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

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

Download the Questions and Answers in Word Format.

• Section 26

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

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

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

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

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

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

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

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

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

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

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

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

  ANSWER:

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

  Section 26.5

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

  ANSWER:

  • Executive order 13360 requires Federal agencies to set goals for and otherwise give special consideration to service-connected disabled veteran businesses in direct Federal contracting. This Executive Order concerns only direct Federal procurement by Federal agencies themselves.
  • The Department’s DBE program concerns only contracts let by state and local agencies in which DOT financial assistance participates. The Executive Order
    does not have the effect of creating a presumption that service-connected disabled veterans are socially and economically disadvantaged for purposes of the DBE program or establishing a goal for the use of firms owned by such veterans in state and local contracts receiving DOT financial assistance.
  • The Department of Transportation encourages service-connected disabled veterans, as well as other individuals with disabilities, to apply for participation in the DBE program.
  • A service connected disabled veteran who is a member of one of the groups presumed in the DBE program to be socially and economically disadvantaged can apply for DBE certification.
  • Individuals with disabilities, including service-connected disabled veterans, can also apply for DBE certification on an individual basis, even if they are not members of groups presumed to be socially and economically disadvantaged for purposes of DBE program.
  • Appendix E to Part 26 explains how an individual who is not a member of one of the groups presumed to be disadvantaged can show that he is disadvantaged on an individual basis. The discussion in this Appendix specifically provides that individuals with disabilities are among those who can use this approach to enter the DBE program.
    
• Section 26.21 - 26.15

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

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

• Section 26.21

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

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

• Section 26.21(c)

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

  Section 26.21(c) provides that "You are not eligible to receive DOT financial assistance unless DOT has approved your DBE program and you are in compliance with it and this part."
  
  If you are a new recipient (e.g., a transit grantee beginning service for the first time, who has never had an approved DBE program), you must have an approved DBE program before you are eligible to begin receiving Federal financial assistance. This was also true under the old DBE rule.
  
  For example, if you are a new transit grantee, hoping to begin receiving FTA funds in the next fiscal year, you must have an FTA-approved DBE program conforming to part 26 before receiving those funds.
  

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

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

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

• MUST A RECIPIENT ENFORCE THE PROMPT PAYMENT CLAUSE REQUIRED BY THE RULE? (Posted - 2/17/00)
  
  
  Yes. Under 26.29(a), recipients are required to include a prompt payment clause in DOT-assisted contracts. This clause must require prime contractors to pay subcontractors and return any retainage within a certain number of days of satisfactory completion of the subcontractors' work. This provision is a race-neutral requirement applying to DBE and non-DBE subcontractors alike.
  
  As 26.37(a) provides, recipients must implement appropriate mechanisms to ensure compliance with Part 26 requirements - including prompt payment - by all program participants. To do so, recipients must use legal and contract remedies available under Federal, state, and local law.
  
  26.29(a) (1) and (2) mention certain mechanisms a recipient may use to implement the prompt payment requirement (i.e., penalties, a requirement for the recipient's written consent for delays). The rule authorizes, but does not require, recipients to use these particular methods.
  
  However, the fact that these two cited methods are not mandatory does not mean that enforcement of the prompt payment clause itself is optional. Under 26.29 and 26.37, recipients must use some effective means or other to ensure compliance with prompt payment requirements. If the recipient does not choose to use the two methods mentioned in 26.29(a) (1) and (2), then it must use other effective methods.
  
• Section 26.37(b), 26.55(g)

• SHOULD RECIPIENTS KEEP TRACK OF DBE "COMMITMENTS," "ACHIEVEMENTS," OR BOTH? (Posted - 2/17/00)
  
  
  Both. Section 26.37(b) requires recipients to have a mechanism to verify that the work committed to DBEs at contract award is actually performed by the DBEs. Obviously, recipients need to track both commitments and actual achievements in order to perform this task.
  
  Final information on actual achievements will often not be available in the same year in which contracts are let. Recipients will often have to rely on commitments information in order to administer their programs (e.g., make needed adjustments with respect to the use of race-neutral and race-conscious measures).
  
  On the other hand, keeping track of actual achievements is crucial to evaluating the operation of recipients' programs. As 26.55(g) provides, actual achievements are not counted toward goals until DBEs receive payment for their work. If the actual achievements of particular contractors, or a recipient's program in general, falls short of commitments, this is an indication that corrective action should be taken to improve program performance.
• Section 26.29, 26.37

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

• DOES THE DEPARTMENT OF TRANSPORTATION ENCOURAGE RECIPIENTS TO ESTABLISH MENTOR-PROTÉGÉ PROGRAMS? (Posted - 2/17/00 - Edited 12/7/01)
  
  
  Yes. A well-run mentor-protégé program can be an important asset to a recipient's efforts to ensure equal opportunities for DBEs.
  
  Besides providing important experience and training to emerging companies, such a program may be an additional source of race-neutral DBE participation to the recipient.
  
  For the first time in the history of the Department's DBE regulations, Part 26 explicitly authorizes recipients to establish mentor-protégé programs as a part of their DBE programs.
  
  Under this authority, recipients may cooperate with private-sector mentor-protégé plans that are consistent with the safeguards against fronts and frauds established in Part 26.
• Section 26.43

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

• HOW DOES A RECIPIENT OBTAIN CENSUS BUREAU DATA TO USE IN CALCULATING ITS OVERALL GOAL? (Posted - 4/12/99 - Edited 12/7/01)
  
  
  The regulation's first example of how a recipient can do Step 1 of the overall goal process involves using data from the Census Bureau's County Business Pattern (CBP) database.
  
  The Department intends to create a web site that will provide ready access to this information. We hope this site will be up and running in plenty of time to be of use to recipients as they prepare to submit their FY 2000 overall goal.
  
  Meanwhile, you can obtain this data from the Census Bureau web site. All of the data is available, however their web site does not have the features we intend to provide to make it easier to search, compile and retrieve the particular data you need.
  
  To access the data, go to http://www.census.gov
  
  There are at least 2 areas of the site that have relevant CBP data.
  
  You can access them by going to the "Subjects A to Z" listing and:
  
  1) Click on "C": then, under "County", click on "County Business Patterns", or paste the following URL into your web browser:
  
  http://www.census.gov/epcd/cbp/view/cbpview.html
  
  2) Click on "B"; then, under "Business", click on "Statistics of United States Businesses (Tabulations by Size and Metropolitan Area)", or paste the following URL into your web browser:
  
  http://www.census.gov/csd/susb/susb.htm
  
  Both pages offer ways to select particular data (i.e. state or county) and different compilations of useful CBP data, some of which can be downloaded for easy use in spreadsheet format.
  
• Section 26.3(a), 26.55

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

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

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

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

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

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

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

• DO RECIPIENTS APPLY POST-AWARD GOOD FAITH EFFORTS REQUIREMENTS TO CONTRACTS ON WHICH THERE IS NO CONTRACT GOAL? (Posted - 2/12/02)
  
  
  No. The post-award good faith efforts requirements of ?26.53(f) apply only to contracts in which there is a contract goal.
  
  These requirements (1) prohibit prime contractors from terminating a DBE for convenience and then substituting the prime contractor's own forces, and (2) require the prime contractor to make good faith efforts to replace a DBE firm that could not complete its contract with another DBE firm, to the extent needed to meet the contract goal.
  
  These provisions are premised on there having been a contract goal that the prime contractor has committed itself to make good faith efforts to meet. When there is a contract goal, the provisions of ?26.53(f) are necessary to prevent a prime contractor from circumventing its good faith efforts obligation after the contract has been awarded.
  
  Where there is no contract goal (i.e., a race-neutral procurement), these provisions are not relevant.
• Section 26.55(c)(3)

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

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

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

• THE COUNTING RULES SAY THAT TO BE A REGULAR DEALER, A SUPPLIER OF BULK GOODS WHO SUPPLEMENTS ITS OWN DISTRIBUTION EQUIPMENT MUST DO SO BY A LONG-TERM LEASE. HOW LONG IS LONG-TERM? (Posted - 4/12/99)
  
  
  The key point is that a lease for trucks or other distribution equipment cannot be an ad hoc deal specific to the particular contract or distribution task.
  
  The leased equipment should be used over an extended period of time to serve a variety of customers and/or contracts.
  
  There is not a specific number of months or years that the Department believes it is useful to rely on in all cases. The scrutiny that a recipient gives a lease arrangement should become stricter the shorter the period of the lease is.
• Section 26.65

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

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

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

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

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

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

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

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

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

• HOW DO RECIPIENTS RESPOND TO APPLICANTS FOR CERTIFICATION WHO ARE CERTIFIED FOR SBA PROGRAMS? (Posted - 4/12/99 - Edited 12/7/01)
  
  
  Recipients may sometimes receive applications from firms who have already been certified by the U.S. Small Business Administration (SBA) under the 8(a) or small and disadvantaged business (SBD) program.
  
  The certification criteria for these programs, which concern only procurement by Federal agencies, are similar - though not identical - to the certification standards for the DOT DBE program.
  
  Recipients have discretion concerning how they treat SBA-certified firms. This discretion is similar to the discretion recipients can exercise with respect to firms certified by another DOT recipient (see 26.83(e))..
  
  Recipients can accept an SBA certification for a firm, just as they can accept a certification by another DOT recipient.
  
  The recipient must ensure that an SBA-certified firm meets the DOT $17.4 million annual average gross receipts cap.
  If the SBA firm has not been the subject of an on-site review, the DOT recipient must perform and evaluate the results of such a review before completing the certification. The recipient may also obtain additional information from the firm for administrative purposes.
  
  On the other hand, the recipient can require the firm to follow the recipient's normal application process, even though SBA (or another DOT recipient) has already certified it.
  
  DOT has sought comment on proposal changes to its rules to implement a November 1999 Memorandum of Understanding (MOU) with SBA. The purpose of the MOU is to facilitate certification of DBEs by SBA and 8(a)/SDB firms by DOT recipients. Until these rules are made final, the guidance in this Q&A continues to apply.
• Section 26.73

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

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

• WOULD IT BE ACCEPTABLE FOR A UNIFIED CERTIFICATION PROGRAM (UCP) TO BE FORMED BY ALL RECIPIENTS IN A STATE OR REGION AGREEING TO ONE FORM, PROCESS, AND PROCEDURE THAT ALL RECIPIENTS WOULD USE, AND DBE FIRMS WOULD ONLY NEED TO APPLY TO ONE OF THE RECIPIENTS INVOLVED? (Posted - 4/12/99)
  
  
  The DOT DBE rule does not prescribe the particular form a UCP must take.
  
  If all recipients in a state or region agreed to use the same form, process, and procedure, and a firm certified by one recipient was accepted by all, that would satisfy the "one-stop shopping" requirement of part 26. There could also be other ways of meeting this requirement.
  
  The Department will work with recipients in each state to facilitate their consideration of the best form of UCP for them.
• Section 26.81(a)

• DO ALL RECIPIENTS HAVE TO PARTICIPATE IN UNIFIED CERTIFICATION PROGRAMS (UCPs)?(Posted - 2/12/02)
  
  
  Section 26.81(a) of the DBE regulation says to recipients that "you and all other recipients in your state must enter into in a Unified Certification Program (UCP)" (emphasis added).
  
  The purpose of this provision is to ensure that DBEs and applicants (including airport concessionaires) will have "one stop shopping" on certification matters with respect to every recipient in the state. This is not possible unless all recipients with certification responsibilities are part of the UCP.
  
  Recipients who are not required to have DBE programs do not have certification responsibilities. Therefore, they do not need to participate in a UCP.
  
  All state DOTs must participate in the UCP. However, subrecipients of state DOTs do not have to be involved in the UCP formation process or sign the UCP agreement on their own. The state DOT is responsible for ensuring (e.g., through subgrant agreements) that its subrecipients comply with all provisions of the UCP (e.g., that they accept as DBEs firms that the UCP has certified).
  
  Airports and transit properties that receive funds directly from FAA or FTA must also participate in the UCP. Since these recipients must participate in the UCP, it is vital that they have the opportunity to be involved in the discussions leading up to its formation (e.g., that they get notice of meetings and working drafts of documents). No direct recipient who wishes to be involved in the work of developing the UCP may be excluded.
  
  All parties who must participate in a UCP (i.e., state DOTs and airports and transit properties that receive funds directly from FAA or FTA) must commit in writing to participate.
  
  We recognize that UCP negotiations involving a large number of recipients may be complex and difficult. That is why the Department allowed three years from the effective date of the rule for recipients to agree on a UCP.
  
  The Department supports efforts by recipients to make this process as simple as possible. Here are a few ideas that we have heard:
  
  A steering committee of recipients in the state, representing all three modes, could take the lead on accomplishing the substantive work of drafting a UCP agreement. Other recipients would then receive and comment on drafts. The steering committee would respond to comments before obtaining written commitments from the other recipients.
  
  An organization (e.g., a state transit association) could negotiate on behalf of small grantees with individual larger grantees from its own and other modes.
  
  Where a single state agency or steering committee is taking the lead on developing the UCP, it could create a web site that permits recipients from around the state to view and participate in the ongoing work of drafting the UCP agreement.
  
  Creating a UCP is a "One DOT" project at the state level. We urge staffs from all highway, transit, and airport agencies to work cooperatively to make this effort succeed. The Department stands ready to assist the parties to UCP negotiations in achieving their objective.
• Section 26.83

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

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

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

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

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

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

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

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