DOT Proposes Stringent Changes to DBE Program

The U.S. Department of Transportation (DOT) on Sept. 6, 2012, issued a Notice of Proposed Rulemaking asking for comment on significant changes it is proposing in its Disadvantaged Business Enterprise (DBE) rules. Comments are due by Nov. 5, 2012. The proposal suggests a series of changes in the bidding process, counting DBE participation and documenting good faith efforts for compliance. The proposed rule also would tighten down on the certification process that determines whether or not a firm qualifies as a DBE. The following is a summary of the most significant proposed changes: Meeting Contract Goal Requirements: DOT is proposing to require that all bidders on contracts that have a DBE participation goal must submit, with their bid, a list of the DBEs that will be used to meet the goal requirement. (Under the current rule states have the option of requiring that the list be submitted with the bid or at a later time). The list must include a description of the work each DBE will perform as well as the dollar amount. A written confirmation from each listed DBE must be included confirming the work and dollar amount that it will perform. The state DOT would be required to include in the contract a provision requiring that these DBEs must be used in compliance with the list unless the contractor obtains a written consent from the state to make a change. The provision will also indicate that the contractor will not be paid for the work unless it is performed by the listed DBE. The contractor must make good faith efforts to replace a terminated DBE with another DBE. If an acceptable DBE is not found, the best faith efforts must be detailed in writing, including a statement indicating why an agreement with a certified DBE could not be reached. A prime contractor’s inability to find a replacement DBE at the original price is not alone sufficient to support a finding that good faith efforts have been made to replace the original DBE. Good Faith Efforts: DOT proposes to revise and greatly expand the types of actions that qualify a “Good Faith Efforts” by a prime contractor in order to to be awarded the contract if it has failed to meet the contract goal requirement. Bidders that do not meet the goal may be required to submit documentation of their “Good Faith Efforts” (GFE) with the bid. As an alternative the state can require only the apparent successful low bidder to submit GFE documentation within one day of the bid opening. The apparent successful bidder must document its best faith efforts at that time and no credit will be given for efforts undertaken after the bid opening. DOT proposes that this GFE documentation include all subcontractor quotes, not just quotes from DBEs, in order to review whether DBE price quotes are substantially higher than other subcontractors. The state is also required to contact all DBEs listed in the documentation to ensure that they were in fact contacted by the prime. States must include in contracts a provision indicating that failure to carry out the DBE commitments is a material breach of contract. Administrative remedies shall include: withholding of monthly progress payments, declaring the contractor in default and terminating the contract, assessing sanctions in the amount of the difference in the DBE contract commitment and actual payments to DBEs, liquidated damages, disqualifying the contractor from future bidding. Counting Trucking Operations: DOT proposes to change its current requirements for how much of a DBE trucking company’s involvement can be counted towards goal achievement. The proposal would give credit for a DBE that leases trucks equipped with drivers from a non-DBE entity up to the amount of transportation services provided by DBEs with their own trucks and drivers. DBEs that lease trucks from non-DBE entities but use their own employees as drivers would receive full credit for these transportation services. Certification: DOT proposes to make a series of technical changes in the requirements for certification, including modifications in determinations related to ownership, and control. Comments: A task force of AGC members will be reviewing the NPRM to assist AGC in providing substantive comments to DOT on the proposed revisions.