DBE COMPLIANCE TRAINING MARYLAND DEPARTMENT OF TRANSPORTATION NOVEMBER 1 AND 5, 2010 New York State...

DBE COMPLIANCE TRAININGMARYLAND DEPARTMENT OF TRANSPORTATION

NOVEMBER 1 AND 5, 2010

New York State Department of TransportationDBE Program Training

May 7 and 8, 2013

Martha Kenley

National DBE Program Manager

Federal Highway Administration

Office of Civil Rights

[email protected]

104/19/23

LEARINING OBJECTIVES

Day 1 History and Background Contract Administration Goals Good Faith Effort Reviews Certification Standards

2

Day 2Certification ProceduresContractor ComplianceCompliance and Enforcement

LEARNING OBJECTIVES

3

HISTORY

Title VI of the Civil Rights Act of 1964

1980 – DOT issued regulations to implement uniform MBE programs on Federally-assisted DOT projects. Included distinct goals for both MBEs and WBEs. Not a required percentage—negotiated State by State

•

4

HISTORY

1982 – Congress passed Surface Transportation Assistance Act 10% National DBE goal (only for MBEs)

1987 – Congress passed the Surface Transportation and Uniform Relocation Assistance Act Added women as presumed disadvantaged

class Added small business size standard

5

HISTORY

DBE Program has continued to be reauthorized and most recently in Section 1101 (b) of Moving Ahead for Progress in the 21st Century (MAP-21)

04/19/23 6

HISTORY

1995 – Adarand v. Pena. U.S. Supreme Court case: Federal racial classifications must undergo strict scrutiny. Must show:

Serve compelling government interest; and

Is narrowly tailored to further that compelling government interest

7

HISTORY

1999 – 49 CFR Part 26 created as DBE program regulations “Good faith efforts” introducedMaximize race-neutral concept 10% goal became “aspirational”Narrow tailoring”

8

NARROW TAILORING

DBE Programs must be “narrowly tailored,” meaning they must be structured only to remedy the effects of past and present discrimination, be flexible and end when the remedial purposes have been achieved

9

2005 9th Circuit Court of Appeals case in which a majority-owned subcontractor sued the DOT, contending he was denied work on a Federal-aid highway contract because even though he submitted the lowest bid, the prime hired a DBE to meet the contract goal

The court held that the Federal DBE Program served a compelling State interest and was constitutional on its face, but that to be “narrowly tailored,” States must limit race conscious measures (contract goals) to those groups that the State can show have actually suffered from discrimination

As a result, Ninth Circuit States were required to conduct disparity studies to determine whether discrimination and its effects have occurred and what specific classes were affected

DBE PRIMARY OBJECTIVE

Provide means for increasing DBE participation in DOT-assisted contracts to create a level playing field on which DBEs can compete fairly with all firms in the transportation industry

FHWA, FAA, and FTA

04/19/23 11

PROGRAM GUIDANCE

Must be issued by OST

In the form of Q and As

OSDBU websitehttp://www.osdbu.dot.gov/DBEProgram/index.cfm

04/19/23 12

DBE PROGRAM COMPLIANCE

State DOT must have: Program Plan - 49 CFR § 26.21 - must have a FHWA

approved, up-to-date DBE Program Plan which describes exactly how the program is administered - policies and procedures

Policy Statement - 49 CFR § 26.23 -commitment to DBE program and responsibilities for implementation

Liaison Officer - 49 CFR § 26.25 - must have independent and direct access to CEO. Should be involved in all DBE decisions

13

RECORDS & REPORTS

State DOT must have and maintain: Records of all DBE participation on contracts, race-

conscious and race-neutral - 49 CFR §26.11(a) Bidders List - 49 CFR §26.11

All firms bidding or participating (primes & subs) Include: name, the age of firm, and annual gross

receipts Primes should include DBEs that bid but were not

used Must submit semi-annual DBE uniform reports

14

DBE DIRECTORY § 26.31

State DOT must maintain a directory of all certified DBEs Address Phone number (email) Types of work the firm has been certified to perform Keep up-to-date Be as specific as possible NAICS Code that most narrowly defines what DBE

performs on federally-assisted contracts

15

DBE CONTRACT ADMINISTRATION

Contract must contain these provisions

Non-discriminationPrompt paymentRetainageEnforcement Provisions

ASSURANCES § 26.13

Each contract, prime and sub must contain the stated assurance as written

Failure by the contractor to carry out these requirements is a material breach of this contract, which may result in the termination of this contract or such other remedy as the recipient deems appropriate.

04/19/23 17

PROMPT PAYMENT §26.29

Must have contract provision that requires primes to pay all subcontractors, material suppliers, truckers no later than 30 days after receipt of payment from State DOT

Must have means of enforcement and mechanism for monitoring

18

RETAINAGE §26.29

Prompt and full payment of retainage from prime to sub within 30 days after the subcontractor’s work is satisfactorily completed

“Satisfactory Completion” means all subcontract work is complete

Incremental payment by State DOT to prime for work that includes sub’s work is deemed satisfactorily completed

04/19/23 19

RETAINAGE §26.29

DOT must select one of the following options for retainage:Decline to hold retainage and prohibit

prime from holding retainageDecline to hold retainage from prime,

but allow prime to hold from sub Hold retainage from prime and provide

for incremental acceptance

State Prime DBE/Subs

Does not withhold from Prime Does not withhold from subcontractors

Does not withhold from Prime Does withhold from subs

Prime must pay within 30 days of completion of subcontractor’s work

Withholds from Primepartial payments to prime upon completion of work

Does withhold from subs

Prime must pay all retainage to sub for completion of accepted work within 30 days of prime’s receipt of payment from State DOT/LPA.

04/19/23 21

SMALL BUSINESS §26.39

State DOT must include a small business element to its DBE program to facilitate participation by small businesses generally, not just DBEsPurpose is to assist State DOTs in attaining

race-neutral DBE participation

22

SMALL BUSINESS

Procurement No local preference; no MBE/WBEBusiness size must conform to DBE

regulations Consult 13 CFR Part 121 for business size caps—

In no case can exceed $22.41 Million State DOTs must verify business size

23

SMALL BUSINESS

Confusion over phrase “set aside” The prohibition on set-asides in § 26.43 specifically

applies to set asides for DBEs. The prohibition exists because set-asides for DBEs would be race-conscious, and therefore would raise constitutional issues

Race-neutral set-asides for small businesses do not raise these same constitutional issues, because of their race-neutral character. Consequently, they are not prohibited by §26.43, and can be among the

approaches used under §26.39

24

SMALL BUSINESS

Best practices:Small business race-neutral set asidesUnbundling, i.e. breaking up larger contracts into smaller contractsReducing bonding requirementsSimplifying prequalification requirements

04/19/23 25

Overall Goal--the program requires each State to establish an overall DBE goal

The annual goal is expressed as a percentage of a State DOT’s federal aid funds

Percentage of DBE participation one would expect in a discrimination-free market

Goal must be based on demonstrable evidence of availability of ready, willing, and able DBEs relative to ALL businesses ready, willing and able to participate on DOT-assisted contracts. 26 CFR 26.45(b).

Annual DBE Goal - Purpose

27

Annual DBE Goal - Basics

Encouraged to follow USDOT’s “Tips for Goal-Setting in the DBE Program” http://www.osdbu.dot.gov/documents/pdf/dbe/Tips_for_Goal.pdf

28

Identify Method Selected

1. Bidder’s List

2. Census Data + DBE Directory

3. Disparity Study

4. Use Goal of Other DOT Recipient

5. Alternate Method

Annual DBE Goal – Step One

29

Bidders List methodDetermine the number of ALL businesses,

successful OR unsuccessful that have bid or quoted on prime or subcontracts during the same time period

State DOT must have mechanism to capture data on DBE and non-DBE subcontractors that submitted bids or quotes.

30


Best data available

How was data collected

What were data sources and why are they reliable

31


Must consider potential minority and women-owned firms that could be eligible for DBE certificationSurvey of businesses through custom

census—filtered by business size/typeSurvey of unsuccessful subcontractors on

bidder’s list if not identified as DBEsMBEs and WBEs in State programs

32


Determine Relevant Geographic Market Area (GMA): Geographic distribution of contractors and subcontractors and area in which contracting dollars are spent

Note: relevant Market Area may not be State Boundaries

33


34

GMA: 2008 – 2012

In-State Dollars Total DollarsRepresentative

State Percentage

Geographic Distribution of Participating Prime

Contractors$727,048,359 $779,140,546 93.31%

Geographic Distribution of Participating Subcontractors

$113,513,436 $151,557,115 74.91%

Total State Market % $840,561,795 $930,697,661 90.32%


Example:

Base Figure represents the relative availability of DBEs in relevant geographic market area (GMA).

35


Number of Ready, Willing and Able DBEs and Potential DBEs

_________________________ = Base Figure %

Number of All Firms

Ready, Willing & Able

Bidders List Example:

36


10 DBEs bid or quoted

on prime or

subcontracts

___________________ = 10.00 % Base Figure

100 Total Firms bid

or quoted on prime

or subcontracts

Weighting by Work Type

Provides a more narrowly-tailored model of availability

Weights used are proportion of dollars spent within each industry: resulting percentage is more heavily influenced by availability in industries where more dollars are spent

May use NAICS, internal work codes, etc.

37


38


1. Decide which work types best represent your DOT-assisted contracts

2. Tally the dollars spent in each work type category as a percentage of the total contract dollars spent

3. Assign work types to each DBE and non-DBE firm

Industry

% of Dollars (weight) DBEs Non-DBEs Weighted %

Trucking 5.00% 1 18 0.28%Engineering/Design 5.00% 1 17 0.29%Construction 90.00% 8 65 11.08%Total 100.00% 10 100 11.65%


Weighting Example: State DOT contracts primarily in Trucking, Engineering/Design, and Construction:

39

DOT must examine all available evidence and determine what adjustments, if any, are necessary

It is not necessary to make a Step Two Adjustment

If state DOT has data but does not use it, state must explain why

Annual DBE Goal – Step Two

40

Median past DBE participation (MPP) Use DBE participation data from past 5 years

to demonstrate capacity (percentages) If MPP figure is very similar to Step One base

figure, should not make any adjustment for past participation

If past participation is disparately low compared to Base Figure, making a step two adjustment may perpetuate past discrimination


41

Median Past Participation Example:

1.Tally total DBE achievement percentage for 5 years.


Total DBE Achieved

(RC+RN) Total Contract Amt Total DBE %2008 $750.00 $5,000.00 15.00%2009 $480.00 $4,000.00 12.00%2010 $200.00 $1,000.00 20.00%2011 $240.00 $6,000.00 4.00%2012 $360.00 $6,000.00 6.00%

42


Choose median (not average) percentage

Median is 12% very close to Base Figure of 11.65%--no adjustment warranted

04/19/23 43

2011 4.00%2012 6.00%2009 12.00%2008 15.00%2010 20.00%

Consider Other Factors

Disparity studies Lack of access to financing Statistical employment data Other data affecting likely DBE

participation—drastic changes in the economy

44


Race-Conscious – Race Neutral Projections

Must meet maximum feasible portion of annual goal through race-neutral means

STA projects portion of goal it projects it will meet

Race-consciousRace-neutral

45

Annual DBE Goal – Other Elements

Race-Neutral Projection Example:

1. Tally total RN DBE achievement percentage for 5 years.

46


Race-Neutral DBE

Amt Total Contract Amt RN DBE %

2008 $100.00 $5,000.00 2.00%

2009 $200.00 $4,000.00 5.00%2010 $30.00 $1,000.00 3.00%

2011 $420.00 $6,000.00 7.00%2012 $300.00 $6,000.00 5.00%

2. Choose median RN percentage:

2008 2.00%2010 3.00%2009 5.00%2012 5.00%2011 7.00%

47


3. Apply to Adjusted Base Figure for final Goal:

Adj. BF: 11.65%6.65% Race-Conscious

5.00% Race-Neutral=

Public Participation1. Consultation with minority, women's and

general contractor groups, community organizations, and other officials or organizations

2. Published notice of proposed overall goal for 30 days, and must accept comments on the goals for 45 days from the date of the notice.

48


ACCOUNTABILITY §26.47(c)

State DOT that has not meet its overall

DBE goal in any given year must submit written analysis to FHWA of why the goal was not met and corrective actions to be taken

49

ANALYSIS

Contract goals below RC projection and/or not adjusted during the year?

Many contracts without goals? Alternative delivery projects (design/build; CMAR,

etc.) with goals that are too low? Significant percentage of contract dollars awarded

based on good faith efforts?

ACCOUNTABILITY

Timeframe State DOT must submit detailed analysis and

established corrective measures to FHWA Division within 90 days of end of fiscal year FOR APPROVAL

If FHWA approves, State DOT in compliance FHWA may give conditional approval

Modifications to overall goal methodologyChanges to RC/RN projectionsAdditional RC or RN measures

51

ACCOUNTABILITY

State DOT is in non-compliance if ANY of the following occur:Do not submit analysis and corrective

actions to FHWA timelyFHWA disapproves of analysis or corrective

actionsDo not fully implement corrective actions or

FHWA imposed conditions for acceptance

52

ACCOUNTABILITY

FHWA can intervene before end of fiscal year if Uniform Report shows unlikelihood of meeting annual goal

53

DBE OVERVIEW

Race Conscious PracticesAssist only DBEsSet contract goalsEvaluate good faith efforts

Race Neutral PracticesDo not affect contract awardDo not require bid gfe analysisAssist ALL small businesses

54

RACE NEUTRAL §26.51

Maximize Race NeutralSupportive ServicesDBE PrimesDBE Participation Beyond GoalDBE Participation on No Goal Contracts

04/19/23 55

CONTRACT GOALS §26.51

Must establish contract goals to meet portion of goal not met race-neutrally

States are not required to set DBE goals on every Federal-aid contract, but must set goals on enough individual contracts to cumulatively reach the overall goal

Alternate Program Delivery

04/19/23 56

CONTRACT GOALS

All contracts that include Federal funds must incorporate the DBE program and may not impose State or local MBE/WBE subcontracting goals

Federally-funded contracts may not include local hiring goals or preferences 23 CFR § 635.117(b)

Setting Contract Goals

Construction AND ConsultantSubcontractable Work ItemsSurvey of DBEsLocationReasonable and Attainable

04/19/23 58

CONSULTANT CONTRACTS

May include DBE goal in the advertisement or solicitation

The top-ranked firm required to demonstrate how the firm would meet the goal at the negotiation phase of the procurement process.

59


If, during the negotiation phase of the procurement process, work committed to DBEs is decreased or eliminated through negotiation of the detailed scope of services the prime consultant must use good faith efforts in revision of its proposal to provide for the participation of DBEs

60


To harmonize Federal statutory policy, a State may establish the use/participation of certified DBE sub-consultant firms as an evaluation criterion which shall be no more than ten (10) percent of the total evaluation criteria in assessing the qualifications of firms to perform the solicited services.

61

DBE OVERVIEW

Contract Goals

If a prime does not meet the DBE contract goal, it must provide the State DOT with documentation to show that it used “good faith efforts” to do so

62

GOOD FAITH EFFORTS

§26.53 and Appendix AAward contract to lowest responsive bidderResponsive if DBE goal metResponsive if demonstrate good faith efforts

04/19/23 63

GOOD FAITH EFFORTS

Bidder took all necessary and reasonable steps to achieve a DBE goal that by their scope, intensity, and appropriateness to the objective could reasonably be expected to obtain sufficient DBE participation

Efforts should be those that one could reasonably expect a bidder to take if the bidder were actively and aggressively trying to meet the goal

04/19/23 64

GOOD FAITH EFFORTS

State DOT must consider the quality, quantity, and intensity of the different kind of efforts the bidder made

Must evaluate overall effort of the bidder’s documented good faith efforts

04/19/23 65

DBE OVERVIEW

Good Faith EffortsRigorous review of documented effortsReview performance of other biddersLowest price not sufficient reason to rejectReview all subcontractor quotes Follow up with DBEs to see if contactedBeware of meaningless, pro-forma

contact/solicitation

66

GOOD FAITH EFFORTS

No formula or point system allowedDetermining sufficiency of a bidder’s

good faith efforts is a judgment call; meeting quantitative formulas is not required, nor possible

Intrinsically fact-specific judgment call particular to specifics of the procurement

04/19/23 67

GOOD FAITH EFFORTS

Responding to all GFE factors does not necessarily mean the bidder demonstrated adequate good faith efforts

04/19/23 68

GOOD FAITH EFFORTS

When apparent low bidder fails to meet the contract goal, but the second low bidder meets it, you may reasonably raise the question of whether, with additional efforts, the apparent low bidder could have met the goal

04/19/23 69

GOOD FAITH EFFORTS

Did bidder make enough work items available to meet the goal

Did bidder choose to self-perform available DBE work items?

Did bidder solicit all available DBEs available for work items

Did bidder follow up with specific DBEs?

04/19/23 70

GOOD FAITH EFFORTS

Did bidder document all solicitations?Emails Phone logsVerify by calling a sampling of DBEs

04/19/23 71

GOOD FAITH EFFORTS

May not reject DBE based upon price if price is not unreasonable

Most primes do not hire subcontractors based upon low bid alone

Did another bidder use a DBE that low bidder rejected because of unreasonable price?

If so, price probably not unreasonable

04/19/23 72

GOOD FAITH EFFORTS

Was there more the bidder could have done to meet the goal?

Missing a goal by a just a few percentage points usually translates into thousands of dollars of missed DBE opportunities

Soliciting DBEs that do not do relevant work constitutes pro forma efforts

04/19/23 73

EVALUATING GFE

Verify bidder’s list of DBEs are certified for work listed

Verify DBE quotesEnsure adequate description of DBE

workWhat is the DBE going to performPartial work items sufficiently described

04/19/23 74

GOOD FAITH EFFORTS

Review of prime commitments and upfront is sometimes based on faulty assumptions

• DBE(s) have capacity to perform the work• DBE material suppliers will act as regular

dealers and an automatic 60% is credited to the goal

Prime commitments are commensurate with the availability of work and quantities estimated under the prime contract

04/19/23 75

GOOD FAITH EFFORTS

Beware of large amount of trucking listed to meet goalHow many trucks does the DBE own?What companies will be providing

supplemental trucking services? DBE/non-DBE

04/19/23 76

GOOD FAITH EFFORTS

Draft well-reasoned and thorough memorandum on all Good Faith Efforts decisions

Reasonable Good Faith Efforts decisions are difficult to challenge because the decision maker is given latitude to weigh a variety of factors in reaching their conclusion

04/19/23 77

GOOD FAITH EFFORTS

If bidder’s good faith efforts are deemed inadequate, the bidder must be offered an opportunity for administrative reconsideration

Give opportunity to provide written documentation or oral argument

Reconsideration official cannot take part in the original determination

04/19/23 78

GOOD FAITH EFFORTS

Bidder must have the opportunity to meet in person with the reconsideration official

Bidder must receive a written decisionNot administratively appealable to

USDOT

04/19/23 79

GOOD FAITH EFFORTS

A contract that was awarded to a bidder who did not meet the goal or demonstrate adequate good faith efforts is ineligible for Federal participation

04/19/23 80

DBE SUPPORTIVE SERVICES

DBE/SS –gone to formula based allocation process. Allocation is a percentage of a State DOT’s federal transportation apportioned fundsIncrease DBE capacity and ability to compete

04/19/23 81

DBE CERTIFICATION STANDARDS

DBE CertificationUnified Certification Programs

(UCPs)Receive and review applicationsPerform interviews and onsite

investigations

04/19/23 82

DBE CERTIFICATION STANDARDS

§§26.63 – 26.71Group MembershipSocial DisadvantageEconomic DisadvantageBusiness SizeOwnershipControl

83

WHAT IS A DBE?

A Disadvantaged Business Enterprise (DBE) is a for-profit small business that is:

At least 51% owned by one or more individuals who are socially and economically disadvantaged

Managed, operated and controlled by one or more of the socially and economically disadvantaged owners

84

Social – Citizen or lawfully admitted permanent residents Groups with presumed social and economic

disadvantageAfrican Americans Subcontinent Asian

Americans

Hispanic Americans Women

Native Americans Others must prove individual social and economic disadvantage

Asian Pacific Americans

86

SOCIAL DISADVANTAGE

Social Disadvantage Signed, notarized statement of

membership in a presumptively disadvantaged group

If in question, certifying entity has burden of proof

GROUP MEMBERSHIP

Additional information may be required beyond notarized statement if well-founded reason-49 CFR 26.63

Written explanation of reasons for questioning group membership

Length of time individual held to be member of group

Whether person is regarded as a member by relevant community

Appropriate documentation of group membership

87

88

INDIVIDUAL DISADVANTAGE

Not in presumptively disadvantaged class, or group membership not proven, applicant required to prove individual social disadvantaged status

Appendix E— Must include the followingOne distinguishing featurePersonal experiencesBarriers to entry in business world

Education - Employment - Business History

DBE OWNERSHIP

Applicant must be owned (51%) by individuals Cannot be owned by another firm, even if DBE Except:

Disadvantaged individual owns and controls applicant firm through parent or holding company, e.g. for tax purposes (26.69(d))

Parent or holding company owns and controls subsidiary Certify the subsidiary if cumulatively 51% ownership by

disadvantaged individuals

Indian Tribe/Native Hawaiian organization, ANCs

89

OWNERSHIP

Not acceptable:Promise to contribute capitalUnsecured note payable to firm or owner not

disadvantagedParticipation as an employee

Loans from financial institutions preferred

Joint checking accountsExamine loans from family or friends

91

OWNERSHIP

Presumed not acceptable:Gifts from any non-disadvantaged

individual or non-DBE firm who isInvolved in the applicant firmInvolved in same or similar line of

businessEngaged in an ongoing business

relationship with the applicant firm.

92

OWNERSHIP

To overcome presumption applicant has burden of proof to demonstrate by clear and convincing evidence:Gift was made for reasons other than

DBE certificationDisadvantaged individual actually

controls the applicant firm

93

ECONOMIC DISADVANTAGE

Less than $1.32M Exclude equity in primary residence and

ownership interest in DBE at issueTransferring personal assets to companies to

avoid exceeding PNW calculationPresent value of retirement assets continue to

be counted as part of PNW Is owner reporting all land/other businesses?Beware of “valueless property”

97

ECONOMIC DISADVANTAGE

Personal Net Worth 49 CFR 26.67 (a) (2) (i) You must require each individual owner of a

firm applying to participate as a DBE, 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 $1.32 million.

(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.

98

FOR MARRIED APPLICANTS

Confirm whether or not PNW statement is reporting marital assets

If an asset is held as community property, or jointly between two people, 50% of the value of the asset is normally attributed to each person

99

PERSONAL NET WORTH

Should you simply accept an owner’s PNW statement?

Where the State DOT has a reasonable basis to believe PNW statement is incomplete or inaccurate, the recipient may “look behind” it, by seeking further information or conducting an investigation to resolve issues.

100

101

BUSINESS SIZE

49 CFR 26.65 Must exist as a small business under

SBA standards (13 CFR 121)Size standard applied must be for type of

work firm seeks to perform in DOT-assisted contracts

Receipts of affiliates must be included

BUSINESS SIZE

Size standards by NAICS Code website:

http://www.sba.gov/content/small-business-size-standards

102

NAICS CODES

NAICS Code. Work performed by DBE must be described in terms of most specific NAICS Code that best describes type of work DBE owners can control and will perform on State DOT contracts

May have multiple NAICS Codes State DOTs may also add a narrative description of

work– clear and specific Ensure NAICS Codes are current and accurate

103

NAICS CODE

Website

http://www.naics.com/search.htm

104

CONTROL

Consider all facts in record viewed as a whole

“You must grant certification to a firm only for specific types of work in which the socially and economically disadvantaged owners have the ability to control the firm” – 49 CFR §26.71(n)

105

DETERMINE CONTROL

Has expertise/ability to intelligently and critically evaluate information presented by others

Makes independent decisionsNo restrictions

107

CONTROL

Family-owned firmFirm controlled by family as group not

eligibleNon-disadvantaged family members may

participate Is disadvantaged owner really in charge?

109

CONTROL

Firm formerly owned by non-disadvantaged individual/family member Transfers ownership to disadvantaged

individualRemains involved in the firm

New owner has burden of proof by clear and convincing evidenceTransfer not made for DBE certificationDisadvantaged individual controls firm

110

CONTROL/INDEPENDENCE

State DOT (or UCP) must only certify independent firms as DBEs – 49 CFR § 26.71(b)

Does not depend on another firm for viability

112

CONTROL

ExpertiseDisadvantaged owner must have

Overall understanding of type of business Managerial and technical competenceRelevant experience and educationAbility to intelligently and critically evaluate

information from others in firmAdministrative functions insufficient

113

BUSINESS STRUCTURES

Sole ProprietorshipsPartnershipsCorporations (C, S, Close)Limited Liability CorporationsLimited PartnershipsLLPs/Professional Corps.Trusts

115

PARTNERSHIPS

Examine:

Partnership Agreement Can significant decisions be made when

disadvantaged owner is not present? Do decisions require concurrence by non-

disadvantaged individual? Who has signature authority? Personal tax returns for business size

116

C CORPORATIONS

Articles of Incorporation and bylaws filed with State

Stockholders are owners--elect the Directors. May have different classes of stock Directors manage overall strategy of the

business, appoint officers. Officers are under the direction of the directors

and manage day-to-day business operations. Corporations are required to have annual

meetings with record keeping (minutes).

117

C CORPORATIONS

Must own at least 51% of each class of voting stock and 51% of aggregate of all stock outstanding

Held directly by disadvantaged personsMust hold highest officer positionMust control Board of Directors

118

C CORPORATIONS

Examine Identify officers and board members,

include gender/ethnicity, date appointed, whether they are involved in or have ownership in other business

Trace firm’s ownership backCorporate tax returns to confirm business

size requirements

119

C CORPORATIONS

Examine Bylaws; Meeting Minutes Who’s on the board? What constitutes a quorum? Can significant decisions be made when

disadvantaged owner is not present? Do decisions require concurrence by non-

disadvantaged individual? Who has signature authority? Who’s running the meetings?

120

TRUSTS

Operate under Declaration of Trust Terminates upon the earlier of

death of beneficiary or termination date of trust. Governed by Trustee as set forth in Declaration of Trust

Can’t be owner of DBE, unless….

121

TRUSTS

If Applicant is owned by Trust examine Declaration of Trust:Beneficial owner and trustee must be

disadvantaged persons; orBeneficial owner must be disadvantaged

AND exercise control of firm rather than trustee; or

Same disadvantaged person is grantor, beneficiary and trustee of revocable living trust.

122

INTERSTATE CERTIFICATION

49 CFR §26.83

Time FramesApplicant sends Home State A certification

letter to State B, requests certificationState B confirms with State A or on-line

State B may accept State A’s certification

without further action

123


If State B does not choose to accept Applicant sends all documents to State B

Copy of State A application and all other supporting documents, affidavits of no change, correspondence

Copy of notices from other States about application status, denials, decertifications

Copy of any certification appeals with DOT Affidavit that all information is true and correct

State B has 7 days to request onsite from State A State A has 7 days to provide onsite to State B

124


State B has 60 days from receipt of all applicant materials to certify firm

If, within 60 days of receipt of all applicant information State B finds good cause to object to State A certification must send notice to applicant of specific reasons for determination and offer applicant opportunity to respond via writing or in person.

State B must have meeting within 30 days of applicant’s request

125


Applicant firm has Burden of Proof—Applicant need only address issues

raised by State BState B must issue written decision

within 30 days of applicant’s written response or meeting with decision maker (later of the two)

Applicant may appeal to DOCR

126


Good Cause to RejectEvidence of fraudNew informationCertification factually erroneous or

inconsistent with regulationsLaws of State B require different resultApplicant does not submit required

documentation

127

OTHER CERTIFICATION

§§ 26.84 and 26.84 deleted DOT/SBE

MOU lapsed; SBA allows self-certification DOCR database of DBE decertifications and

denials A DBE stays certified until its certification is

removed through due process procedures in 49 CFR §26.87

No such thing as “recertification” or “expiration”

128

CERTIFICATION DENIALS

Must provide written explanation with reasons for denialSpecific evidence in record leading to denialSpecific portion of the regulations upon

which denial is based Include ALL reasons for denial Include information of appeal rights under

26.89, including address and 90 day time frame

129

CERTIFICATION APPEALS

UCP must provide entire record to USDOT within 20 days of request

USDOT decision based upon status of firm as of date of appeal

USDOT affirms UCP decision unless it is not supported by evidence in the record

USDOT may remand for additional investigation if record incomplete or unclear

If USDOT reverses denial, UCP must take immediate action to certify firm

USDOT will not uphold denial based on grounds not specified in UCP decision

130

CERTIFICATION DENIAL

Establish time period of no more than one year (from time firm receives letter of denial) before firm may reapply for certification

Less than one year with FHWA Division approval

Normal re-application waiting period does not apply to firms that withdraw-but can go to “end of line” when issue corrected (New rule)

Unless abuse of withdrawal is determined

131

CHANGED CIRCUMSTANCES

DBE must inform UCP in writing of any change affecting size, disadvantaged status, ownership or control

Changes in managementAttach supporting documentation Notification in form of affidavitWithin 30 days of the change

132

ANNUAL AFFIDAVIT

DBE must provide every year sworn affidavit affirming no changes in circumstances affecting size, disadvantaged status, ownership or control or any material changes in the information provided in the application form.

Must specifically affirm that firm continues to meet business size standards

Supporting documentation attached—Tax Returns personal and corporate

133

REMOVING DBE CERTIFICATION

26.87 Procedures Written notification that there is “reasonable cause

to believe that a certified firm is ineligible” Specific reasons, evidence, regulations Opportunity for informal hearing to respond and

provide supporting evidence—firm could choose to submit writing

UCP has burden of proof Decision-maker not involved in original decision Maintain complete record of hearing

134


Grounds for decisionChange in firm since certification Information not available at time of cert Information concealed or misrepresentedChange in federal regulationsDocumented finding that original decision

was factually erroneousNOT changed opinion

135


Firm remains certified until internal decision is rendered

Removal of NAICS Code, or partial decertification requires same process

Written notice of decisionSpecific record evidence, regulationsAppeal information

136


Effects of Certification Removal Prime or State DOT made commitment to use DBE

AND subcontractor executed before DBE is notified of its ineligibility, prime may count work toward goal BUT State DOT cannot count toward annual goal—except if because exceeded size standard

Prime or State DOT made commitment but subcontractor not executed before DBE is notified, prime cannot count work toward goal, must make good faith efforts to replace with eligible DBE

137

THIRD-PARTY COMPLAINTS

Written complaint may be filed by any person alleging DBE ineligible

Not required to accept general allegations or anonymous complaint

Complainant’s identity must be kept confidential

Must review records; may request additional information and investigate

138

USDOT INITIATED PROCEEDINGS

FHWA finds reasonable cause to believe certified firm is ineligibleDirect UCP to initiate removal proceedingsFHWA must provide UCP and DBE with

notice, including reasonsUCP must immediately start removal

proceedings

139

DAY 2

04/19/23 140

CERTIFICATION PROCEDURES

Receive an applicationNew rule says certifying entity must request

additional information within 30 days after receipt of the application

90 days from complete application Extend once for no more than 60 days with

written notice and explanation with specific reasons for extension

Failure to timely process is constructive denial appealable to DOT

141

CERTIFICATION APPLICATION

Statement from applicant of type of work it intends to perform

Date Firm Established Date Disadvantaged Person Took Ownership Manner in which ownership obtained Legal form of ownership

142

CERTIFICATION

Keep files confidential notwithstanding State law

Safeguard from disclosure to unauthorized persons information that may reasonably be regarded as proprietary or confidential

143

What/When/Why Onsite Reviews Are Required

Objectives for On-site Review What to look for/ask for Conducting Interviews

ONSITE REVIEWS

144

WHEN?

Original Application--26.83(1)Annual Update indicates material changeDBE notification of material changeAdditional NAICS Code requested3rd Party Complaint, etc.As a matter of procedure at certain intervals

of time

WHY?

Onsite reviews are most effective means of confirming representations that:The Disadvantaged Owner controls firm for

each NAICS Code requestedThe firm operates independentlyOwns what it what it says it owns

146

WHY?

If plan to operate as a regular dealer, determine it has warehouse and/or distribution equipment

If manufacturer, determine if it has plant

Has staff and equipment necessary to do the job

147

DETERMINE CONTROL

Independence Is firm dependent on another for viability?Are all, or most of its contracts, with one prime?

Has the DOT discovered via onsite review that the firm co-located with another firm?

Present or recent employer/employee relationships between the DBE owner and non-DBE?

148

COME PREPARED

Know before you go:Business StructureOwner or OwnersPercentage OwnershipPNWGross ReceiptsBecome Familiar with Business Documents

150

ONSITE REVIEW

Develop QuestionnaireType out answersPrint out onsiteSignature

151

ONSITE REVEIWS

Interview Disadvantaged Owner AloneFind out what an owner of this type of

business should know and ask the tough questions—ask an expert to go with you

Interview Principal OfficersLet them talk…Review recent contracts—who signed

152

ONSITE REVIEWS

On-site Visit to Job Site if ActiveIs the applicant’s equipment in

use?Do the worker’s know who they

work for?

153

TERMINATION FOR CONVENIENCE

§26.53 (f)

Prime contractors may not terminate for convenience a DBE that it relied upon to obtain the contract without:

Good CauseState DOT (DBE Liaison) written

approval

154


What Constitutes Good Cause? DBE fails or refuses to sign contract DBE fails or refuses to perform to normal industry standards DBE fails to meet prime’s reasonable bond requirements DBE goes bankrupt DBE is suspended or debarred (ineligible for fed. contracts) DBE is not a responsible contractor (in opinion of recipient) DBE voluntarily withdraws DBE is ineligible to receive DBE credit for work type DBE (key person) death or disability Other documented good cause

155


What Does Not Constitute Good Cause?Prime wants to self-perform the workPrime wants to substitute with another DBE

or non-DBE subcontractorPrime contractor makes it impossible for

DBE to perform its work in an acceptable manner

156


Request to Terminate for Good CausePrime gives written notice to DBE of intent

to terminate with copy to State DOTDBE has 5 days to respond to notice and

explain why it objects and why State DOT should not approve prime’s request (shorter period if public safety involved)

Applies to post-awards and pre-award deletions and substitutions

157

SUBSTITUTION §26.53(g)(h)

DBE is terminated for any reasonPrime must make good faith efforts to

fine another DBE to the extent needed to meet goal

Need not be for same work itemContractual administrative remedies will

be invoked if prime does not comply

04/19/23 158

PROGRAM OVERSIGHT §26.37

State DOTs must provide written certification that it has reviewed records AND monitored work sites in-state to ensure work committed to DBEs is actually performed by DBEs to which the work was committed

Every contract

159

DBE COMPLIANCE

Must review subcontractDoes it align with commitmentWhat is DBE supposed to be doing?

04/19/23 160

DBE OVERVIEW

Prime Contractor and State DOT only get credit when DBE performs a commercially useful function (CUF)

Do not confuse CUF with certification

16104/19/23

19

CUF REVIEWS

Is the DBE operating independently?

Using its own employeesUsing its own equipment In charge

Is the DBE performing what the contract said it would perform?

04/19/23

NORMAL INDUSTRY PRACTICE

Normal Industry PracticeIs role on project consistent with

normal industry practice?Would a prime contractor hire a non-

DBE subcontractor to perform these services?

Is the DBE performing in the same manner as other contractors?

16304/19/23

DBE OVERVIEW

No matter what DBE is hired to perform, count only the value of the actual work or service it is actually performing on specific contract

04/19/23 164

DEFINITIONS AND COUNTING

SubcontractorManufacturerRegular DealerService Provider (Consultant or

Broker)Hauler

04/19/23 165


DBE Subcontractor Most common Performing specific work items with own forces

pursuant to a contract agreement with prime Furnish and install Count 100% of prime’s payment to DBE

toward contract goal ---if-----NEXT SLIDE

04/19/23 166


DBE Subcontractor, furnish and installCount cost of materials if the DBE

Negotiates price Determines quality and quantity of materials Orders the materials Pays for the materials

May not count cost of material, supplies, equipment purchased/leased from prime

04/19/23 167

DBE COMPLIANCE

Joint ChecksCheck by prime contractor made out to

supplier or manufacturer AND DBE OK if Approval and Oversight

prior approval from the recipient a written joint check agreement among the

parties (including the suppliers concerned) providing full and prompt disclosure of the expected use of joint checks

04/19/23 168


DBE ManufacturerPrime purchases materials from a DBE

manufacturer may count 100% of cost if: DBE operates a factory that produces materials

on the premises to meet contract specifications DBE takes product and alters it to meet

contract specifications

04/19/23 169


DBE Regular Dealer Prime contracts with a regular dealer to supply

and deliver products. Regular dealer owns, operates a store or

warehouse that contains products it sells to public For bulk items DBE must own and operate

distribution equipment, have a master agreement with a supplier

Count 60% of cost of materials/supplies

04/19/23 170


DBE TruckersOwn and operate at least one truck on the projectManage trucking operation for portion of contract it is responsible forMay supplement by leasing trucks from established equipment leasing business if it has exclusive use and control

04/19/23 171

COUNTING TRUCKING

Count value of trucking services provided by DBE with trucks it owns

If DBE supplements its fleet:Count value of trucking services provided by

other DBE firms with their own trucksCount value of trucking services provided by

non-DBE firms in an amount not to exceed value of trucking services provided by DBE firms. 1:1

04/19/23 172

TRUCKING

Must develop mechanism to monitor trucking operationsDBE must report payments to supplemental

haulers, indicating whether or not DBERandom audits to verifyCollect ticketsVerify trucking firm before allowed on jobsiteRequire list of all trucks to be used on job

04/19/23 173


DBE Service Provider Prime hires a DBE to provide a bona fide

service Professional Technical Managerial Brokerage

Count entire amount of fees or commissions if reasonable

04/19/23 174

20

PERFORMANCE RED FLAGS

Supervision of DBE employees by prime or other contractor

DBE’s owner unaware of the status of the work or the performance of the business

Inquiries are answered by prime, not DBE

Laborers don’t know who they work for

04/19/23

21

PERFORMANCE RED FLAGS

Are DBEs being “helped” in their performance? Work performed jointly with another firm

Any portion of the work performed by the prime or any other firm?

Use common sense—is independence compromised?

04/19/23

22

EQUIPMENT

DBE may lease equipment if consistent with standard industry practice and at competitive rates

A lease agreement Is required and should be on long- term basis

A DBE may lease equipment on an ad hoc basis from another contractor, excluding the prime, with approval from the DOT

Equipment leased and used by the DBE with payment deducted from the prime contractor's payment(s) to the DBE is not allowed

04/19/23

23

EQUIPMENT RED FLAGS

Equipment used by DBE belongs to the prime contractor or another contractor with no formal lease agreement

Equipment signs and markings cover another owner's identity, usually through the use of magnetic signs

04/19/23

24

MATERIALS RED FLAGS

Materials for the DBE ordered, or paid for, by the prime

Joint checks used to pay for the materials

Materials or supplies necessary for the DBE’s performance are delivered by or billed to another business

04/19/23

TRUCKING RED FLAGS

DBE truck never at jobsitePrime is using its trucks for

portion of work committed to DBE

Unfamiliar trucks at jobsiteDrivers can’t identify employers

18004/19/23

CONTRACT COMPLIANCE

Prime lists DBE X toward goal to perform rebar services. Due to weather delays, prime is behind schedule (bonus for early completion). Oversight reveals Prime’s employees help DBE tie rebar to save time.

Is this allowed? Can it be counted?

18104/19/23

SANCTIONS

What does the contract say?Withhold estimates, progress paymentsBreach of contractLiquidated damagesInternal prequalification process

remediesOIG investigation if fraud suspected

Watch Closely

Joint VenturesMentor Protégés

Prior approval of planDistinct roles

COMPLIANCE AND ENFORCEMENT

Compliance & Enforcement

Failure to comply by State DOT

Suspension/termination of Federal fundsRefusal to approve projects, grants, contracts

184


Enforcement actions General Complaints made against DOT

Any person Within 180 days In writing Confidentiality

Compliance Reviews by FHWA Finding of Noncompliance

Reasonable cause notice Conciliation Enforcement Actions

185


Enforcement Actions - Contractors Suspension/debarment

False representation as DBE Attempt to use ineligible firm Over-reportingOIGReferral to Dept. of Justice

186

Date post:	25-Dec-2015
Category:	Documents
Upload:	duane-harper
View:	215 times
Download:	0 times