AGC Urges DOT to Drop Proposed DBE Program Changes and Focus on Program Intent

AGC submitted supplemental comments to the U.S. Department of Transportation (DOT) on its Sept. 6, 2012, proposal to make significant changes in the administration of its Disadvantaged Business Enterprise (DBE) program. The original comment period closed in 2012, but because of the outpouring of negative criticism from the industry, DOT decided to hold a listening session in early December and extend the comment period.  Moreover, the agency has chosen to seek specific comments on the costs associated with the proposed changes.  Along with AGC of America, many chapters and individual members also submitted comments and participated in the listening session. AGC’s supplemental comments focused primarily on the proposed changes to the procurement process, which would require prime contractors to submit a list of the DBEs to be used on that project with their bids, specifying the scope of work the DBEs will perform, subcontract price, and a letter of verification from the DBEs confirming this. The proposed changes would also require prime contractors unable to meet goal requirements to submit, along with the bid documentation, a report detailing the “good faith efforts” or steps they have undertaken including quotes from all subcontractors. AGC’s supplemental comments reemphasized that this proposed rule modification is a major change from current requirements that will have significant ramifications on how this program is administered and will result in significant cost impacts on federal-aid highway construction projects. The comments questioned whether the agency has produced sufficient data to support the need to make the proposed changes and whether the proposed changes will in any way help achieve the program’s objective. AGC also pointed out that DOT’s Office of Inspector General (OIG) issued a report on April 23, 2013, that criticized the program’s administration, which should encourage the agency to rethink how the program has been implemented over the past 30 years, what it has accomplished and what changes should be made to focus the program on what the OIG says is one of its primary objectives: “Assisting in the development of DBE firms so that they can compete outside the DBE program.” AGC said that, “Without question there will be cost increases should the proposed revisions to the DBE regulations be implemented.”  AGC and the American Road and Transportation Builders Association (ARTBA) cooperated in a survey of our memberships to determine if costs could be identified. The results from the approximately 300 responses are being submitted for the record. The results show that 75 percent of respondents indicate costs would increase at least by $25,000 per contract to comply with the extensive new DBE information that must be submitted with the bid as well as the expanded good faith efforts documentation. Over 9 percent of respondents said costs would increase as much as $100,000 per contract. To put that into perspective, there are currently 130,000 active federal-aid highway contracts.  At $25,000 additional cost per contract the cost increase is nearly $3 billion. AGC recommended that the proposed changes be dropped and, instead, DOT focus on improving the outcomes of the program. There should be less emphasis on achieving numbers of firms participating in the program and on dollar amounts awarded and more emphasis on the business success of the firms that are participating.