a certified
public accountant (CPA) attesting that the CPA had examined his or her
PNW pursuant to Sec. 26.67(a)(2)(iii) and determined that his or her
PNW does not exceed $750,000. This option was intended to eliminate the
need for the applicant to provide personal income tax information to
the DOT recipient as supporting documentation for purposes of proving
PNW.
The Department received numerous comments concerning the proposed
alternative documentation for establishing an applicant's PNW. Many
commenters supported the proposed option of allowing applicants to
submit a CPA's affidavit as to PNW instead of filing personal income
tax information. A majority of the commenters in favor of the proposal
highlighted the fact that such an option would be less intrusive and
would protect the privacy and confidentiality interests of applicants
in their personal economic and financial information. Furthermore, some
commenters noted that this option would alleviate the burden of the
application process on applicants and would reduce the amount of
paperwork associated with the DBE program, thereby facilitating the
entire process. One commenter also felt that CPAs are better situated
to evaluate financial statements because of their academic and
professional training.
A roughly equal number of commenters felt quite differently about
the issue. An overwhelming majority of recipients opposed the proposal
to allow the submission of a CPA's affidavit in lieu of an individual
applicant's personal income tax return or other such documentation in
order to prove PNW. Many commenters felt that it was very important for
the recipients themselves to verify the PNW of each applicant, and that
to allow a simple affidavit of a CPA would unduly inhibit their ability
to do so, and would prevent the recipients from closely tracking the
eligibility of applicants through their
[[Page 35548]]
own independent assessment. Moreover, a number of commenters strongly
maintained that by requiring applicants to submit personal income tax
information, rather than merely a CPA's affidavit, recipients could
better safeguard the integrity of the DBE program because they would be
able to certify applicants' eligibility to the Department with
unqualified certainty, having done the eligibility determination as to
PNW themselves. Of particular concern to those commenters opposed to
the CPA affidavit was the fact that it could not be guaranteed that the
various CPAs utilized by applicants would be familiar with the
technical aspects of the DBE program, and that such CPAs would only,
and could only, certify the PNW of applicants based on the information
provided to them, which would not be available to the recipients if an
affidavit were allowed to supplant the current requirement of actual
documentation. This, they speculated, could lead to potential
misinformation and, as a consequence, various forms of disclaimers and
waivers by the CPAs in order to shield them from liability based on an
applicant's supply of faulty or incomplete information. Accordingly, a
majority of commenters opposed were concerned that this proposed
alternative, while appearing more efficient, would open the door to,
and increase the potential for, fraud and abuse by reducing the level
of scrutiny with which a recipient could exercise over the applications
submitted and in making the ultimate eligibility determinations.
The Department is clearly concerned with maintaining the integrity
of the program. Central to the narrow tailoring of the DBE program is
the PNW requirement, and as such there is a great need to ensure that
every measure is taken to qualify applicants who are truly socially and
economically disadvantaged within the meaning of the statutes governing
the DBE program and as intended by Congress. Thus, a thorough
eligibility determination process that is not overly burdensome is
required. Having been persuaded by the recipients' comments opposing
the CPA option on grounds of maintaining program integrity, the
Department has decided not to adopt this proposal. Therefore,
individual applicants are required to submit their personal income tax
information to DOT recipients so that the recipients themselves can
make unqualified and accurate determinations of applicants' eligibility
under the DBE program.
It should be emphasized that the privacy and confidentiality
concerns raised by many of the commenters does not go unheeded. The
final rule, as it has existed since 1999, explicitly requires that the
personal financial information of applicants be kept strictly
confidential. This confidentiality requirement is not taken lightly,
and cannot and will not be compromised. We note that the regulation has
been amended previously to prohibit the release by recipients of
applicants' PNW-related personal financial information, even in the
face of State freedom of information or open records laws.
We understand the justifiable privacy concerns associated with
collecting personal tax returns; nevertheless, it is incumbent upon the
Department to safeguard the integrity of the program. Providing the
recipients with the necessary means and information to determine the
eligibility of applicants to participate in the DBE program is critical
to accomplishing this end, and such determinations must be unqualified
and verified. This, we believe, is necessary to ensure that the DBE
program is indeed narrowly tailored, so as to comply with Adarand and
its progeny.
The 2001 NPRM went further in its proposed changes to Sec. 26.67
as to the calculation of an applicant's PNW. The proposed change
addressed vested pension plans, Individual Retirement Accounts, 401(k)
accounts, and other retirement savings or investment programs in which
the assets cannot be distributed to the individual at the present time
without significant adverse tax or interest consequences. We proposed
two options: (1) That PNW should include only the present value of such
assets, less the tax and interest penalties that would accrue if the
asset were distributed at the present time; and/or (2) to exclude such
assets altogether from the PNW calculation.
As with the PNW proposal, the public comments received regarding
retirement assets were sharply divided. Some commenters suggested that
either method would be acceptable. One commenter offered a variation on
these two proposed methods of calculating PNW--having applicants list
their accounts and like assets, but not actually including them in the
PNW calculation unless they are accessed. Another commenter suggested
only counting such assets at the point they become vested.
A substantial number of other commenters opposed the inclusion of
pension plans and other retirement assets in the PNW calculation,
arguing that only liquid assets should be included, and because such
assets are not available without penalty they should not be counted.
These commenters also voiced the concern that calculating the penalty
(i.e., present value minus taxes and interest penalties if withdrawn)
would be too problematic and burdensome on small business owners and
recipients. It would also be difficult to verify. Others suggested that
retirement assets have no bearing on whether a particular DBE has the
present ability to do the required work within the program, and
therefore should be excluded from any PNW calculation. To include such
assets in the PNW calculation, some commenters contended, would be to
penalize DBEs for investing wisely.
A similarly substantial number of commenters, mostly recipients,
strongly urged the inclusion of pension plans and other retirement
assets in the PNW calculation. Many supporters of the inclusion of such
assets stressed that to exclude them would go against generally
accepted accounting practices. One commenter stated that the proposal
of counting the assets and then taking into account the consequent
liability is fairer than simply counting the asset in whole. Other
commenters suggested that it is important to include these assets in
the PNW calculation because it would prevent applicants from diverting
funds to such accounts in order to meet the PNW requirement, and
thereby preclude any possibility of fraud or abuse. One commenter
stated that retirement assets are plainly assets, and therefore should
be included in any accounting of PNW, taking appropriate account of
penalties and present value.
Although retirement assets may not be readily available as sources
of financing for business operations, they are part of a person's
overall wealth. While we understand that it may be difficult to
calculate the assets, we must maintain the integrity of the program and
ensure that the calculation reflects the individual's true wealth. To
exclude these assets would be misleading and could compromise the
integrity of the program. Therefore, we are continuing to require that
the present value of assets be counted. Recipients should count only
the present value of the 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 determination, the recipient would subtract
the interest or tax penalties the individual would incur if he or she
withdrew the assets today.
[[Page 35549]]
Retainage
As the Department noted in the preamble to the February 1999 final
rule, delays in payment have long been one of the most significant
barriers to the competitiveness, and in some cases the viability, of
small subcontractors. One of the delays in payment which subcontractors
have been most concerned about is the payment of retainage.
Subcontractors have told us they often finish their work on a contract
months or years before the end of the project on which the prime
contractor is working, but the prime contractor does not pay them fully
until after the recipient has paid retainage to the prime contractor at
the end of the entire project. To help surmount this barrier, the 1999
final rule requires prime contractors to pay retainage to
subcontractors promptly after the subcontractors satisfactorily
complete their work.
Many states and other recipients have responded creatively to this
provision, taking such measures as making incremental payments to prime
contractors or eliminating retainage altogether. Where recipients have
not taken such measures, however, prime contractors have complained
that the requirement to pay subcontractors fully before the recipient
pays retainage to the prime contractor is a financial hardship on prime
contractors.
In order to address the prime contractors' concerns without
diminishing the benefit of the existing provision to subcontractors,
the Department proposed three approaches: (1) A recipient could
eliminate retainage entirely, neither retaining funds from prime
contractors nor permitting prime contractors to hold retainage from
subcontractors; (2) a recipient could decide not to retain funds from
prime contractors, but give prime contractors discretion to hold
retainage from subcontractors (the recipient would require prime
contractors to pay subcontractors in full after satisfactory completion
of the subcontractor's work); or (3) the recipient could hold retainage
from prime contractors but make incremental inspections and approvals
of the prime contractor's work at various stages of the project (the
recipient would pay the prime contractor the portion of the retainage
based on these approvals), and the prime contractor, in turn, would be
required to promptly pay all retainage owed to the subcontractor for
satisfactory completion of the approved work.
We received eighty-four comments on the issue of retainage. Several
commenters favored the proposed changes, with most agreeing that
options (1) and (3) are best, so long as they would not conflict with
state law. A majority of commenters favored the proposed changes with
modifications. Several commenters noted the difficulty on prime
contracts in implementing the three options when it may be difficult to
evaluate the quality of each subcontractor's work in situations where
the result of the subcontractor's work may not be known until other
work is performed on top of it. In twenty-two letters submitted, option
(3) was pointed out as the best because commenters said, of the need
for prime contractors to have the flexibility to hold retainage until
the state accepts the portion of the work performed by the
subcontractor. Another commenter recommended a fourth option: all
retainage amounts must be returned within fifteen business days of
satisfactory completion of the work, regardless of whether the prime
contractor was paid.
Several commenters requested a definition of ``satisfactory
completion.'' For purposes of this provision, we have defined
satisfactory completion of a subcontractor's work as when all the tasks
called for in the subcontract have been accomplished and documented as
required by the recipient. When a recipient has made an incremental
acceptance of a portion of a prime contract, the work of a
subcontractor covered by that acceptance is considered satisfactorily
completed.
Twenty-three commenters disagreed entirely with the proposed
changes, including eleven State DOTs. Many of these commenters were
concerned that one or more of the options could conflict with state
laws, or force recipients into a ``cookie cutter'' solution. Others
found option (3) unworkable, costly, or in need of a phase-in period
for implementation. A few commenters recommended the complete
elimination of retainage. They pointed to the root causes of difficulty
in recouping retainage--such as inspector delays and inefficiency--that
lead to the contractors being unduly penalized.
The Department wants recipients to have flexibility in their
implementation of retainage. The Department believes that it is best to
implement solutions that minimize difficulties for both subcontractors
and prime contractors. Current Sec. 26.29 addresses the difficulties
caused by retainage for subcontractors, but does so in a way that prime
contractors were concerned shifted too much of the burden to them. The
purpose of the amendments to Sec. 26.29 is to mitigate the problems
raised by prime contractors while retaining the benefits of the section
to subcontractors. The Department also believes that recipients should
have flexibility in their implementation of this section. For these
reasons, we are adopting the proposed amendments and permitting
recipients to choose which of the three options to use. Whichever
option the recipient chooses, it must apply it uniformly to all
contracts. We are defining ``prompt'' as no later than thirty days.
Based on our experience in program review thirty days was the most
common length of time suggested by recipients. The Department believes
that this is a sensible amount of time for payment of retainage.
Size Standard
One of the purposes of the DBE rule is to make it possible for
small firms to grow. This includes the opportunity for subcontractors
to become able to compete as prime contractors. To be able to perform
prime contracts, companies often need to be larger and have more
resources than they had as subcontractors. Frequently, firms attempting
to grow will perform both prime contracts and subcontracts. This may
create a dilemma for DBE firms in some instances. In order to work as
prime contractors, firms may need to grow beyond the limits of the SBA
size standards applicable to their subcontracting field. If they do,
then recipients may decertify the companies because they no longer
qualify as small businesses. A number of firms have expressed concern
that this situation penalizes success and impedes achievement--an
important objective of the DBE program.
We have issued guidance stating that recipients should not totally
decertify a firm because it exceeds the size standard for one or more
of its activities. Under Sec. 26.65(a), if a firm meets the size
standard for one type of work (e.g., as a general contractor), it
should continue to be certified and receive DBE credit for that type of
work, even if it has exceeded the size standard for another type of
work (e.g., as a specialty subcontractor). When its specific section
exceeds particular size standards, the firm will not remain eligible
and receive DBE credit for this type of activity, but will retain its
certification for its other areas that remain DBE eligible. It is
important for recipients to make these distinctions, as 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
[[Page 35550]]
only in those areas in which it does meet size standards.
The Department sought comment on whether any modifications of the
rule to address further the situations of firms that work as both prime
contractors and subcontractors. There was no proposed language offered,
but instead used recently issued guidance to shape the issue. Ten
commenters favored changes with some modification or variation. One
comment noted that the proposal raises concerns that DBEs who graduate
from one type of work area are devising creative approaches to
restructure their companies so they can remain in the DBE program.
Another commenter favored change, but wanted to increase the
certification gross receipts cap to $25,000,000. The gross receipts cap
is statutory, and the Department's discretion to raise it is limited to
making adjustments for inflation.
Some commenters may have believed that the guidance language was a
proposed change, but it was not. The major objections from those
commenters opposed are that the change would be confusing and create
tracking problems for the recipients. Several commenters noted
questions that would be raised by the changes, including how often size
standards should be checked, how it should be measured, and by whom. We
recommend that size determinations be reviewed by the unified
certification agency that conducted the most recent certification, and
that the certifications be reviewed every three years. As such, we are
not making any changes to the provision.
Evidence of Group Membership
Section 26.67 requires that recipients rebuttably presume that
members of groups specified in the regulation are disadvantaged.
Recipients are further required to obtain a signed, notarized statement
of disadvantage from all persons whose membership in a disadvantaged
group is relied upon for DBE certification. The current regulation also
allows recipients to request additional proof of ethnicity. Several
commenters indicated that a signed, notarized statement of ethnicity is
sufficient. Other commenters felt that additional proof is necessary,
however, and that they should be permitted to request additional proof
rather than relying on a checked box on a form. We agree that
recipients should continue to have the flexibility to require proof of
ethnicity. We caution recipients, however, to apply these standards
uniformly.
In particular, recipients should avoid making members of a
particular ethnic group routinely meet a higher level of proof than
members of other groups. For example, many recipients accept a driver's
license or a birth certificate as adequate proof of group membership.
These forms of identification always indicate gender and sometimes may
indicate the race of the holder. They often do not designate, however,
whether an individual is Hispanic or Native American. In some
instances, members of these groups have been required to provide
several additional types of proof of ethnicity simply because their
driver's license did not indicate their particular group membership.
The Department does not object to recipients' requirements that
applicants document group membership. If a recipient chooses to require
proof then it should do so uniformly, by requiring at least one piece
of evidence from each applicant. A driver's license or a birth
certificate may be adequate forms of proof of group membership. In
cases where the required proof does not indicate specific races,
however, such as Hispanic or Native American, the applicant only should
be required to provide the same level of proof as members of other
groups. For example, if a birth certificate is adequate for one group,
then a single piece of evidence (but not multiple pieces of evidence)
may be required from members of other groups. Such single pieces of
evidence might include naturalization papers; Indian tribal roll cards;
tribal voter registration certificate; a letter from a community group,
educational institution, religious leader, or government agency stating
that the individual is a member of the claimed group; or, a letter from
the individual setting forth specific reasons for believing himself/
herself to be a member of the designated group. If a recipient has a
reasonable basis for doubting the validity of the asserted group
membership of an applicant, then it is appropriate for the recipient to
collect additional information. In such a case, the recipient must
inform the applicant, in writing, of the reasons for seeking additional
documentary evidence. It is our expectation that requiring a written
record justifying the need for additional information will help to
reduce the number of unnecessary requests.
Confidentiality
In the NPRM we proposed amending the confidentiality section of the
regulation to parallel the existing, tighter confidentiality provision
of Sec. 26.67 concerning personal net worth information. We received
twenty-three comments on this section, all of which at least in part
supported the proposed change. Therefore, recipients may not release
confidential business information under any circumstance without the
submitter's written consent. This proposal has the effect of extending
to all confidential business information the protection previously
given to PNW-related personal financial information.
Two commenters asked about UCPs and the issue of several people
having access to the applicant's confidential information. Section
26.101 requires that all recipients be bound by the regulations in part
26. So while it may be necessary for confidential information to be
shared among several UCP participants in the certification process, no
one may release the confidential information to an outside party
without the submitter's consent. Part 26 specifically intends to
preempt disclosure under state or local law, so a recipient may not
release this information even under local and State FOIA laws. For
information that is not considered or deemed confidential business
information, the recipient must comply with State freedom of
information or open records laws.
Recipients may continue to report data in formats that do not
reveal the submitter's name. For example, Sec. 26.11 requires that
recipients keep and maintain information on DBE and non-DBE
contractors' and subcontractors' annual gross receipts of the firm.
There are a variety of methods by which recipients can keep and
maintain confidential information private. For example, each applicant
could be assigned a case number, and all confidential matters that
might be needed by different resources could refer to the case number,
with only a specific entity in possession of the master list for
certification purposes.
Economic Disadvantage
The majority of commenters on this section supported removing
paragraph (B)(2) under ``Economic Disadvantage'' in Appendix E to part
26, ``Individual Determinations of Social and Economic Disadvantage.''
This paragraph requires that in the case of applications by individuals
to be considered socially and economically disadvantaged on an
individual basis, the applicant submit personal financial information
about his or her spouse. Because it is inconsistent with the way the
Department's personal net worth provisions under Sec. 26.67 work in
the case of applicants who are members of a group presumed to be
economically and socially disadvantaged, we are deleting it.
The primary result of this change is that the Department no longer
requires
[[Page 35551]]
spouses to complete PNW forms in addition to the applicant, even in
cases of individual requests to be considered as disadvantaged (the
Department never has permitted the routine collection of spousal
information in other contexts). We are preserving, however, the ability
for recipients to request relevant information from spouses on a case-
by-case basis when the recipient has a specific reason to look into the
spouse's finances. For example, when there has been a transfer of
assets to the spouse within the previous two years, it is appropriate
to collect certain information about the spouse, because assets
transferred to the spouse are attributed to the applicant for purposes
of calculating PNW. We also recognize that the recipients will want to
be able to investigate a spouse's finances in situations where the
recipient suspects the applicant is fraudulently transferring assets
over to his/her spouse in order to qualify as a disadvantaged
individual or when there is an affiliation relationship between the
applicant's business and a spouse's business.
Credit for Trucking Firms
The issue of how to count DBE credit for trucking operations, which
was debated vigorously among commenters to the 1999 final rule, has
continued to be controversial. The SNPRM that led to the 1999 final
rule proposed that to be performing a commercially useful function
(CUF), a DBE trucking firm had to own fifty percent of the trucks it
used in connection with a contract. A number of comments said that this
requirement was out of step with industry practice, which commonly
involves companies leasing trucks from owner-operators and other
sources for purposes of a project. The final rule provided that a DBE
need not provide all the trucks on a contract to receive credit for
transportation services, but it must control the trucking operations
for which it seeks credit. It must have at least one truck and driver
of its own, but it can lease trucks owned by others, both DBEs and non-
DBEs, including owner-operators. For work done with its own trucks and
drivers, and for work done with DBE lessees, the firm receives credit
for all transportation services provided. For work done with non-DBE
lessees, the firm gets credit only for the fees or commissions it
receives for arranging the transportation services, because the
services themselves are being performed by non-DBEs.
In the years since the publication of the final rule, the
Department has received communications from a number of state DOTs,
trucking companies, and other parties saying that the portion of the
rule limiting credit for trucks leased from non-DBE firms reduced
opportunities for DBE trucking companies and did not take into account
sufficiently the important role of leasing in the trucking industry. In
response, the Department asked in the preamble to the May 2001 NPRM
whether the rule should expand the credit available for DBE truck
leasing (e.g., by counting credit for twice the number of trucks a DBE
owned, so that a DBE that owned one truck used on a contract and leased
another from a non-DBE firm would get credit for two trucks).
Commenters to the NPRM were divided on the issue. Eleven commenters
preferred to leave the current rule in place, citing administrative
simplicity and prevention of abuse as their major reasons. Five
commenters endorsed the example suggested in the NPRM preamble of
permitting credit for twice the number of trucks a DBE owns, and six
others suggested variations on that example (e.g., authorizing credit
for three times the number of trucks owned by the DBE). Some commenters
emphasized the need for safeguards to ward off potential abuse of the
provision. Twenty-three commenters favored permitting credit for all
leased trucks used by a DBE on a contract, subject to certain
safeguards (e.g., for trucks on long-term leases, the DBE firm is
responsible for supervision and control of all trucks on the contract).
The principle that DBE participation should be counted only for
work performed with a DBE firm's own forces is an important one that
the Department's DBE program follows consistently. For example, when a
DBE firm subcontracts part of its work to a non-DBE firm, the
subcontracted portion does not count toward DBE goals, as per Sec.
26.55(a)(3). The Department's existing counting provision for trucking
services was explicitly designed to be consistent with this principle
(64 FR 5116 (Feb. 2, 1999)). Allowing credit for unlimited use of non-
DBE leased trucks could also lead to program abuses and reduce DBE
contracting opportunities for DBEs in other types of work.
At the same time, the Department is aware that flexibility in
administering the DBE program is important to recipients and
contractors, and we are sensitive to the concerns of trucking companies
that opportunities may have been reduced under the 1999 final rule. In
light of these factors, the Department has granted program waivers to
two states, Indiana and Wisconsin, permitting credit for leased trucks
for twice the number of trucks owned by DBE trucking firms on a
contract. The Department believes that this approach reasonably
accommodates many of the concerns commenters expressed with respect to
reduced DBE trucking participation while not departing from the
Department's principle of counting DBE credit only for work performed
by DBE firms themselves.
Consequently, the Department, in this final rule, will adopt the
following approach. Recipients may count for DBE credit the dollar
volume attributable to no more than twice the number of trucks on a
contract owned by a DBE firm or leased from another DBE firm, but is
not required to do so. For example, if DBE Firm X owned two trucks,
leased two others from another DBE firm, and leased six others from a
non-DBE firm, the DBE credit authorized for Firm X's participation
would be equivalent to the dollar volume of work attributable to eight
trucks (four trucks owned by or leased from DBEs, multiplied by two).
DBE credit for the remaining two non-DBE trucks leased for the contract
would be limited to the fees or commissions received by the DBE firm
pertaining to those two trucks.
The final rule permits, but does not require, recipients to count
credit in this manner. That is, a recipient could choose to continue
the counting provisions its DBE program adopted to comply with the 1999
final rule. If a recipient chooses to modify its counting provisions to
count the additional credit for non-DBE lessees permitted by today's
amendment, it must do so via a change to its DBE program approved by
the cognizant FHWA, FTA, or FAA office. The OA approval is necessary to
ensure the appropriate safeguards are taken by the recipients to
prevent fraud.
III. Alaska Native Corporations
In Sec. 26.73(h) of the current DBE rule, the Department codified
its interpretation of former 49 CFR part 23 that ANC-owned firms, as
well as firms owned by Indian tribes and Native Hawaiian Organizations,
must meet the DBE rule's eligibility standards concerning size and
control. In the preamble to the February 1999 final rule (64 FR 5121
(Feb. 2, 1999)), the Department explained why it did not believe that
43 U.S.C. 1626(e), a provision of the Alaska Native Claims Settlement
Act (ANCSA), mandated different treatment for ANC-owned firms in the
DOT DBE program. The Department continues to believe that the legal and
policy reasoning behind this provision was sound. However, an
[[Page 35552]]
amendment to Public Law 107-117 ``making appropriations for the
Department of Defense for the fiscal year ending September 30, 2002,
and for other purposes,'' has superceded the application of Sec.
26.73(h) to ANC-owned firms.
Section 702 of Public Law 107-117 amended 43 U.S.C. 1626(e), a
provision of the Alaska Native Claims Settlement Act, to say that:
Any entity (i.e., a subsidiary, partnership, or joint venture of
an ANC) that satisfies subsection (e)(2) of this section (which
establishes ownership and control criteria for ANC-related entities)
that has been certified under section 8 of Public Law 85-536 (i.e.,
is certified by the Small Business Administration under the 8(a) or
small disadvantaged business programs) is a Disadvantaged Business
Enterprise for the purposes of Public Law 105-178 (i.e., TEA-21).
Based on the above language, an entity meeting criteria to be an
ANC-owned firm must be certified as a DBE, even if it does not meet
size, ownership, and control criteria otherwise applicable to DBEs. For
example, an ANC-related entity could exceed SBA small business size
standards or have its daily business operations controlled by a non-
disadvantaged individual and still be certified if it met the section
702 criteria.
Consequently, the Department is deleting references to ANC-related
entities from Sec. 26.73(h) and creating a new Sec. 26.73(i). The new
paragraph sets forth certification criteria for ANC-related entities
consistent with 43 U.S.C. 1626(e). Because these certification criteria
differ from those applicable to all other DBE applicants, recipients
would not use the new DOT Uniform Application Form for ANC-related
entities. Recipients instead would collect (and applicants would have
to provide) sufficient documentation that an ANC-related entity meets
the new criteria including information sufficient to allow the
recipients to administer their DBE programs with respect to ANC-related
entities. If an ANC-related entity did not meet all the requirements
(e.g., it had not been certified by SBA), then its certification would
continue to be processed under Sec. 26.73(h), in the same manner as
Indian Tribal firms.
The statutory requirement to treat ANC-owned entities differently
from all other applicants for certification in the DBE program, because
of the reference in section 702 to TEA-21, on its face applies only to
firms seeking work on FTA- and FHWA-assisted contracts. The statute
does not apply to firms seeking work on FAA-assisted contracts. To
avoid confusion and unnecessary administrative complexity, however, in
this rule the Department is applying the altered certification
requirements for ANC-related entities to all parts of the DBE program,
including FAA-assisted contracts and concessions.
IV. Clarification Regarding Multi-Year Projects and Other Revisions
Multi-Year Projects
A recipient of DOT funds--FAA, FTA, or FHWA--may set an overall
project 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 (Sec.
26.45(f)(3)), specifically including a 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. This change
to the regulation would apply to all such projects the option for a
project goal currently available to design-build contracts.
With respect to its other DOT-assisted contracting activities, the
recipient would also submit its regular annual overall goal for review.
In doing so 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.
An overall project 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 total expenditure of $500 million.
Recipients W and Z can submit jointly 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 with which it could be useful to establish an
overall project goal include design-build contracts. In such a case,
the overall project goal would serve as the goal for the master
contractor. The master contractor would then proceed to establish
contract goals for the subcontracts 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. It is the Department's view, however,
that recipients of funds from all three operating administrations can
make use of project goals.
Clarification Concerning Primary Industry Classification
Section 26.5 of the DBE final rule defined primary industrial
classification as the four-digit Standard Industrial Classification
(SIC) code designation defined in 13 CFR part 121 by the Small Business
Administration. In the final rule we further stated that as the North
American Industrial Classification System (NAICS) replaces the SIC
system, reference to SIC codes and the SIC Manual are deemed to refer
to the NAICS manual and applicable codes. We would like to take this
opportunity to remind recipients that effective October 1, 2000, the
Small Business Administration is no longer using the SIC system for its
small business standards. The SBA published a final rule on May 15,
2000, adopting small business size standards based on the NAICS (65 FR
30840). The new table of small business size standards that accompanied
the rule contained errors, so the SBA published a replacement table in
the Federal Register on September 5, 2001 (65 Fed. Reg. 53533).
Therefore, the term ``Standard Industrial Classification'' and the
acronym ``SIC'' will be replaced with ``North American Industrial
Classification System'' and the acronym ``NAICS'' throughout the text
of the regulation. Although this change was not included in the Interim
Final Rule, the change is editorial in nature and does not require
notice and comment.
The SBA rule on NAICS standards can be obtained through the
Internet at: http://www.sba.gov/size/. Further information about NAICS,
including a table matching SIC codes to NAICS codes, is available on
the U.S. Bureau of Census' Web page at: http://census.gov/epcd/www/naics.html.
The North American Industry Classification
[[Page 35553]]
Manual-- United States, 1997 is available from the National Technical
Information Service, 5285 Port Royal Road, Springfield, VA, 22161; by
calling 1 (800) 553-6847; or via the Internet at:
http://www.ntis.gov/product/naics.htm
Regulatory Analyses and Notices
Executive Order 12866 and DOT Regulatory Policies and Provisions
This rule is not a significant regulation under either Executive
Order 12866 or DOT Regulatory Policies and Provisions. The rule will
not impose any new costs on recipients or contractors. It simply would
make administrative adjustments concerning existing provisions and
assist contractors by implementing the SBA-DOT MOU. It would also
reduce burdens on contractors and recipients through the use of new
uniform forms.
Regulatory Flexibility Act Analysis
The Department certifies that this rule will not have significant
economic effects on a substantial number of small entities. While the
rule affects small entities, it does not have a significant economic
impact on anyone.
Paperwork Reduction Act
This rule contains information collection requirements. As required
by the Paperwork Reduction Act of 1995 (the PRA, 44 U.S.C. 3507(d)),
the Department will submit these requirements to the Office of
Information And Regulatory Affairs of the Office of Management and
Budget for review.
As noted elsewhere in this preamble, the Department adopted the
suggestion of having one standard reporting form in the February 2,
1999, DBE final rule. The Uniform Semi-Annual Report of DBE Awards or
Commitments and Achievements form is contained in Appendix B. At the
present time, the Department has an information collection item
approved under the Paperwork Reduction Act. This is for a quarterly DBE
data report from recipients to DOT (OMB No. 2105-0510). This approval
expired July 31, 2001. Because the reporting requirement has been
reduced to semi-annually, the burden has been reduced.
Firms applying for DBE certification must provide information to
recipients to allow them to review the firm's continuing eligibility.
The 1999 DBE final rule also called for a single, uniform, nationwide
certification application form. Part 26 requires firms applying for DBE
certification to provide information to recipients to allow them to
make eligibility decisions. Currently, an applicant firm may be
required to fill out different applications for FAA, FHWA and FTA
recipients. The Department believes that requiring one uniform
application will reduce the paperwork burden. The Uniform Certification
Application form is contained in Appendix F.
This rule provides forms for the Unified Certification Program for
recipients. UCP certifying agencies are responsible for maintaining a
directory of certified DBE firms. Instead of the hundreds that used to
be required, now only 52 consolidated directories will exist.
Additionally, recipients must submit DBE programs to be approved by the
Department, including calculations of overall goals. As they complete
this requirement, recipients may temporarily expend more hours than in
the past on information-related tasks.
Federalism
The Department has determined that this final rule will not have
Federalism impacts sufficient to warrant preparation of a Federalism
assessment.
List of Subjects in 49 CFR Part 26
Administrative practice and procedure, Airports, Civil rights,
Government contracts, Grant-programs--transportation, Mass
transportation, Minority businesses, Reporting and recordkeeping
requirements.
Issued this 4th day of June, 2003, at Washington, DC.
Norman Y. Mineta,
Secretary of Transportation.
For the reasons set forth in the preamble, the Department amends 49 CFR
part 26 as follows:
PART 26--PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN
DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS
1. The authority citation for 49 CFR part 26 continues to read as
follows:
Authority: 23 U.S.C. 324; 41 U.S.C. 2000d, et seq.; 49 U.S.C.
1615, 47107, 47113, 47123; Pub. L. 105-178, Sec. 1101(b), 112 Stat.
107, 113.
2. In 49 CFR part 26, the term ``Standard Industrial Classification''
is revised to read ``North American Industrial Classification System''
wherever it occurs. The acronym ``SIC'' is revised to read ``NAICS''
wherever it occurs.
3. Amend Sec. 26.5 by adding, in alphabetical order among the existing
definitions, a definition of ``DOT/SBA MOU Memorandum of Understanding
or MOU'' after ``DOT-assisted contract and a definition of ``SBA
certified firm'' after ``Small Business Administration'', and by
revising the definition of ``Primary industry classification'', to read
as follows:
Sec. 26.5 What do the terms in this part mean?
* * * * *
DOT/SBA Memorandum of Understanding or MOU, refers to the agreement
signed on November 23, 1999, between the Department of Transportation
(DOT) and the Small Business Administration (SBA) streamlining
certification procedures for participation in SBA's 8(a) Business
Development (8(a) BD) and Small Disadvantaged Business (SDB) programs,
and DOT's Disadvantaged Business Enterprise (DBE) program for small and
disadvantaged businesses.
* * * * *
Primary industry classification means the North American Industrial
Classification System (NAICS) designation which best describes the
primary business of a firm. The NAICS is described in the North
American Industry Classification Manual--United States, 1997 which is
available from the National Technical Information Service, 5285 Port
Royal Road, Springfield, VA, 22161; by calling 1 (800) 553-6847; or via
the Internet at: http://www.ntis.gov/product/naics.htm.
* * * * *
SBA certified firm refers to firms that have a current, valid
certification from or recognized by the SBA under the 8(a) BD or SDB
programs.
* * * * *
4. Revise Sec. 26.29 to read as follows:
Sec. 26.29 What prompt payment mechanisms must recipients have?
(a) You must establish, as part of your DBE program, a contract
clause to require prime contractors to pay subcontractors for
satisfactory performance of their contracts no later than 30 days from
receipt of each payment you make to the prime contractor.
(b) You must ensure prompt and full payment of retainage from the
prime contractor to the subcontractor within 30 days after the
subcontractor's work is satisfactorily completed. You must use one of
the following methods to comply with this requirement:
(1) You may decline to hold retainage from prime contractors and
prohibit prime contractors from holding retainage from subcontractors.
(2) You may decline to hold retainage from prime contractors and
require a contract clause obligating prime
[[Page 35554]]
contractors to make prompt and full payment of any retainage kept by
prime contractor to the subcontractor within 30 days after the
subcontractor's work is satisfactorily completed.
(3) You may hold retainage from prime contractors and provide for
prompt and regular incremental acceptances of portions of the prime
contract, pay retainage to prime contractors based on these
acceptances, and require a contract clause obligating the prime
contractor to pay all retainage owed to the subcontractor for
satisfactory completion of the accepted work within 30 days after your
payment to the prime contractor.
(c) For purposes of this section, a subcontractor's work is
satisfactorily completed when all the tasks called for in the
subcontract have been accomplished and documented as required by the
recipient. When a recipient has made an incremental acceptance of a
portion of a prime contract, the work of a subcontractor covered by
that acceptance is deemed to be satisfactorily completed.
(d) Your DBE program must provide appropriate means to enforce the
requirements of this section. These means may include appropriate
penalties for failure to comply, the terms and conditions of which you
set. Your program may also provide that any delay or postponement of
payment among the parties may take place only for good cause, with your
prior written approval.
(e) You may also establish, as part of your DBE program, any of the
following additional mechanisms to ensure prompt payment:
(1) A contract clause that requires prime contractors to include in
their subcontracts language providing that prime contractors and
subcontractors will use appropriate alternative dispute resolution
mechanisms to resolve payment disputes. You may specify the nature of
such mechanisms.
(2) A contract clause providing that the prime contractor will not
be reimbursed for work performed by subcontractors unless and until the
prime contractor ensures that the subcontractors are promptly paid for
the work they have performed.
(3) Other mechanisms, consistent with this part and applicable
state and local law, to ensure that DBEs and other contractors are
fully and promptly paid.
5. In Sec. 26.37, revise paragraph (b) to read as follows:
Sec. 26.37 What are a recipient's responsibilities for monitoring the
performance of other program participants?
* * * * *
(b) Your DBE program must also include a monitoring and enforcement
mechanism to ensure that work committed to DBEs at contract award is
actually performed by DBEs.
* * * * *
6-7. In Sec. 26.55, revise paragraphs (d)(5) and (h) to read as
follows:
Sec. 26.55 How is DBE participation counted toward goals?
* * * * *
(d) * * *
(5) The DBE may also lease trucks from a non-DBE firm, including
from an owner-operator. The DBE who leases trucks from a non-DBE is
entitled to credit for the total value of transportation services
provided by non-DBE lessees not to exceed the value of transportation
services provided by DBE-owned trucks on the contract. Additional
participation by non-DBE lessees receives credit only for the fee or
commission it receives as a result of the lease arrangement. If a
recipient chooses this approach, it must obtain written consent from
the appropriate Department Operating Administration.
Example to this paragraph (d)(5): DBE Firm X uses two of its own
trucks on a contract. It leases two trucks from DBE Firm Y and six
trucks from non-DBE Firm Z. DBE credit would be awarded for the
total value of transportation services provided by Firm X and Firm
Y, and may also be awarded for the total value of transportation
services provided by four of the six trucks provided by Firm Z. In
all, full credit would be allowed for the participation of eight
trucks. With respect to the other two trucks provided by Firm Z, DBE
credit could be awarded only for the fees or commissions pertaining
to those trucks Firm X receives as a result of the lease with Firm
Z.
* * * * *
(h) Do not count the participation of a DBE subcontractor toward a
contractor's final compliance with its DBE obligations on a contract
until the amount being counted has actually been paid to the DBE.
8. Revise Sec. 26.61(c) to read as follows:
Sec. 26.61 How are burdens of proof allocated in the certification
process?
* * * * *
(c) You must rebuttably presume that members of the designated
groups identified in Sec. 26.67(a) are socially and economically
disadvantaged. This means they do not have the burden of proving to you
that they are socially and economically disadvantaged. In order to
obtain the benefit of the rebuttable presumption, individuals must
submit a signed, notarized statement that they are a member of one of
the groups in Sec. 26.67(a). Applicants do have the obligation to
provide you information concerning their economic disadvantage (see
Sec. 26.67).
* * * * *
9. Revise Sec. 26.63(a) to read as follows:
Sec. 26.63 What rules govern group membership determinations?
(a)(1) If, after reviewing the signed notarized statement of
membership in a presumptively disadvantaged group (see Sec. 26.61(c)),
you have a well founded reason to question the individual's claim of
membership in that group, you must require the individual to present
additional evidence that he or she is a member of the group.
(2) You must provide the individual a written explanation of your
reasons for questioning his or her group membership and a written
request for additional evidence as outlined in paragraph (b) of this
section.
(3) In implementing this section, you must take special care to
ensure that you do not impose a disproportionate burden on members of
any particular designated group. Imposing a disproportionate burden on
members of a particular group could violate Sec. 26.7(b) and/or Title
VI of the Civil Rights Act of 1964 and 49 CFR part 21.
* * * * *
10-11. Revise Sec. 26.67(a)(2) and remove and reserve paragraph (c) as
follows:
Sec. 26.67 What rules determine social and economic disadvantage?
(a) * * *
(1) * * *
(2) (i) You must require each individual owner of a firm applying
to participate as a DBE (except a firm applying to participate as a DBE
airport concessionaire) whose ownership and control are relied upon for
DBE certification to certify that he or she has a personal net worth
that does not exceed $750,000.
(ii) You must require each individual who makes this certification
to support it with a signed, notarized statement of personal net worth,
with appropriate supporting documentation. This statement and
documentation must not be unduly lengthy, burdensome, or intrusive.
(iii) In determining an individual's net worth, you must observe
the following requirements:
(A) Exclude an individual's ownership interest in the applicant
firm;
(B) Exclude the individual's equity in his or her primary residence
(except any portion of such equity that is attributable to excessive
withdrawals from the applicant firm).
(C) Do not use a contingent liability to reduce an individual's net
worth.
[[Page 35555]]
(D) With respect to assets held in vested pension plans, Individual
Retirement Accounts, 401(k) accounts, or other retirement savings or
investment programs in which the assets cannot be distributed to the
individual at the present time without significant adverse tax or
interest consequences, include only the present value of such assets,
less the tax and interest penalties that would accrue if the asset were
distributed at the present time.
(iv) Notwithstanding any provision of Federal or state law, you
must not release an individual's personal net worth statement nor any
documentation supporting it to any third party without the written
consent of the submitter. Provided, that you must transmit this
information to DOT in any certification appeal proceeding under Sec.
26.89 in which the disadvantaged status of the individual is in
question.
* * * * *
12. Amend Sec. 26.73 by revising paragraph (h), and adding a new
paragraph (i), to read as follows:
Sec. 26.73 What are other rules affecting certification?
* * * * *
(h) A firm that is owned by an Indian tribe or Native Hawaiian
organization, rather than by Indians or Native Hawaiians as
individuals, may be eligible for certification. Such a firm must meet
the size standards of Sec. 26.35. Such a firm must be controlled by
socially and economically disadvantaged individuals, as provided in
Sec. 26.71.
(i) The following special rules apply to the certification of firms
related to Alaska Native Corporations (ANCs).
(1) Notwithstanding any other provisions of this subpart, a direct
or indirect subsidiary corporation, joint venture, or partnership
entity of an ANC is eligible for certification as a DBE if it meets all
of the following requirements:
(i) The Settlement Common Stock of the underlying ANC and other
stock of the ANC held by holders of the Settlement Common Stock and by
Natives and descendents of Natives represents a majority of both the
total equity of the ANC and the total voting power of the corporation
for purposes of electing directors;
(ii) The shares of stock or other units of common ownership
interest in the subsidiary, joint venture, or partnership entity held
by the ANC and by holders of its Settlement Common Stock represent a
majority of both the total equity of the entity and the total voting
power of the entity for the purpose of electing directors, the general
partner, or principal officers; and
(iii) The subsidiary, joint venture, or partnership entity has been
certified by the Small Business Administration under the 8(a) or small
disadvantaged business program.
(2) As a recipient to whom an ANC-related entity applies for
certification, you do not use the DOT uniform application form (see
Appendix F of this part). You must obtain from the firm documentation
sufficient to demonstrate that entity meets the requirements of
paragraph (i)(1) of this section. You must also obtain sufficient
information about the firm to allow you to administer your program
(e.g., information that would appear in your DBE Directory).
(3) If an ANC-related firm does not meet all the conditions of
paragraph (i)(1) of this section, then it must meet the requirements of
paragraph (h) of this section in order to be certified, on the same
basis as firms owned by Indian Tribes or Native Hawaiian Organizations.
13. Amend Sec. 26.83 by revising paragraphs (c)(7) introductory text
and (c)(7)(i) to read as follows:
Sec. 26.83 What procedures do recipients follow in making
certification decisions?
* * * * *
(c) * * *
(7) Require potential DBEs to complete and submit an appropriate
application form, unless the potential DBE is an SBA certified firm
applying pursuant to the DOT/SBA MOU.
(i) You must use the application form provided in Appendix F to
this part without change or revision. However, you may provide in your
DBE program, with the approval of the concerned operating
administration, for supplementing the form by requesting additional
information not inconsistent with this part.
* * * * *
14. Add a new Sec. 26.84, to read as follows:
Sec. 26.84 How do recipients process applications submitted pursuant
to the DOT/SBA MOU?
(a) When an SBA-certified firm applies for certification pursuant
to the DOT/SBA MOU, you must accept the certification applications,
forms and packages submitted by a firm to the SBA for either the 8(a)
BD or SDB programs, in lieu of requiring the applicant firm to complete
your own application forms and packages. The applicant may submit the
package directly, or may request that the SBA forward the package to
you. Pursuant to the MOU, the SBA will forward the package within
thirty days.
(b) If necessary, you may request additional relevant information
from the SBA. The SBA will provide this additional material within
forty-five days of your written request.
(c) Before certifying a firm based on its 8(a) BD or SDB
certification, you must conduct an on-site review of the firm (see
Sec. 26.83(c)(1)). If the SBA conducted an on-site review, you may
rely on the SBA's report of the on-site review. In connection with this
review, you may also request additional relevant information from the
firm.
(d) Unless you determine, based on the on-site review and
information obtained in connection with it, that the firm does not meet
the eligibility requirements of Subpart D of this part, you must
certify the firm.
(e) You are not required to process an application for
certification from an SBA-certified firm having its principal place of
business outside the state(s) in which you operate unless there is a
report of a ``home state'' on-site review on which you may rely.
(f) You are not required to process an application for
certification from an SBA-certified firm if the firm does not provide
products or services that you use in your DOT-assisted programs or
airport concessions.
15. Redesignate Sec. 26.85 as Sec. 26.86. Within the redesignated
Sec. 26.86, redesignate paragraphs (b) and (c) as paragraphs (c) and
(d) and add a new paragraph (b) to read as follows:
Sec. 26.86 What rules govern recipients' denials of initial requests
for certification?
* * * * *
(b) When you deny DBE certification to a firm certified by the SBA,
you must notify the SBA in writing. The notification must include the
reason for denial.
* * * * *
16. Add a new Sec. 26.85, to read as follows:
Sec. 26.85 How do recipients respond to requests from DBE-certified
firms or the SBA made pursuant to the DOT/SBA MOU?
(a) Upon receipt of a signed, written request from a DBE-certified
firm, you must transfer to the SBA a copy of the firm's application
package. You must transfer this information within thirty days of
receipt of the request.
(b) If necessary, the SBA may make a written request to the
recipient for additional materials (e.g., the report of the on-site
review). You must provide a copy of this material to the SBA within
forty-five days of the additional request.
[[Page 35556]]
(c) You must provide appropriate assistance to SBA-certified firms,
including providing information pertaining to the DBE application
process, filing locations, required documentation and status of
applications.
17. Amend Sec. 26.87 by redesignating paragraphs (h) through (j) as
paragraphs (i) through (k) and by adding a new paragraph (h) to read as
follows:
Sec. 26.87 What procedure does a recipient use to remove a DBE's
eligibility?
* * * * *
(h) When you decertify a DBE firm certified by the SBA, you must
notify the SBA in writing. The notification must include the reason for
denial.
* * * * *
18. Amend Sec. 26.89 by revising paragraphs (a)(1) and (f)(7)to read
as follows:
Sec. 26.89 What is the process for certification appeals to the
Department of Transportation?
(a)(1) If you are a firm that is denied certification or whose
eligibility is removed by a recipient, including SBA-certified firms
applying pursuant to the DOT/SBA MOU, you may make an administrative
appeal to the Department.
* * * * *
(f) * * *
(7) The Department provides written notice of its decision to you,
the firm, and the complainant in an ineligibility complaint. A copy of
the notice is also sent to any other recipient whose administrative
record or decision has been involved in the proceeding (see paragraph
(d) of this section). The Department will also notify the SBA in
writing when DOT takes an action on an appeal that results in or
confirms a loss of eligibility to any SBA-certified firm. The notice
includes the reasons for the Department's decision, including specific
references to the evidence in the record that supports each reason for
the decision.
* * * * *
19. In Sec. 26.109, revise paragraph (a)(2) to read as follows:
Sec. 26.109 What are the rules governing information,
confidentiality, cooperation, and intimidation or retaliation?
(a) * * *
(1) * * *
(2) Notwithstanding any provision of Federal or state law, you must
not release information that may be reasonably be construed as
confidential business information to any third party without the
written consent of the firm that submitted the information. This
includes applications for DBE certification and supporting
documentation. However, you must transmit this information to DOT in
any certification appeal proceeding under Sec. 26.89 in which the
disadvantaged status of the individual is in question.
20. In Appendix B, revise the heading and add a form reading as
follows:
Appendix B to Part 26--Uniform Report of DBE Awards or Commitments and
Payments Form
BILLING CODE 4910-62-P
[[Page 35557]]
[GRAPHIC] [TIFF OMITTED] TR16JN03.051
[[Page 35558]]
[GRAPHIC] [TIFF OMITTED] TR16JN03.052
[[Page 35559]]
21. In Appendix E, under Economic Disadvantage, remove and reserve
section (B)(2).
22. Add a new Appendix F to read as follows:
Appendix F to Part 26--Uniform Certification Application Form
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