Chapter 7

**7 - [Disadvantaged Business Enterprise]{.underline}**

> 7.1 [Comparison of Old vs. New DBE Rules]{.underline} (6/99)
>
> 7.1.1 [Applicability of DBE Rules to Grantee Programs]{.underline}
> (2/00)
>
> 7.1.2 [Definition of Terms]{.underline} (2/00)
>
> 7.2 [Administrative Requirements]{.underline} (6/99)
>
> 7.2.1 [Who Must Have a DBE Program?]{.underline} (6/99)
>
> 7.2.2 [DBE Liaison Officer]{.underline} (6/99)
>
> 7.2.3 [Required Efforts on Behalf of DBE Financial
> Institutions]{.underline} (6/99)
>
> 7.2.4 [Prompt Payment Mechanisms]{.underline} (10/05)
>
> 7.2.5 [DBE Directory]{.underline} (6/99)
>
> 7.2.6 [Bidders List]{.underline} (6/99)
>
> 7.2.7 [Monitoring Contractors' Performance]{.underline} (2/00)
>
> 7.3 [Goals for DBE Participation]{.underline} (6/99)
>
> 7.3.1 [DOT National Goal of 10%]{.underline} (6/99)
>
> 7.3.2 [Use of Quotas and Set-Asides]{.underline} (6/99)
>
> 7.3.3 [Establishing Overall Goals]{.underline} (2/00)
>
> 7.3.4 [Establishing Overall Goals for Transit Vehicle
> Manufacturers]{.underline} (6/99)
>
> 7.3.5 [Means of Meeting Overall Goals]{.underline} (6/99)
>
> 7.3.5.1 [Race-Neutral Means]{.underline} (6/99)
>
> 7.3.5.2 [Using Contract Goals]{.underline} (6/99)
>
> 7.3.5.3 [Evaluation of Contractor Proposals for DBE
> Participation]{.underline} (2/00)
>
> 7.3.5.4 [Good Faith Efforts to Meet Contract Goals]{.underline}
> (10/05)
>
> 7.3.5.5 [Counting DBE Participation toward the Goal]{.underline}
> (10/05)

4.  [Certification: Standards and Procedures]{.underline} (2/00)

5.  [Exemptions and Waivers]{.underline} (6/99)

**7.1 COMPARISON OF OLD VS. NEW DBE RULES**

+-----------------------------------------------------------------------+
| **REQUIREMENT**                                                       |
+-----------------------------------------------------------------------+
| The Federal Department of Transportation's policies concerning        |
| Disadvantaged Business Enterprise (DBE) participation in programs of  |
| the Federal Transit Administration are set forth in 49 CFR Part 26.   |
|                                                                       |
| 49 CFR Part 26 supercedes the old DBE regulation found at 49 CFR Part |
| 23, subparts A and C through E. [^1] This Part 26 also supercedes FTA |
| Circular 4716.1A, dated July 26, 1988.                                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Grantees are encouraged to visit the Web sites of the Department of
Transportation, Office of Small and Disadvantaged Business Utilization
(OSDBU)** [^2] **and the FTA Office of Civil Rights** [^3] **for current
information and guidance on DBE regulations and issues. Following is a
summary of the old vs. the new DBE rules as found at the Web site of the
Office of Small and Disadvantaged Business Utilization (OSDBU).**

# **Setting and Meeting DBE Goals**

+-----------------------------------+-----------------------------------+
| # **Old Rule -- Part 23**         | # **New Rule -- Part 26**         |
+-----------------------------------+-----------------------------------+
| 1\. Did not use, but also did not | **1. The new rule explicitly      |
| prohibit, quotas. It explicitly   | prohibits the use of quotas. The  |
| authorized set-asides under some  | rule also explicitly prohibits    |
| circumstances. DOT never          | the use of set-asides, except in  |
| penalized recipients for failing  | extreme cases to remedy egregious |
| to meet goals under the old rule, | problems. The rule explicitly     |
| but the text of the rule did not  | provides that recipients will not |
| make the point explicitly.        | be penalized for failing to meet  |
|                                   | their DBE goals.**                |
| 2\. Under the old rule,           |                                   |
| recipients who had less than a    | **2. The new rule views the       |
| ten percent goal had to make a    | statutory 10 percent goal as a    |
| special justification to the      | nationwide aspirational goal,     |
| Department.                       | which does not require that       |
|                                   | recipients set their goals at 10  |
| 3\. Under the old rule, overall   | percent or any other particular   |
| goals were set to achieve the     | level.**                          |
| object of "maximum practicable"   |                                   |
| use of DBEs. The recipient's goal | 3\. Recipients must set overall   |
| could be based directly on the 10 | goals to represent a "level       |
| percent national goal or on the   | playing field"- the amount of DBE |
| recipient's past achievements.    | participation they could          |
|                                   | realistically expect in the       |
| 4\. The old rule did not mandate  | absence of discrimination. This   |
| the use of race-neutral measures  | goal must be based on             |
| or give them priority. There was  | demonstrable evidence of the      |
| no prompt payment requirement.    | availability of ready, willing    |
|                                   | and able DBEs to participate on   |
| 5\. Under the old rule, contract  | your DOT-assisted contracts. The  |
| goals were required on all        | rule gives recipients substantial |
| contracts with subcontracting     | flexibility in the methods they   |
| possibilities, regardless of      | choose to set overall goals.      |
| whether the contract goals were   |                                   |
| needed to meet overall goals.     | 4\. Recipients must obtain as     |
|                                   | much as possible of the DBE       |
| **\                               | participation needed to meet      |
| \                                 | their overall goals through       |
| \                                 | race-neutral measures.            |
| \                                 | Race-neutral measures include     |
| \                                 | such activities as training,      |
| \                                 | technical assistance, bonding     |
| **                                | assistance, business development  |
|                                   | or mentor-protégé programs,       |
| 6\. The old rule employed the     | breaking contracts up into pieces |
| same good faith efforts           | that small businesses can readily |
| mechanism, but did not emphasize  | perform, and awards of prime      |
| as strongly the mandate that      | contracts to DBEs through the     |
| recipients seriously consider     | regular competitive process. One  |
| good faith efforts showings.      | type of race-neutral measure, a   |
| There was no reconsideration      | prompt payment provision, will be |
| provision.                        | required for all subcontractors,  |
|                                   | DBEs and non-DBEs alike.          |
| 7\. The old rule did not have an  |                                   |
| over-concentration provision.     | 5\. Contract goals, or other      |
|                                   | race-conscious measures, must be  |
|                                   | used only to obtain DBE           |
|                                   | participation needed to meet      |
|                                   | overall goals that cannot be      |
|                                   | obtained through use of           |
|                                   | race-neutral measures. Contract   |
|                                   | goals are not required on every   |
|                                   | contract. If recipients are       |
|                                   | over-achieving or under-achieving |
|                                   | their overall goals, they have to |
|                                   | adjust their use of contract      |
|                                   | goals.                            |
|                                   |                                   |
|                                   | **\                               |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | \                                 |
|                                   | **                                |
|                                   |                                   |
|                                   | 6\. When there is a contract      |
|                                   | goal, a bidder must make good     |
|                                   | faith efforts to meet it. The     |
|                                   | bidder can do so either through   |
|                                   | obtaining enough DBE              |
|                                   | participation to meet the goal or |
|                                   | documenting the good faith        |
|                                   | efforts it made to do so. The     |
|                                   | rule explicitly provides that     |
|                                   | recipients must not disregard     |
|                                   | showings of good faith efforts,   |
|                                   | and it gives bidders the right to |
|                                   | have the recipient reconsider a   |
|                                   | decision that their good faith    |
|                                   | efforts were insufficient.        |
|                                   |                                   |
|                                   | 7\. If a recipient determines     |
|                                   | that DBE firms are so             |
|                                   | over-concentrated in a certain    |
|                                   | type of work as to unduly burden  |
|                                   | the opportunity of non-DBE firms  |
|                                   | to participate in this type of    |
|                                   | work, it must devise appropriate  |
|                                   | measures to address this          |
|                                   | over-concentration.               |
+-----------------------------------+-----------------------------------+

## Certification and Eligibility

+-----------------------------------+-----------------------------------+
| # **Old Rule -- Part 23**         | # **New Rule -- Part 26**         |
+-----------------------------------+-----------------------------------+
| **1. The old rule did not state a | **1. Applicants must show that    |
| specific standard of proof.**     | they meet size, group membership, |
|                                   | ownership and control standards   |
| **2. The old rule did not have    | by a preponderance of the         |
| either a personal net worth cap   | evidence.**                       |
| for participation or a            |                                   |
| requirement to submit information | **2. Each disadvantaged           |
| concerning personal net worth.**  | individual seeking certification  |
|                                   | for his or her firm must submit a |
| **3. The less specific standards  | notarized certification of        |
| of the old regulation were        | disadvantage and a statement of   |
| interpreted in many varying ways  | personal net worth. If an         |
| by recipients and DOT offices,    | individual's personal net worth   |
| leading to inconsistent and       | (excluding his or her principal   |
| confusing results.**              | residence and his of her interest |
|                                   | in the applicant firm) exceeds    |
| **4. Formerly, a firm that wanted | \$750,000, the person is not an   |
| to work for the State highway     | eligible DBE owner.**             |
| agency, two airports, and three   |                                   |
| transit agencies in the same      | **3. Ownership and control        |
| State had to fill out six         | requirements provide detailed,    |
| application forms and endure six  | specific, clarified standards for |
| certification processes. This     | determining whether to certify    |
| created significant burdens on    | firms. The standards are intended |
| applicants and used recipient     | to resolve many difficult issues  |
| resources inefficiently.**        | that have arisen in the           |
|                                   | implementation of the program.**  |
| **5. The old rule suggested, but  |                                   |
| did not require, administrative   | **4. By February 2002, all the    |
| due process. Recipients'          | transit, airport, and highway     |
| practices varied, and some        | recipients in each State are      |
| recipients' processes were so     | required to agree on a unified    |
| lacking in due process that       | certification program (UCP). This |
| substantively valid decisions     | program must be fully operational |
| were overturned by the courts on  | no later than August 2003. The    |
| procedural grounds. Many          | UCP must provide for "one-stop    |
| recipients erroneously believed   | shopping" for DBE firms applying  |
| that the Department required      | for certification in each State.  |
| annual recertifications, which    | The applicant fills out one form, |
| burdened DBEs and used recipient  | goes through one application      |
| resources inefficiently.**        | process and, if certified, can    |
|                                   | work as a DBE for any DOT         |
| **6. The old rule lacked specific | recipient in the State. There     |
| standards and procedures for      | will be a single DBE directory    |
| certification appeals, resulting  | for the State. The rule allows    |
| in informal and sometimes         | recipients substantial discretion |
| inconsistent handling of          | about the form the UCP will take  |
| certification issues.**           | in each State.**                  |
|                                   |                                   |
|                                   | **5. In certifying or             |
|                                   | decertifying firms, recipients    |
|                                   | must provide administrative due   |
|                                   | process to ensure that procedures |
|                                   | are fair. When a firm is          |
|                                   | certified, it normally stays      |
|                                   | certified for three years, but    |
|                                   | must inform the recipient in      |
|                                   | writing of any changes that would |
|                                   | affect its eligibility and must   |
|                                   | submit an annual affidavit that   |
|                                   | such changes have not taken       |
|                                   | place.**                          |
|                                   |                                   |
|                                   | **6. All certification actions    |
|                                   | begin with a proceeding by a      |
|                                   | recipient. A party dissatisfied   |
|                                   | with the result can appeal to the |
|                                   | DOT Office of Civil Rights. This  |
|                                   | appeal proceeding is an           |
|                                   | administrative review of the      |
|                                   | record of the recipient's action, |
|                                   | and does not involve a new        |
|                                   | hearing before DOT. Recipients    |
|                                   | must promptly implement the       |
|                                   | Department's decision.**          |
+-----------------------------------+-----------------------------------+

## Program Administration

+-----------------------------------+-----------------------------------+
| # **Old Rule -- Part 23**         | # **New Rule -- Part 26**         |
+-----------------------------------+-----------------------------------+
| **\                               | > **\                             |
| 1. There was no program waiver    | > 1. A recipient can apply to the |
| provision in the old rule.**      | > Department for a program waiver |
|                                   | > if it wants to implement the    |
| **3. The inconsistency of DOT     | > program in a way not provided   |
| guidance concerning the old rule  | > for in the rule. If the         |
| led to substantial confusion and  | > Secretary believes that the     |
| was criticized by a General       | > recipient's idea will meet the  |
| Accounting Office report. Greater | > program's objectives, he or she |
| coordination is appropriate in an | > will approve the application.   |
| era of "One DOT."**               | > Waivers can apply to such       |
|                                   | > matters as overall and contract |
| **5. The old rule did not have    | > goals, but program waivers do   |
| similar provisions.**             | > not apply to DBE eligibility    |
|                                   | > standards and procedures, which |
|                                   | > must remain uniform             |
|                                   | > nationwide.**                   |
|                                   | >                                 |
|                                   | > **2. Recipients must submit     |
|                                   | > revised DBE program documents   |
|                                   | > to DOT, reflecting the new      |
|                                   | > rule's changed requirements, by |
|                                   | > September 1999.**               |
|                                   | >                                 |
|                                   | > **\                             |
|                                   | > 3. To avoid confusion and       |
|                                   | > promote consistency and         |
|                                   | > certainty, written guidance     |
|                                   | > about the new rule is valid and |
|                                   | > binding -- and represents the   |
|                                   | > official position of the        |
|                                   | > Department -- only if it has    |
|                                   | > been approved by the DOT        |
|                                   | > General Counsel. Guidance       |
|                                   | > issued under the old rule is no |
|                                   | > longer binding.\                |
|                                   | > **                              |
|                                   |                                   |
|                                   | **\                               |
|                                   | 4. Recipients must begin to       |
|                                   | collect data about the bidders on |
|                                   | their contracts and subcontracts, |
|                                   | for later use in calculating      |
|                                   | overall goals.**                  |
|                                   |                                   |
|                                   | **5. In the near future, DOT will |
|                                   | develop new, uniform program data |
|                                   | reporting and certification       |
|                                   | application forms.**              |
+-----------------------------------+-----------------------------------+

**7.1.1 [Applicability of DBE Rules to Grantee Programs]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR § 26.3\--*To Whom Does This Part Apply\--* defines the         |
| applicability of the new DBE regulations in terms of the types of     |
| funds being expended by the recipient. The types of *Federal transit  |
| funds* to which the DBE regulations apply are defined as those        |
| authorized by:                                                        |
|                                                                       |
| a)  Titles I, III, V and VI of ISTEA, Pub. L. 102-240, or             |
|                                                                       |
| b)  Federal transit laws in Title 49, U.S. Code, or                   |
|                                                                       |
| c)  Federal transit laws in Titles I, III, and V of the               |
|     Transportation Equity Act for the 21^st^ Century (TEA-21),        |
|     Pub. L. 105-178.                                                  |
|                                                                       |
| *Stated simply, any third party contract which is awarded by a FTA    |
| grantee and which is funded in whole or in part with Federal DOT      |
| funds, is subject to the DBE regulations in 49 CFR Part 26. It does   |
| not matter whether the Federal funds are for planning, capital or     |
| operating assistance, the DBE rules apply.* *A contract that is       |
| funded entirely with local funds -- without any Federal funds -- is   |
| not subject to the DBE requirements under this rule.*                 |
+-----------------------------------------------------------------------+

**DISCUSSION**

The DBE rules set forth in 49 CFR Part 26 apply to all third party
contracts funded in whole or in part with Federal DOT funds. This does
not mean, however, that every procurement or contract must be reviewed
for DBE participation. The rules give grantees flexibility in when and
how they establish individual contract goals. Certain types of
procurements (e.g., off-the-shelf commodities) may not have
subcontracting opportunities or be appropriate for DBE goal setting. In
other words, the DBE rules that apply to all contracts also include
guidance and flexibility throughout Part 26 as to how grantees can
comply with this part without subjecting every procurement to an
individual review for DBE participation. If, for example, the grantee
can meet its overall goal through race-neutral means, then contract goal
setting will not be necessary. And where goal setting is

necessary, the rules do not require goals for every contract nor that
every procurement be reviewed for goal setting purposes.

**7.1.2 [Definition of Terms]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.5\--*What Do The Terms Us                             |
| ed In This Part Mean?\--* contains definitions of the terms used in t |
| he new DBE regulation. The definitions of the designated groups inclu |
| ded in the definition of "socially and economically disadvantaged ind |
| ividual" are derived from the Small Business Administration's (SBA) n |
| ew small disadvantaged business program regulation (13 CFR § 124.3).  |
+-----------------------------------------------------------------------+

### DEFINITIONS

> a\) *Disadvantaged business* *enterprise* or *DBE* means a for-profit
> small business concern: (1) That is at least 51 percent owned by one
> or more individuals who are both socially and economically
> disadvantaged, or, in the case of a corporation, 51 percent of the
> stock of which is owned by one or more such individuals; and (2) Whose
> management and daily business operations are controlled by one or more
> of the socially and economically disadvantaged individuals who own it.
>
> b\) *Small business concern* means, with respect to firms seeking to
> participate as DBEs in DOT-assisted contracts, a small business
> concern as defined pursuant to section 3 of the Small Business Act and
> Small Business Administration regulations implementing it (13 CFR part
> 121) that also does not exceed the cap on average annual gross
> receipts specified in 49 CFR §26.65(b). The cap is currently set at
> \$16.6 million in average annual gross receipts over the firm's
> previous three fiscal years. [^4] This amount is adjusted for
> inflation by the Secretary of DOT from time to time. It should be
> noted that a not-for-profit firm may not 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.
>
> c\) *Race- conscious* measure or program is one that is focused
> specifically on assisting only DBEs, including women-owned DBEs. The
> use of contract goals is the primary example of a *race-conscious*
> measure in the DBE program, but set-asides and price credits for DBEs
> would also be considered *race-conscious* measures.
>
> d\) *Race-neutral* measure or program is one that is, or can be, used
> to assist all small businesses. While benefiting DBEs, such programs
> are not solely focused on DBE firms. Examples of *race-neutral*
> measures would include outreach programs, technical assistance
> programs, and prompt payment clauses, all of which can assist a wide
> variety of small businesses, not just DBEs. As used in this
> regulation, *race-neutral includes gender neutrality*.
>
> e\) *Set-aside* means a contracting practice restricting eligibility
> for the competitive award of a contract solely to DBE firms.
>
> f\) *Personal net worth* means the net value of the assets of an
> individual remaining after total liabilities are deducted. An
> individual's *personal net worth* does not include: The individual's
> ownership interest in an applicant or participating DBE firm or the
> individual's equity in his or her primary place of residence. An
> individual's *personal net worth* includes only his or her own share
> of assets held jointly or as community property with the individual's
> spouse.
>
> g\) *Socially and economically disadvantaged individuals* means any
> individual who is a citizen (or lawfully admitted permanent resident)
> of the United States and who is --
>
> \(1\) Any individual who a recipient finds to be a socially and
> economically
>
> disadvantaged individual on a case-by-case basis.
>
> \(2\) Any individual in the following groups, members of which are
> rebuttably
>
> presumed to be socially and economically disadvantaged:

(i) "Black Americans," which includes persons having origins in any of
    the Black racial groups of Africa;

(ii) "Hispanic Americans," which includes persons of Mexican, Puerto
     Rican, Cuban, Dominican, Central or South American, or other
     Spanish or Portuguese culture or origin, regardless of race;

(iii) "Native Americans," which includes persons who are American
      Indians, Eskimos, Aleuts, or Native Hawaiians;

(iv) "Asian-Pacific Americans," which includes persons whose origins are
     from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam, Laos,
     Cambodia (Kampuchea), Thailand, Malaysia,\
     Indonesia, the Philippines, Brunei, Samoa, Guam, the U.S. Trust
     Territories of the Pacific Islands, Macao, Fiji, Tonga, Kirbati,
     Juvalu, Nauru, Federated States of Micronesia, or Hong Kong;

(v) "Subcontinent Asian Americans," which includes persons whose origins
    are from India, Pakistan, Bangladesh, Bhutan, the Maldives Islands,
    Nepal or Sri Lanka;

(vi) Women;

(vii) Any individual groups whose members are designated as socially and
      economically disadvantaged by the SBA, at such time as the SBA
      designation becomes effective.

```{=html}
<!-- -->
```
h)  *Contract* means a legally binding relationship obligating a seller
    to furnish supplies or services (including, but not limited to,
    construction and professional services) and the buyer to pay for
    them. For purposes of this part, a *lease* is considered to be a
    *contract.*

i)  *Bidders List* -- For the meaning of this term, see Section 7.2.6 --
    *Bidders List.*

7.2 ADMINISTRATIVE REQUIREMENTS

**7.2.1 [Who Must Have a DBE Program?]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.21\--*Who Must Have a DB                              |
| E Program?\--* requires all FTA recipients who receive \$250,000 or m |
| ore in FTA planning, capital, and/or operating assistance in a *Feder |
| al fiscal year*, exclusive of transit vehicle purchases, and transit  |
| vehicle manufacturers who must submit an overall goal under Sec. 26.4 |
| 9, to have a DBE program meeting the requirements of 49 CFR part 26.  |
+-----------------------------------------------------------------------+

**7.2.2 [DBE Liaison Officer]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.25\--*What Is the Requireme                           |
| nt for a Liaison Officer?\--* requires grantees to have a DBE Liaison |
|  Officer who has direct, independent access to the Chief Executive Of |
| ficer concerning DBE program matters. The Liaison Officer must be res |
| ponsible for implementing all aspects of the grantee's DBE program. G |
| rantees must also have adequate staff to administer the DBE program.  |
+-----------------------------------------------------------------------+

### DISCUSSION

**The DBE Liaison Officer will be responsible for overseeing all aspects
of the grantee's DBE program. One area of the Liaison Officer's
responsibility would include acting as an advocate for DBE contractors,
subcontractors and suppliers of any tier on the grantee's contracts. The
DBE Liaison Officer would be available to any DBE who is experiencing
difficulties in the payment process or in any other aspect of the
contract work. The Liaison Officer would be available to investigate
complaints, mediate disputes and recommend remedies to the appropriate
grantee management officials.**

**Some grantees require their contractors to post notices on the job
site, (these notices are provided by the grantee), identifying the DBE
Liaison Officer, and the contractors must require all subcontractors of
any tier to include an appropriate notification in their subcontracts
with DBE firms.** [^5]

**7.2.3 [Required Efforts On Behalf of DBE Financial
Institutions]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.27\--*What Efforts Must Recipients Make Concerning DBE     |
| Financial Institutions?\--* requires grantees to thoroughly           |
| investigate the full extent of services offered by DBE financial      |
| institutions in the community, and to make reasonable efforts to use  |
| these institutions. Grantees must also encourage prime contractors to |
| use such institutions.                                                |
+-----------------------------------------------------------------------+

**7.2.4 [Prompt Payment Mechanisms]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| > 49 CFR §26.29\--*What Prompt Payment Mechanisms Must Recipients     |
| > Have?\--* requires grantees to establish a contract clause which    |
| > requires prime contractors to pay subcontractors for satisfactory   |
| > performance of their contracts no later than 30 days from receipt   |
| > of each payment that the grantee makes to the prime contractor.     |
| > This clause must also require the prompt return of retainage        |
| > payments from the prime contractor to the subcontractor within 30   |
| > days after the subcontractor's work is satisfactorily completed.    |
| >                                                                     |
| > This part also discusses other aspects of a prompt payment program  |
| > that grantees may wish to consider, including:                      |
|                                                                       |
| (1) Appropriate penalties for failure to comply,                      |
|                                                                       |
| ```{=html}                                                            |
| <!-- -->                                                              |
| ```                                                                   |
| (1) Prior written consent of grantee for delays in payment of         |
|     subcontractors,                                                   |
|                                                                       |
| (2) Requirement for primes and subcontractors to use alternative      |
|     dispute resolution mechanisms to resolve payment disputes, and    |
|                                                                       |
| (3) Requirement that primes will not be paid for work performed by a  |
|     subcontractor until the prime ensures that the subcontractor is   |
|     paid.                                                             |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Prompt payment provisions are an important race-neutral mechanism that
can benefit DBEs and all other small businesses. Under part 26, all
grantees must include a provision in their DOT-assisted contracts
requiring prime contractors to make prompt payments to their
subcontractors, DBE and non-DBE alike. DBE contractors are significantly
affected by late payments from prime contractors, and lack of prompt
payment constitutes a very real barrier to the ability of DBEs to
compete in the marketplace. Non-DBE contractors are also affected by
late payment problems. A prompt payment requirement applying to all
subcontractors is an excellent example of a race-neutral measure that
will assist all subcontractors.**

**The required contract clause would obligate the prime contractor to
pay subcontractors no later than 30 days from the receipt of each
payment the grantee makes to the prime contractor. Payment is required
only for satisfactory completion of the subcontractor's work. Retainage
would have to be returned within 30 days from the time the
subcontractor's work had been satisfactorily completed, even if the
prime contractor's work had not yet been completed. The number of days
specified in the prompt payment clause for the payment of subcontractors
may be less than 30 days, at the grantee's discretion. Grantees who
already operate under prompt payment statutes may use their existing
authority in implementing this requirement. It may be necessary,
however, to add to existing contract clauses in some cases (e.g., if
existing prompt payment requirements do not cover retainage).**

**Paragraph (e) of § 26.29 lists a series of additional measures that
the regulation authorizes, but does not require, grantees to use. In
addition to the mechanisms suggested by §26.29, another possible
mechanism that grantees should consider would be declaring a prime
contractor to be not responsible for future awards where the contractor
has exhibited a pattern of withholding or making late payments to
subcontractors**.

##### Best Practices

Following are examples of *prompt payment* and *reporting requirements*
(of payments to subcontractors*)* contract clauses used by the Chicago
Transit Authority (CTA). [^6] We would note that the time periods
specified in the CTA clause for payment of subcontractors may be too
aggressive and may not be feasible for all grantees. In any event, FTA
gives grantees discretion in stipulating the payment timelines in their
prompt payment contract clauses.

##### PROMPT PAYMENT TO SUBCONTRACTORS 

A. The Contractor is required to pay all Subcontractors for all work
that the Subcontractor has satisfactorily completed, no later than five
(5) business days after the Contractor has received payment from the
Authority. [^7]

B. In addition, all Retainage amounts must be paid by the Contractor to
the Subcontractor no later than fourteen (14) business days after the
Subcontractor has, in the opinion of the VP Construction, satisfactorily
completed its portion of the Work. [^8]

C. A delay in or postponement of payment to the Subcontractor requires
good cause and prior written approval of the General Manager,
Purchasing.

D. The Contractor is required to include, in each subcontract, a clause
requiring the use of appropriate arbitration mechanisms to resolve all
payment disputes.

E. The Authority will not pay the Contractor for work performed unless
and until the Contractor ensures that the Subcontractors have been
promptly paid for the work they have performed under all previous
payment requests, as evidenced by the filing with the Authority of lien
waivers, canceled checks (if requested), and the Contractor's sworn
statement that it has complied with the prompt payment requirements.
Prime Contractors must submit a prompt payment affidavit, (form to be
provided by the Authority) which identifies each subcontractor (both DBE
and non-DBE) and the date and amount of the last payment to such
subcontractor, with every payment request filed with the Authority,
except for the first payment request, on every contract with the
Authority. (See below for *Prompt Payment Affidavit* developed by CTA).

F. Failure to comply with these prompt payment requirements is a breach
of the Contract, which may lead to any remedies permitted under law,
including, but not limited to, Contractor debarment. In addition,
Contractor's failure to promptly pay its Subcontractors is subject to
the provisions of 50 ILCS 505/9.

## REPORTING REQUIREMENTS DURING THE TERM OF THE CONTRACT

> A. The bidder shall, within five (5) business days of contract award,
> or prior to any work being performed, execute formal subcontracts or
> purchase orders with the DBE firms\
> included in the bid. [^9] These written agreements shall be made
> available to the General Manager, DBE Program, upon request. All
> contracts between the bidder and its subcontractors must contain a
> prompt payment clause as set forth in Section VIII herein.
>
> B. During the term of annual contracts, the bidder shall submit
> regular \"Status Reports of DBE Subcontract Payments\" in a form
> acceptable to the Authority. The frequency with which these reports
> are to be submitted will be determined by the General Manager, DBE
> Program, but in no event will reports be required less frequently than
> quarterly. **In the absence of written notice from the General
> Manager, DBE Program, the bidder's first "Status Report of DBE
> Subcontract Payments" will be due ninety (90) days after the date of
> contract award, with additional reports due quarterly thereafter.**
>
> C. In the case of a one-time procurement with either a single or
> multiple deliveries, a "Status Report of DBE Subcontract Payments," in
> a form acceptable to the Authority, indicating final DBE payments
> shall be submitted directly to the General Manager, DBE Program. The
> information must be submitted prior to or at the same time as the
> bidder's final invoice to the Authority user department identified in
> the solicitation. (NOTICE: The original invoices must be submitted
> directly to the Authority's department identified in the contract
> documents and the Status Report of DBE Subcontract Payments must be
> submitted directly to the General Manager, DBE Program.) **Failure to
> follow these directions may delay final payment.**
>
> D. The address for the General Manager, DBE Program, is: CTA General
> Manager, Chicago Transit Authority, DBE/EEO Programs/Contract
> Compliance Department, 567 West Lake Street, Chicago, IL 60661-1498).

# 

# **PROMPT PAYMENT AFFIDAVIT**

Contractor will place a check in the appropriate box below that applies
to this payment request.

> Re: Payment Request No. \_\_\_\_\_\_\_

I, \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, the
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Name Title (e.g., President, Vice President, etc.)

> of
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
> (\"Company\"), do state the following with regard to payments made
> under Contract No. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
> (\"Contract\"):
>
> 1\. Subcontractors, at the first tier, both DBE and non-DBE, who
> completed work and were listed for payment on the prior Payment
> Request No. \_\_\_\_\_\_\_, were paid no later than five (5) business
> days after Company received payment from CTA.
>
> 2\. Copies of invoices and cancelled checks for subcontractors at the
> first tier who were paid under the prior payment request have been
> delivered or mailed to the DBE Department. In addition, Company has
> attached to the current Payment Request all lien waivers for prior
> subcontractor payments and any other documentation required by CTA.
> (Failure to attach all required documentation to the Payment Request
> or forward cancelled checks and invoices to the CTA DBE Department may
> cause the Payment Request to be rejected by CTA.)
>
> 3\. All retainage amounts withheld from any subcontractor who
> satisfactorily completed its portion of the contract work, including
> punch list items, were paid to the subcontractor(s) no later than
> fourteen (14) business days after it satisfactorily completed its
> work, whether or not CTA has paid said retainage amounts to Company.
> Attach a copy of the cancelled check evidencing payment of each
> retainage amount.
>
> 4\. There was no delay in or postponement of any payment owed to a
> subcontractor, whether periodic payment or retainage amount, except
> for good cause and after receipt of prior written approval from the
> CTA Purchasing Agent.
>
> Attach a copy of the written approval from the CTA Purchasing Agent.

+------------------------------+---------------------------------------+
| Subscribed and sworn to      | \_\_\_                                |
|                              | \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ |
| before me this               | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
| \_\_\_\_\_\_\_\_             |                                       |
|                              | Company Name                          |
| day of \_\_\_\_\_\_\_\_      |                                       |
| 20\_\_\_                     | \_\_\_                                |
|                              | \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ |
| \_\_\_\_                     | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_ |                                       |
| \_\_\_\_\_\_\_\_\_\_\_\_\_\_ | Signature                             |
|                              |                                       |
| Notary Public                | \_\_\_                                |
|                              | \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\ |
|                              | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
|                              |                                       |
|                              | Print Name                            |
|                              |                                       |
|                              | Date:                                 |
|                              | \_\_\_\_\                             |
|                              | _\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ |
+------------------------------+---------------------------------------+

**7.2.5 [DBE Directory]{.underline}**

+-----------------------------------------------------------------------+
| #### **REQUIREMENT**                                                  |
+-----------------------------------------------------------------------+
| 49 CFR §26.31\--*What Requirements Pertain to the DBE Directory?\--*  |
| requires grantees to compile and update at least annually a directory |
| or source list of all firms eligible to participate as DBEs in the    |
| grantee's programs. The listing for each firm must include its        |
| address, phone number, and the types of work the firm has been        |
| certified to perform as a DBE. This directory is to be made available |
| to interested persons, including contractors and the public on        |
| request.                                                              |
+-----------------------------------------------------------------------+

**DISCUSSION**

**Grantees must maintain directories of DBE firms that have been
certified to do work as DBEs. The information required for the Directory
includes the name, address, phone number, and the types of work the firm
has been certified to perform as DBE. The primary purpose of the
Directory is to show the results of the certification process. Since
certification under the DBE rule pertains to the various kinds of work a
firm's disadvantaged owners can control, it is important to list those
kinds of work in the Directory. For example, if a firm seeks to work in
fields A, B, and C, but the grantee has determined that its
disadvantaged owners can control its operations only with respect to A
and B, then the Directory would recite that the firm is certified to
perform work as a DBE in fields A and B.**

**The focus of the Directory is intended to be eligibility. A Directory
is intended to permit interested firms to contact the DBEs. The
Directory is not intended to be a comprehensive business resource
manual. For example, information about firms' qualifications,
geographical preferences for work, performance track record,
capitalization, etc. are not required to be part of the Directory.**

**7.2.6 [Bidders List]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.11\--*What Records Do Recipients Keep and Report?\--*      |
| requires grantees to create and maintain a *bidders list*, consisting |
| of all firms bidding on prime contracts and bidding or quoting        |
| subcontracts on DOT-assisted projects. For every firm, the following  |
| information must be included:                                         |
|                                                                       |
| (1) Firm name,                                                        |
|                                                                       |
| (2) Firm address,                                                     |
|                                                                       |
| (3) Firm's status as a DBE or non-DBE,                                |
|                                                                       |
| (4) The age of the firm,                                              |
|                                                                       |
| (5) The annual gross receipts of the firm.                            |
+-----------------------------------------------------------------------+

### DISCUSSION

**The *bidders list* is intended to be a count of all firms that are
participating, or attempting to participate, on DOT-assisted contracts.
The list must include all firms that bid on prime contracts or bid or
quote subcontracts on DOT-assisted projects, including both DBEs and
non-DBEs. DOT believes that *bidders lists* are a promising method for
accurately determining the availability of DBE and non-DBE firms, and
DOT believes that developing bidders data will be useful for grantees.
Creating and maintaining a bidders list will give grantees another
valuable way to measure the relative availability of ready, willing and
able DBEs when setting their overall goals. (See section
7.3.3\--*Establishing Overall Goals*.) The DOT regulations do not impose
any procedural requirement as to how the data is collected. Grantees are
free to choose how they collect the required data. DOT suggests that
grantees consider using a widely publicized public notice or a widely
disseminated survey to encourage all firms that have bid on the
grantees' contracts to make themselves known to the grantee. Once the
list of bidders has been created, grantees will need to supplement this
information with the age of each firm (since establishment) and the
annual gross receipts of the firm (or an average of its annual gross
receipts). Grantees can gather this additional information by sending a
questionnaire to the firms on the list, or by any other means that the
grantee believes will produce reliable information. The grantee's plan
for how to create and maintain the list and gather the required
information must be included in its DBE program.**

7.  **[Monitoring Contractors' Performance]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.37\--*What Are a Recipient's Responsibilities for          |
| Monitoring the Performance of Other Program Participants?\--*         |
| requires grantees to establish a monitoring and enforcement mechanism |
| to verify that the work committed to DBEs at contract award is        |
| actually performed by the DBEs.                                       |
+-----------------------------------------------------------------------+

**DISCUSSION**

**DOT has avoided prescribing monitoring and enforcement mechanisms for
grantees. The Department is looking for grantees themselves to define a
strong and effective set of monitoring and compliance provisions in
their DBE programs. These mechanisms could be almost anything available
to the grantee under Federal, State or local law (e.g., liquidated
damages provisions, responsibility determinations, suspension and
debarment rules, etc.). The results that grantees must measure consist
of payments actually made to DBEs, not just promises at the award stage.
Credit toward goals can be awarded only when payments (including, for
example, the return of retainage payments) are actually made to DBEs.
Grantees must keep a running tally of the extent to which, on each
contract, performance had matched promises. Prime contractors whose
performance fell short of original commitments would be subject to the
compliance mechanisms the grantee had made available.**

**Best Practices**

Suggestions for monitoring contractor's performance would include:

a)  Requiring adequate justification when a prime contractor proposes to
    substitute a non-DBE subcontractor.

b)  Conducting status reviews of contractor's compliance at regularly
    scheduled project meetings.

c)  Requiring written monthly or quarterly reviews of the contractor's
    performance in meeting goals.

d)  Requiring the contractor to propose plans to cure and then implement
    those plans when the contractor is failing to meet the contract
    goals.

**7.3 GOALS FOR DBE PARTICIPATION**

**7.3.1 [DOT National Goal of 10%]{.underline}**

### 

### DISCUSSION

#### **There is a statutory goal that not less than 10 percent of the transit funds authorized are to be expended with DBEs. Under the former part 23, the 10 percent goal derived from the statute played a role in the setting of overall goals by grantees. For example, if grantees had a goal of less than 10 percent, the rule required them to make a special justification to FTA. *The new rule makes clear that the 10 percent goal is an aspirational goal that applies to the Department of Transportation on a national level, not to individual grantees or their contractors.* The national goal of 10 percent is not tied to grantees' goal-setting decisions. Grantees set goals based on what will achieve a level playing field for DBEs in their own programs, without regard to the national DOT goal. Grantees are not required to set their overall or contract goals at 10 percent or any other particular level. Nor are grantees required to make a special justification if their overall goals are less then 10 percent.**

**7.3.2 [Use of Quotas and Set-Asides]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR § 26.43\--*Can Recipients Use Quotas or Set-Asides as Part of  |
| This Program?\--* prohibits the use of quotas for DBEs on             |
| DOT-assisted contracts under any circumstances. Set-asides are not    |
| permitted except in limited and extreme circumstances to redress      |
| egregious instances of discrimination.                                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The DBE program does not set aside a certain percentage of contracts
or dollars for a specific set of contractors. The DBE program is a goals
program, which encourages participation without imposing rigid
requirements of any type.**

***Quotas* are not permitted under any circumstances. A *quota* is a
simple numerical requirement that a contractor must meet, without
consideration of other factors. For example, if a grantee sets a 12
percent goal on a particular contract and refuses to award the contract
to any bidder who does not have a 12 percent DBE participation, either
refusing to look at showings of good faith efforts or arbitrarily
disregarding them, then the grantee has used a quota. Bidders must make
good faith efforts to meet contract goals where such goals are stated,
but grantees may not deny a contract to a bidder simply because it did
not obtain enough DBE participation to meet the goal. Grantees must
seriously consider bidders' documentation of good faith efforts. If
bidders make good faith efforts to meet contract goals, they have
complied with the intent of the DBE regulations, even if their good
faith efforts fail to meet the actual contract goal.**

***Set-asides* are not permitted except in extreme circumstances to
redress extreme instances of discrimination. A contracting agency sets a
contract aside for DBEs if it permits no one but DBEs to compete for the
contract. Firms other than DBEs are not eligible to bid. A grantee may
use a set-aside under part 26 if other methods of meeting overall goals
are demonstrated to be unavailing and the grantee has legal authority
independent of part 26. DOT believes that set-asides should not be used
in the DBE program unless they are absolutely necessary to address a
specific problem when no other means would suffice*. Set-asides are a
last resort.***

**7.3.3 [Establishing Overall Goals]{.underline}**

+-----------------------------------------------------------------------+
| ##### REQUIREMENT                                                     |
+-----------------------------------------------------------------------+
| 49 CFR §26.45**\--***How Do Recipients Set Overall Goals?\--*         |
| requires grantees to set an overall goal for DBE participation in     |
| their DOT-assisted contracts. The overall goal must be based upon     |
| demonstrable evidence of the relative availability of DBEs in the     |
| grantee's own market. Section 26.45 also furnishes examples of        |
| methods that grantees may use to develop a base figure for the        |
| *relative availability of DBEs* in their particular market. The       |
| methods suggested include the use of DBE Directories, Census Bureau   |
| Data, Bidders Lists, etc. Goals must be submitted to FTA by August 1  |
| of each year. Public participation is also required in establishing   |
| an overall goal; i.e., consultation with minority, women's and        |
| general contractor groups, and other organizations that could have    |
| information concerning the availability of DBEs, as well as public    |
| notices announcing the proposed overall goal and its rationale.       |
+-----------------------------------------------------------------------+

**DISCUSSION**

**"Establishing Overall Goals" is not normally a procurement office
function. DBE program administrators should seek guidance from the U.S.
DOT Office of Small and Disadvantaged Business Utilization
(<http://osdbu.dot.gov/>).**

**7.3.4 [Establishing Overall Goals for Transit Vehicle
Manufacturers]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.49\--*How Are Overall Goals Established for Transit        |
| Vehicle Manufacturers?\--* requires grantees to obtain a              |
| certification from each transit vehicle manufacture that desires to   |
| bid or propose upon a DOT-assisted transit vehicle procurement that   |
| it has complied with the requirements of 49 CFR §26.49. Grantees may, |
| however, with FTA approval, establish project-specific goals for DBE  |
| participation in the procurement of transit vehicles in lieu of       |
| complying through the overall goal-setting procedures.                |
+-----------------------------------------------------------------------+

**DISCUSSION**

**49 CFR §26.49 requires transit vehicle manufacturers (TVMs) to
establish and submit for FTA approval an annual overall percentage goal
for DBEs. Part 26 continues the older rule that was in part 23 for TVMs.
TVMs must set their goals based on the principles in**

**§26.45. Grantees are required to obtain a certification from TVMs that
wish to bid or propose on DOT-assisted transit vehicle procurements, or
alternately, grantees may, with FTA approval, establish a
project-specific goal for DBE participation.** [^10] **The APTA
*Standard Bus Procurement Guidelines* provide a sample *solicitation
provision* and a *certification* to be signed by the TVM's authorized
official.** [^11]

**7.3.5 [Means of Meeting Overall Goals]{.underline}**

**7.3.5.1 [Race-Neutral Means]{.underline}**

  -----------------------------------------------------------------------
  **REQUIREMENT**

  49 CFR §26.51\--*What Means Do Recipients Use to Meet Overall Goals?\--
  r*equires grantees to meet the maximum feasible portion of their
  overall goal by using *race-neutral* means of facilitating DBE
  participation. This Section includes examples of *race-neutral* steps
  that grantees can take to facilitate DBE participation. In any year in
  which the grantee expects to meet part of its goal through race-neutral
  means and the remainder through contract goals, the grantee must
  maintain data separately on DBE achievements in those contracts with
  and without contract goals, respectively. This data must be reported to
  FTA.
  -----------------------------------------------------------------------

##### DISCUSSION

**One of the key points of the new DBE rule is that, in meeting overall
goals, grantees have to give priority to *race-neutral* means. By
*race-neutral* means (a term that includes gender neutrality for
purposes of this rule), DOT means outreach, technical assistance,
procurement process modification, etc.---measures that can be used to
increase opportunities for all small businesses, not just DBEs, and *do
not involve setting specific goals for the use of DBEs on individual
contracts.* Whenever a DBE receives a prime contract because it is the
lowest responsible bidder, the resulting DBE participation was achieved
through race-neutral measures. Similarly, when a DBE receives a
subcontract on a project that does not have a contract goal, its
participation was also achieved through race-neutral measures.**

***Race-neutral* means include, but are not limited to, the following:**

(1) **Arranging solicitations, times for the submission of bids or
    proposals, quantities, specifications, and delivery schedules in
    ways that facilitate participation by DBEs, and other small
    businesses. Examples might include the unbundling of large contracts
    to make them more accessible to small\
    businesses, requiring or encouraging prime contractors to
    subcontract portions of work that they might otherwise perform with
    their own forces, etc.;**

(2) **Providing assistance in overcoming limitations such as inability
    to obtain bonding or financing (e.g., by such means as simplifying
    the bonding process, reducing the bonding requirements, eliminating
    the impact of surety costs from bids, and providing services to help
    DBEs, and other small businesses, obtain bonding and financing;**

(3) **Providing technical assistance and other services;**

(4) **Carrying out information and communications programs on
    contracting procedures and specific contract opportunities (e.g.,
    ensuring the inclusion of DBEs and other small businesses on grantee
    mailing lists for bidders; ensuring that prime contractors receive
    lists of potential subcontractors; provision of information in
    languages other than English, where appropriate);**

(5) **Implementing a supportive services program to develop and improve
    immediate and long-term business management, record keeping, and
    financial and accounting capability for DBEs and other small
    businesses;**

(6) **Providing services to help DBEs, and other small businesses,
    improve long-term development, increase opportunities to participate
    in a variety of kinds of work, handle increasingly significant
    projects, and achieve eventual self-sufficiency;**

(7) **Establishing a program to assist new, start-up firms, particularly
    in fields in which DBE participation has historically been low;**

(8) **Ensuring distribution of the DBE Directory, through print and
    electronic means, to the widest feasible universe of potential prime
    contractors; and**

(9) **Assisting DBEs and other small businesses to develop their
    capability to utilize emerging technology and conduct business
    through electronic media.**

**7.3.5.2 [Using Contract Goals]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.51(d)\--*What Means Do Recipients Use to Meet Overall      |
| Goals?\-- r*equires grantees to establish contract goals to meet any  |
| portion of their overall goal that they do not project being able to  |
| meet using *race-neutral* means. Grantees may use contract goals only |
| on those DOT-assisted contracts that have subcontracting              |
| possibilities. Further, grantees are not required to set goals on     |
| every DOT-assisted contract, nor must they set a particular contract  |
| goal at the level of the overall goal. The particular contract goal   |
| will depend on the type of work involved, the location of the work,   |
| and the availability of DBEs for the work of the particular contract. |
| However, over the period covered by the overall goal, grantees must   |
| set contract goals so that they will cumulatively result in meeting   |
| any portion of the overall goal that they do not project being able   |
| to meet through the use of race-neutral means. If the grantee's       |
| approved projection indicates that it can meet its entire overall     |
| goal through race-neutral measures, the grantee must implement its    |
| program without setting contract goals during that year.              |
+-----------------------------------------------------------------------+

**DISCUSSION**

**The expressed priority for race-neutral means does not preclude the
use of race-conscious measures, such as contract goals, by grantees. The
rule simply requires grantees to get the maximum feasible DBE
participation through race-neutral measures. The first step is to
establish an overall goal and estimate, in advance, what part of the
goal can be met through the use of race-neutral measures. This
projection is furnished to FTA at the time the overall goal is
submitted, and is subject to FTA approval. The grantee uses
race-conscious measures (e.g., sets contract goals) to get the remainder
of the DBE participation it needs to meet the overall goal. If the
grantee expects to meet its entire overall goal through race-neutral
means, it could, with FTA approval, implement its program without any
use of contract goals.**

**Grantees will most likely use a combination of race-neutral and
race-conscious measures. It is important that grantees keep accurate
records of contract awards to DBEs through race-neutral vs.
race-conscious methods. The grantee's actual experience with the methods
will enable the grantee to adjust the methodology it uses to achieve its
future overall goal. For example, a grantee that was consistently able
to meet its overall goal using only race-neutral measures would never
need to use contract goals.**

**The new DBE rule makes clear that contract goals are not required on
all contracts. The rule also states that the contract goal need not be
set at the same level as the overall goal. For example, if a grantee has
an overall goal of 11 percent, it does not have to set a contract goal
on each contract. Nor does it have to establish an 11 percent goal on
each contract where it does set a contract goal. The idea is for the
grantee to set contract goals that, cumulatively for the year, bring in
enough DBE participation, which when added to the participation expected
from race-neutral measures, will result in achieving the overall goal.**

### Best Practices

When grantees must use contract goals to meet their overall goal,
grantees need to review candidate procurements to determine if they
afford subcontracting opportunities for DBE participation. DBE
subcontracting goals are to be established based on the known
availability of qualified DBEs**.** Grantees can obtain information
about certified DBE firms from their State or local government offices
as well as the Federal *Small Business Administration*, which publishes
a listing of certified small businesses and small disadvantaged
businesses on their *Pro-Net* Internet site. *Pro-Net* is an
Internet-based database of information on more than 171,000 small,
disadvantaged, 8(a) and women-owned businesses. This data is free to the
general public as a resource for those seeking contractors and
subcontractors and/or partnership opportunities. Businesses profiled on
the *Pro-Net* can be searched by SIC codes; key words; location; quality
certifications; business type, ownership race and gender; E.I.
capability, etc.[^12] Of course, grantees are required to maintain a
current *Directory* of DBE sources in order to facilitate the
establishment of specific contract goals and to assist prime contractors
in identifying potential DBE subcontractors. See Section 7.2.5, *DBE
Directory*, above.

Grantee initiatives to promote DBE participation in their third-party
contracts would include such steps as:

-   Reviewing all purchase requisitions above a certain dollar threshold
    or for certain types of work (e.g. construction and professional
    services), to determine if DBE goals should be required.

```{=html}
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```
-   Encouraging bidders to divide their total requisitions, where
    appropriate, into economically feasible units, tasks or quantities
    so as to permit maximum DBE participation.

```{=html}
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```
-   Stressing the importance of DBE participation at pre-bid/proposal
    conferences, with guidance to bidders and proposers as to the
    resources available to them in locating potential DBE subcontractors
    and suppliers (such as the Small Business Administration's *Pro-Net*
    database).

```{=html}
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```
-   Targeting advertisement notices in minority-owned newspapers in
    addition to other newspapers of general circulation.

```{=html}
<!-- -->
```
-   Extending the bidding time to allow contractors to identify DBE
    firms and permit their certification where necessary. This technique
    was used by the Metro-Dade Transit Agency on a procurement for
    technical, computer-related end items where DBE firms with the
    technical expertise to perform the work were not certified. Allowing
    an extended proposal period permitted the prime contractors to
    locate DBE subcontractors and have them certified. [^13]

```{=html}
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```
-   Including a prominent notification in all "Notice of Award Letters"
    similar to that used by NYC Transit:

> *Your contract contains a Disadvantaged Business Goal of
> \_\_\_\_\_\_%. The Contract requires that you submit work schedules
> and copies of executed subcontract agreements for your proposed DBE
> subcontractors within 30 days of the date of this award letter. You
> are further required to submit monthly reports of your progress toward
> meeting these goals, on the forms provided in the contract documents*.
> [^14]

-   Inviting your DBE program office to participate on all selection
    committees for procurements that require DBE subcontracting goals.

**7.3.5.3 [Evaluation of Contractor Proposals For DBE
Participation]{.underline}**

::: Definition-Term
**DISCUSSION**
:::

::: Definition-Term
**There are two practices for submission of DBE information by offerors\
**
:::

-   ::: Definition-Term
    **Offerors may be required to complete their DBE submissions,
    including either the list of proposed DBE subcontractors and
    amounts, or the proof of good faith efforts, with their offers. This
    approach is typical of professional service contracts; or**
    :::

-   ::: Definition-Term
    **Offerors may be required only to promise compliance with the
    program in their offers, postponing submission of the list of
    subcontractors (or proof of good faith efforts) until determination
    of the apparent low bidder.**
    :::

**When determining compliance with DBE requirements, two scenarios are
possible:**

-   **The proposer/bidder submits information indicating that the DBE
    goals will be met; or**

-   **The proposer/bidder submits information indicating that the DBE
    goals will not be met.**

The following are best practices to follow for the two scenarios:

**[Scenario 1: Proposer/bidder submits information that the DBE goals
will be met]{.underline}**

**[Required Information]{.underline} ‑ The information submitted by the
offeror must include:**

-   **Names of DBE subcontractors/suppliers participating in the
    contract. DBEs must be eligible (those that are currently certified
    or that can be certified prior to award);**

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-   **A description of the work each DBE is to perform or the products
    to be provided by the DBE, with an indication of the percentage of
    the work to be done by the DBE's own work forces, as compared with
    that which will be subcontracted by the DBE to other DBEs or
    non-DBEs; and**

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```
-   **The dollar value of each proposed DBE subcontract, including the
    dollar values of subcontracts to be awarded by the DBE
    subcontractor.**

**[Counting DBE Participation]{.underline} ‑ Having received the above
information, verify the counting of DBE participation towards the goal
using the criteria set forth above in section 7.3.5.5, *Counting DBE
Participation Toward the Goal*.**

**If the goal has been met satisfactorily, the award process can
continue. If the goal has not been met even though the offeror stated
that it will, you should assess the cause for differing conclusions;
notify the offeror and seek additional information, or consider
documentation of good faith efforts as provided by your DBE program and
procedures.**

-   **If you have required evidence of compliance from all offerors with
    their offers, giving the offeror an additional opportunity may,
    depending on your program and procedures, appear to give the offeror
    an unfair chance to re‑evaluate its offer after submission. You
    apparently have either a mistake or an offer that does not comply
    with the terms of your solicitation. In the former case, you should
    follow the guidance on mistakes in Section 4.4.5, \"Bid Mistakes.\"
    In the latter case, you may work with the offeror to reconcile the
    difference if your DBE program provides for that opportunity; if
    your program provides it, all offerors could have expected the**
    **opportunity and it would not give the offeror a gratuitous or
    unfair second chance to evaluate its offer.**

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```
-   **However, if you requested evidence be submitted only after
    selecting the apparent awardee, you may work freely with the offeror
    to reconcile the discrepancy, as all offerors should expect the
    opportunity to provide information regarding responsibility and
    similar determinations made prior to award.**

**If these steps conclude with the offeror meeting the goal or
demonstrating good faith efforts to meet the goal, you can proceed with
the award. If these steps conclude without the offeror meeting the goal
or demonstrating good faith efforts to meet the goal, you can eliminate
the offer and proceed to the next ranked offer.**

**[Scenario 2: Offeror submits information that the DBE goals will not
be met.]{.underline}**

**[Required Information]{.underline} ‑ Documentation of good faith
efforts by the proposer/bidder is required in all cases where the
proposer/bidder fails to meet the stated goal for DBEs. As discussed
above, the solicitation may require that good faith efforts be
accomplished prior to bid opening or that good faith efforts be
accomplished prior to the receipt of best and final offers. Where the
shopping period is permitted after final submission of offers, good
faith effort requirements are established accordingly.**

**Your agency\'s DBE program** **should include guidelines for
determining and evaluating good faith efforts by proposers/bidders.
Criteria for determining whether a good faith effort was made can
include those factors discussed in section 7.3.5.4\--*Good Faith Efforts
to Meet Contract Goals*.**

If the proposer/bidder has satisfactorily demonstrated good faith
efforts, the award process must continue. If not, the offer should not
be accepted, and you may proceed to the next best offer (next lowest
bid, or next highest score proposal, depending on your agency\'s DBE
program components). In either case, the proposer/bidder\'s good faith
effort documentation, as well as your written evaluation of that
material, are important entries in the contract file. This is a
potential protest area and should be well documented.

**7.3.5.4 [Good Faith Efforts to Meet Contract Goals]{.underline}**

+-----------------------------------------------------------------------+
| ### REQUIREMENT                                                       |
+-----------------------------------------------------------------------+
| 49 CFR §26.53\--*What Are the Good Faith Efforts Procedures           |
| Recipients Follow?\--* requires grantees to award a contract that     |
| requires a DBE goal to a bidder/offeror who has made *good faith      |
| efforts* to meet the goal. A *good faith effort* is defined as one    |
| where the bidder:                                                     |
|                                                                       |
| (1) Documents that it has obtained enough DBE participation to meet   |
|     the goal; or                                                      |
|                                                                       |
| (2) Documents that it made adequate good faith efforts to meet the    |
|     goal, even though it did not succeed in obtaining enough DBE      |
|     participation to do so.                                           |
|                                                                       |
| Appendix A to Part 26 -- *Guidance Concerning Good Faith Efforts,*    |
| provides grantees with suggested types of actions that they should    |
| consider when making judgments as to whether bidders/offerors have    |
| used good faith efforts. Grantees are specifically prohibited from    |
| ignoring bona fide good faith efforts.                                |
|                                                                       |
| It follows from the above that grantees, in a negotiated procurement, |
| may not give extra credit (higher evaluation scores) to an offeror's  |
| proposal if it exceeds the grantee's subcontracting goal, nor less    |
| credit (lower scores) to a proposal that cannot achieve the full DBE  |
| goal. The DOT requirement is that the offeror make good faith efforts |
| to meet the goal, and if this is demonstrated by the offeror the      |
| grantee cannot penalize the offeror in the proposal evaluation and    |
| contract award process.                                               |
|                                                                       |
| If a grantee determines that an otherwise successful bidder/proposer  |
| has failed to meet the good faith efforts requirement of this Part,   |
| the grantee must provide the bidder/proposer an opportunity for       |
| *administrative reconsideration*. The requirements that grantees must |
| follow in the administrative reconsideration process are outlined in  |
| 49 CFR § 26.53(d).                                                    |
+-----------------------------------------------------------------------+

## DISCUSSION

**The types of actions that grantees should consider as part of the
bidder's good faith efforts would include, but not be limited to, the
following:**

(1) **Adequate solicitation of DBEs (through all reasonable and
    available means), with sufficient time for DBEs to respond to the
    solicitation;**

(2) **Selecting portions of the work to be performed by DBEs in order to
    increase the likelihood that the DBE goals will be achieved;**

(3) **Providing interested DBEs with adequate information about the
    plans, specifications and requirements of the contract in a timely
    manner;**

(4) **Negotiating in good faith with interested DBEs. The fact that
    there may be some additional costs involved in finding and using
    DBEs is not in itself sufficient reason for a bidder's failure to
    meet the contract goal, as long as the costs are reasonable. Prime
    contractors are not, however, required to accept higher quotes from
    DBEs if the price difference is excessive or unreasonable.**

(5) **Not rejecting DBEs as being unqualified without sound reasons
    based on a thorough investigation of their capabilities.**

(6) **Making efforts to assist interested DBEs in obtaining bonding,
    lines of credit, or insurance as required by the grantee or
    contractor.**

(7) **Making efforts to assist interested DBEs in obtaining necessary
    equipment, supplies, materials, or related assistance or services.**

(8) **Effectively using the services of available minority/women
    community organizations and other organizations to provide
    assistance in the recruitment and placement of DBEs.**

**In determining whether a bidder has made good faith efforts, grantees
may take into account the performance of other bidders in meeting the
contract goal. For example, if the apparent successful bidder failed to
meet the goal, but meets or exceeds the average DBE participation
obtained by other bidders, grantees may view this as evidence of the
bidder having made good faith efforts.**

**The CFR allows discretion to grantees in when they require
bidders/proposers to submit their good faith efforts documentation. This
may be required: (a) as a matter of responsiveness with initial bids
under sealed bid procedures; (b) as a matter of responsiveness with
initial proposals under contract negotiation procedures; or (c) as a
matter of responsibility at any time before the grantee commits itself
to the performance of the contract by the bidder/proposer.** [^15]

> **In those procurements where bidders/proposers are required to submit
> their DBE participation information and good faith efforts with the
> initial bid/proposal as a matter of responsiveness, they are to be
> evaluated on the basis of that information, and may be rejected if the
> information presented is not satisfactory. (See however, the
> requirement for administrative reconsideration noted above in the
> Requirements block.) During the course of the negotiation process,
> changes may be made to the contract scope that affect either the need
> for some DBE subcontractors or the level of their participation. In
> that event, the agency should request that the proposer adjust its
> subcontract plan to maintain or enhance the DBE participation, and
> should require each proposer to submit a final DBE participation plan
> as part of its Final Proposal Revision (Best and Final Offer).**

# 

# **Best Practices**

Following is a solicitation provision used by the Chicago Transit
Authority (CTA) describing the types of actions that CTA would consider
as demonstrating *good faith efforts* on the part of a bidder. [^16]

**GOOD FAITH EFFORTS**

> In order to be responsive, a bidder must make good faith efforts to
> meet the DBE participation goal set forth in the contract. The bidder
> must document the good faith efforts it made in that regard. Thus, the
> Bid submitted to the Authority must be accompanied by written
> documentation prepared by the bidder evidencing all of its sufficient
> and reasonable good faith efforts toward fulfilling the goal. These
> efforts must be active steps, and ones, which could reasonably be
> expected to lead to sufficient DBE participation to meet the contract
> DBE participation goal. Mere *pro forma* efforts are not acceptable
> and will be rejected by the General Manager, DBE Program.
>
> Good Faith Efforts require that the bidder consider all qualified
> DBEs, who express an interest in performing work under the contract.
> This means that the bidder cannot reject\
> a DBE as unqualified unless the bidder has sound reasons based on a
> thorough investigation of the DBE's capabilities. Further, the DBE's
> standing within its industry, membership in specific groups,
> organizations or associations and political or social affiliation (for
> example, union vs. non-union employee status) are not legitimate
> causes for the rejection or non-solicitation of bids in the
> Contractor's efforts to meet the contract DBE participation goal.
>
> The following list, which is not exclusive or exhaustive, sets forth
> the types of actions, which indicate good faith efforts on the part of
> a bidder to meet the DBE goal. The extent and type of actions required
> will vary depending on such things as industry practice; the time
> available for submitting a bid and the type of contract involved.

A. Attendance at a pre-bid meeting, if any, scheduled by the Authority
to inform DBEs of subcontracting opportunities under a given
solicitation.

B. Advertisement in general circulation media, trade association
publications, and minority-focus media for at least twenty (20) days
before bids are due. If 20 days are not available, publication for a
shorter reasonable time is acceptable.

> C. Written notification to capable DBEs that their interest in the
> contract is solicited.
>
> D. Documentation of efforts to negotiate with DBEs for specific
> sub-contracts including at a minimum:
>
> 1\. The names, addresses, and telephone numbers of DBEs that were
> contacted and the date(s) of contact.
>
> 2\. A description of the information provided to DBEs regarding the
> plans and specifications for portions of the work to be performed.
>
> 3\. A statement explaining why additional agreements with DBEs were
> not reached.
>
> E. For each DBE the bidder contacted but rejected as unqualified, the
> reason for the bidder's conclusion.
>
> F. Documentation of efforts made to assist the DBEs contacted that
> needed assistance in obtaining bonding or insurance required by the
> bidder or the Authority.
>
> G. Documentation of efforts to utilize the services of small business
> organizations, community and contractor groups to locate qualified
> DBEs.
>
> H. Documentation that the bidder has broken out contract work items
> into economically feasible units in fields where there are available
> DBE firms to perform the work.
>
> I. Evidence that adequate information was provided to interested DBEs
> about the plans, specifications and requirements of the contract, and
> that such information was communicated in a timely manner.
>
> J. Documentation of any efforts made to assist interested DBEs in
> obtaining necessary equipment, supplies, materials or related
> assistance or services.

**GOOD FAITH EFFORTS RECONSIDERATION**

> If it is determined that the apparent successful low bidders have
> failed to meet the requirements of the contract goal/good faith
> efforts, the Authority will provide them with ONE opportunity for
> administrative reconsideration, before the Authority awards the
> contract. This reconsideration will include the following:
>
> A. The bidder will be permitted to either provide written evidence or
> to present oral argument at a pre-scheduled time that the
> documentation it submitted with its bid met the DBE goal and/or showed
> good faith efforts to do so. No new evidence of good faith efforts may
> be presented after the bid submission deadline.
>
> B. The Authority's Reconsideration Officer will review the evidence
> presented by the bidder and issue a written determination that the
> bidder has: 1) met the DBE goal; 2) not met the DBE goal but has made
> adequate good faith efforts to do so; or 3) has not met the DBE goal
> and the good faith efforts made were not adequate.
>
> C. The decision of the Authority's Reconsideration Officer is final
> and may not be appealed to the Authority, its funding agencies or the
> USDOT.
>
> D. The Authority will not award a contract to any bidder who does not
> meet the contract DBE participation goal or show good faith efforts to
> meet that goal. Thus, it is essential that all bidders submit ALL
> relevant documentation concerning the DBE goal and/or good faith
> efforts in the envelope or package containing their sealed bid.

**7.3.5.5 [Counting DBE Participation toward Goals]{.underline}**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| 49 CFR § 26.55\--*How is DBE Participation Counted Toward Goals?\--*  |
| sets forth the criteria to be used in counting DBE participation      |
| toward DBE contract goals. Grantees should refer to this section and  |
| not rely solely on the discussion below since the section may contain |
| relevant additional details not included here.                        |
+-----------------------------------------------------------------------+

**DISCUSSION**

**49 CFR § 26.55 defines the methodology for counting DBE participation
toward contract goals. *Grantees must be familiar with the details of
this section, not all of which are discussed here.* The basic principles
of this section are summarized below:**

1.  **When a DBE participates in a contract, you count only the value of
    the work actually performed by the DBE toward DBE goals.**

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```
(a) **For construction contracts, count the entire amount of that
    portion of the contract that is performed by the DBEs own forces,
    including the cost of supplies purchased and equipment leased by the
    DBE for the work.**

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```
(a) **For professional, technical, consultant or managerial services
    contracts, count the entire amount of fees or commissions charged by
    a DBE firm for providing a bona fide service, or for providing bonds
    or insurance specifically required for the performance of a
    DOT-assisted contract, provided you determine the fee to be
    reasonable and not excessive as compared with fees customarily
    allowed for similar services.**

(b) **When a DBE subcontracts part of the work of its contract to
    another firm, the value of the subcontracted work may be counted
    toward DBE goals only if the DBE's subcontractor is itself a DBE.
    Work that a DBE subcontracts to a non-DBE firm does not count toward
    DBE goals.**

**2. When a DBE performs as a participant in a joint venture, count a
portion of the total dollar value of the contract equal to the distinct,
clearly defined portion of the work that the DBE performs with its own
forces toward DBE goals.**

**3. Count expenditures to a DBE contractor only if the DBE is
performing a *commercially useful function* on that contract. This
section sets forth a number of criteria for determining when a DBE is
performing a *commercially useful function*. Included among these
criteria for determining when a DBE is performing a commercially useful
function is a requirement that the DBE perform or exercise
responsibility for at least 30 percent of the total cost of its contract
with its own work force, or that the DBE does not subcontract a greater
portion of the work of a contract than would be expected on the basis of
normal industry practice for the type of work involved. Grantee
decisions on commercially useful functions matters are subject to review
by FTA, but are not administratively appealable to DOT. This section
also contains detailed guidance for: (i) determining whether a DBE
*trucking company* is performing a *commercially useful function*, and
(ii) how to count DBE participation under several scenarios, including
DBE ownership of the trucks and circumstances when the trucks are leased
from a non-DBE owner.** [^17]

**4. For expenditures with DBEs who supply materials or supplies, this
section establishes rules for counting DBE participation based upon
whether the DBE is a manufacturer or a regular dealer. For expenditures
with DBE manufacturers, count 100 percent of the cost of the materials
or supplies. For expenditures with DBEs who are regular dealers, count
60 of the cost of the materials or supplies.**

**5. For purchases of materials and supplies from a DBE, which is
neither a manufacturer nor a regular dealer, do not count any portion of
the cost of the materials and supplies toward DBE goals. However, fees
or commissions charged by a DBE for assistance in the procurement of the
materials and supplies, or fees or transportation charges for the
delivery of materials or supplies required on a job site, may be counted
toward DBE goals, provided they are reasonable and not excessive as
compared with industry practices.**

6.  **Do not count the participation of a DBE subcontractor toward the
    prime contractor's DBE achievements or your overall goal until the
    amount being counted toward the goal has been paid to the DBE.**

**Best Practices**

Following is a solicitation provision developed by the Chicago Transit
Authority (CTA) that defines how the Authority will evaluate and count
DBE participation. [^18]

**COUNTING DBE PARTICIPATION TOWARD THE CONTRACT GOAL**

The inclusion of any DBE by the bidder in its bid documents shall not
conclusively establish the bidder's eligibility for full DBE credit for
the firm's participation in the contract. The amount of DBE
participation credit shall be based upon an analysis by the General
Manager, DBE Program, of the specific duties which will be performed by
the DBE.

**The bidder may count toward its DBE goal only expenditures to firms
which are currently certified by the IL UCP (or with the Authority prior
to the implementation of the IL UCP) and which perform a commercially
useful function**. A firm is considered to perform a commercially useful
function when it is responsible for the performance of a distinct
element of the work and carries out its responsibilities by actually
performing, managing and supervising the work involved.

To determine whether a firm is performing a commercially useful
function, the General Manager, DBE Program, will evaluate the amount of
work subcontracted, industry practices and other relevant factors. The
General Manager, DBE Program, reserves the right to deny or limit DBE
credit to the bidder where any DBE is found to be engaged in substantial
pass-through activities with others.

DBE participation shall be counted toward the DBE goal in the contract
as follows:

> A. Once a DBE is determined to be eligible in accordance with these
> rules, the total dollar value of the contract awarded to the DBE may
> be counted toward the DBE goal except as indicated below.
>
> B. A bidder may count toward its DBE goal that portion of the total
> dollar value of a contract with an eligible joint venture equal to the
> distinct, clearly defined portion of the work of the contract that the
> DBE performs with its own forces.
>
> C. Consistent with normal industry practices, a DBE may enter into
> subcontracts. If a DBE subcontracts more than thirty percent (30%) or
> a significantly greater portion of the work of the contract than would
> be expected on the basis of normal industry practices, the DBE shall
> be presumed not to be performing a commercially useful function.
> Evidence may be presented by the bidder involved to rebut this
> presumption. [^19]
>
> D. When a DBE subcontracts a part of the work under the contract to
> another firm, the value of the subcontracted work may only be counted
> towards the DBE goal if the DBE's subcontractor is itself a DBE. Work
> that a DBE subcontracts to a non-DBE firm does not count towards the
> DBE goal.
>
> E. The bidder may count one-hundred percent (100%) of its expenditures
> for materials and supplies required under the contract and which are
> obtained from a DBE manufacturer towards the DBE goal. The bidder may
> count sixty percent (60%) of its expenditures for material and
> supplies under the contract obtained from a DBE regular dealer towards
> its DBE goal. The terms "manufacturer" and "regular dealer" are
> defined in 49 C.F.R. Part 26.55(e)(1)(ii) and (2)(ii).
>
> F. The bidder may count towards its DBE goal expenditures to DBEs
> which are not manufacturers or regular dealers, such as fees or
> commissions charged for services and assistance in the procurement of
> essential personnel, facilities, equipment, materials or supplies and
> transportation charges as set forth in 49 C.F.R. Part 26. However, the
> General Manager, DBE Program, must determine the fee or charge to be
> reasonable and not excessive as compared with fees or charges
> customarily allowed for similar services.
>
> G. The bidder must use good business judgment when negotiating with
> subcontractors and take a DBE's price and capabilities into
> consideration. The fact that there may be some additional costs
> involved in finding and using DBE firms is not sufficient reason to
> fail to meet the DBE goal set forth in the contract, as long as such
> costs are reasonable.

7.4 CERTIFICATION: STANDARDS AND PROCEDURES

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| 49 CFR Part 26, Subparts D and E, prescribe standards to be applied   |
| and procedures to be followed when certifying businesses as DBEs.     |
| *Grantees must use the new certification standards for all decisions  |
| issued after March 4, 1999.* Grantees must also determine whether\    |
| all disadvantaged *owners of current certified firms meet the         |
| personal net worth standard by September 1, 1999.\                    |
| *                                                                     |
|                                                                       |
| APPENDIX E to Part 26 contains guidance as to how grantees are to     |
| make individual determinations of *social and economic disadvantage*. |
+-----------------------------------------------------------------------+

**DISCUSSION**

**"Certification: Standards and Procedures" is not normally a
procurement office function. DBE program administrators should seek
guidance from the U.S. DOT Office of Small and Disadvantaged Business
Utilization (<http://osdbu.dot.gov/>).**

**7.5 EXEMPTIONS AND WAIVERS**

+-----------------------------------------------------------------------+
| # **REQUIREMENT**                                                     |
+-----------------------------------------------------------------------+
| #### 49 CFR §26.15\--*How Can Recipients Apply for Exemptions o       |
| r Waivers?\--* describes the provisions made by DOT for the granting  |
| of exemptions and waivers to the requirements of the DBE regulations. |
+-----------------------------------------------------------------------+

### DISCUSSION

**There is a distinction made in this section between *exemptions* and
*waivers.* The procedures to be followed when applying for *exemptions*
and *waivers* are described in §26.15.**

***Exemptions* are for unique situations that are most likely not to be
either generally applicable to all recipients or to have been
contemplated in the rulemaking process. If such a situation occurs and
it makes it impractical for a particular grantee to comply with a
provision of part 26, the grantee should apply for an exemption from
that provision. The Secretary will grant the request only if it
documents special or exceptional circumstances, not likely to be
generally applicable, and not contemplated in connection with the
rulemaking that established this part, that make the grantee's
compliance with a specific provision of this part impractical.**

***Waivers*, by contrast, are not designed for extraordinary
circumstances where a grantee may not be able to comply with part 26.
*Waivers* are for situations where a grantee believes that it can better
accomplish the objectives of the DBE program through means other than
the specific provisions of part 26. The waiver provision is designed to
ensure that DOT and a grantee can work together to respond to any unique
local circumstances. Grantees are encouraged to carefully review the
circumstances in their own jurisdictions to determine what mechanisms
are best suited to achieving compliance with the overall objectives of
the DBE program. If a grantee believes it is appropriate to operate its
program differently from the way that a provision of Subpart B or C
provides, including, but not limited to, any provisions regarding
administrative requirements, overall or contract goals, good faith
efforts or counting provisions, it can apply for a waiver. For example,
waiver requests could pertain to such subjects as the use of a
race-conscious measure other than a contract goal, different ways of
counting DBE participation in certain industries, use of separate
overall or contract goals to address demonstrated discrimination against
specific categories of socially and economically disadvantaged
individuals, the use or wording of assurances, differences in
information collection requirements and methods, etc.**

[^1]: \- As of January 29, 1999.

[^2]: \- <http://osdbu.dot.gov/>

[^3]: \- [http://www.fta.dot.gov/office/civil]{.underline}

[^4]: \- As of April 1, 1999.

[^5]: \- For an example of a clause, see BART Clause SC7.1.10
    "Ombudsperson." Contact BART at (510) 464-6380.

[^6]: For further information contact Mr. Donald Mayes, Manager, DBE
    Contract Compliance at 312-664-7200, ext. 3519.

[^7]: We would note that five business days to pay subcontractors may
    not be realistic in all cases and could lead to complaints from
    subcontractors that the grantee enforce this timeframe.

[^8]: Other transit agencies have imposed a 30-day requirement for
    payment of retainage.

[^9]: The five-day requirement may not be realistic. Some agencies
    require subcontracts with DBEs within 60 days of contract award if
    the contract term is less than one year, or within 30 days of
    commencement of work for a contract that is for one year or more.
    The commencement of work rather than initial contract award is more
    realistic in the case of multiyear contracts where work may not
    start for another year or so.

[^10]: \- The TVM must certify that it has complied with the DBE goal
    requirements of § 26.49.

[^11]: \- See the APTA *Guidelines* sections 1.1.3.5 for the
    *solicitation provision* and 1.1.5.7 for the DBE *certification.*

[^12]: \- The Internet address for Pro-Net is:
    <http://pro-net.sba.gov/>.

[^13]: \- Contact King Elliott, Metro-Dade Transit Agency, 111 N.W.
    First St., Suite 910, Miami, FL 33128 at (305) 375-3634.

[^14]: \- New York City Transit. Contact Stan Grill at (718) 694-4350.

[^15]: 49 CFR § 26.53(b)(3).

[^16]: For further information contact Mr. Donald Mayes, Manager, DBE
    Contract Compliance at 312-664-7200, ext. 3519.

[^17]: \- Paragraph (d).

[^18]: \- For further information contact Mr. Donald Mayes, Manager, DBE
    Contract Compliance at 312-664-7200, ext. 3519.

[^19]: The CTA requirement is more restrictive than the CFR.