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

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

Prev
\|[**Index**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cdbeqna.cfm)
\| Next

Section 26

HOW DO I CONTACT DOT FOR ADDITIONAL INFORMATION ON THIS RULE?

(Posted - 4/12/99 - Edited 12/7/01)

**ANSWER**:

•  You can log onto the Department\'s web site for the DBE program:
[**http://osdbu.dot.gov/business/dbe/index.html**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cindex.html)

•  Or simply log onto the main DOT web site
([**www.dot.gov**](http://www.dot.gov/)) and click on either [**Doing
Business with DOT**](http://www.dot.gov/business.html) or [**About
DOT**](http://www.dot.gov/about_dot.html) and look in the Office of
Small and Disadvantaged Business portion of the site for information on
the DBE program.

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

•  For information on DBE certification appeals: Departmental Office of
Civil Rights, 202-366-5992 (Joe Austin). Note that the correct room
number for this office is Room 5414.

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

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

-   Federal Highway Administration (FHWA) Office of Civil Rights -
    202-366-6753 (Charles Klemstine) or Office of Chief Counsel
    202-366-1346 (JoAnne Robinson)

-   Federal Transit Administration (FTA) Office of Civil Rights
    202-366-6718 (David Solomon); or Office of Chief Counsel,
    202-366-4011 (Scheryl Portee)

-   Federal Aviation Administration (FAA) Office of Civil Rights -
    202-267-3259 (Michael Freilich)

•  You may also contact the
[**FTA**](http://www.fta.dot.gov/office/regional/),
[**FAA**](http://www.faa.gov/acr/staff.htm), or
[**FHWA**](http://www.fhwa.dot.gov/keyfield/index.htm) field office that
serves your area.

Section 26.3

IF ANOTHER FEDERAL AGENCY ADMINISTERS A FEDERAL-AID CONTRACT OR
UNDERTAKES A FEDERAL-AID PROJECT AT THE REQUEST OF A RECIPIENT, IS THE
OTHER FEDERAL AGENCY SUBJECT TO THE REQUIREMENTS OF TITLE 49 CFR PART
26?

(Posted - 9/1/05)

**ANSWER**:

-   No.  The USDOT DBE program requirements apply to the activities of
    non-Federal recipients of DOT financial assistance specified in 49
    C.F.R. § 26.3.  The purpose of the USDOT DBE program is to ensure
    that Federal funds distributed to state, local, and regional
    authorities are not used to engage in discriminatory conduct or to
    perpetuate the past effects of discrimination by denying contracting
    opportunities to small disadvantaged businesses. 

```{=html}
<!-- -->
```
-   Similarly, it is the policy of the Federal government to ensure that
    small disadvantaged businesses have the maximum practicable
    opportunity to participate in the performance of contracts let by
    Federal agencies.  Establishing and implementing a DBE program
    consistent with the requirements of Title 49 part 26 is a condition
    the Federal government places on the receipt of Federal funds by
    non-Federal authorities.  It is not a condition that Congress
    intended to impose on Federal agencies through Federal assistance
    programs created to support state, local, and regional authorities. 
    Federal agency conduct in this regard is governed by different
    statutory and regulatory requirements.

-   Most Federal agencies have programs analogous to the DBE program
    aimed at ensuring equal opportunity for minority and women owned
    businesses to participate in Federal contracting.  If another
    Federal agency is authorized to administer a Federal-aid contract or
    project on behalf or at the request of a recipient of USDOT
    financial assistance, the other Federal agency and the recipient
    should agree on how the other Federal agency will contribute to the
    recipient's achievement of its annual overall DBE goal.  The other
    Federal agency must be willing to report to the recipient its DBE
    achievements on DOT assisted contracts for inclusion in the reports
    made by the recipient to the appropriate operating administration.

-   The Federal Acquisition Regulations would govern the procurement
    activities undertaken by the other Federal agency. 

Section 26.5                        

ARE SERVICE-CONNECTED DISABLED VETERAN BUSINESSES ELIGIBLE TO
PARTICIPATE IN THE DBE PROGRAM?

(Posted - 9/1/05)

**ANSWER**:

-   Executive order 13360 requires Federal agencies to set goals for and
    otherwise give special consideration to service-connected disabled
    veteran businesses in direct Federal contracting.  This Executive
    Order concerns only direct Federal procurement by Federal agencies
    themselves.

-   The Department's DBE program concerns only contracts let by state
    and local agencies in which DOT financial assistance participates. 
    The Executive Order

> does not have the effect of creating a presumption that
> service-connected disabled veterans are socially and economically
> disadvantaged for purposes of the DBE program or establishing a goal
> for the use of firms owned by such veterans in state and local
> contracts receiving DOT financial assistance. 

-   The Department of Transportation encourages service-connected
    disabled veterans, as well as other individuals with disabilities,
    to apply for participation in the DBE program. 

-   A service connected disabled veteran who is a member of one of the
    groups presumed in the DBE program to be socially and economically
    disadvantaged can apply for DBE certification.  

-   Individuals with disabilities, including service-connected disabled
    veterans, can also apply for DBE certification on an individual
    basis, even if they are not members of groups presumed to be
    socially and economically disadvantaged for purposes of DBE program.

-   Appendix E to Part 26 explains how an individual who is not a member
    of one of the groups presumed to be disadvantaged can show that he
    is disadvantaged on an individual basis.  The discussion in this
    Appendix specifically provides that individuals with disabilities
    are among those who can use this approach to enter the DBE program.

[**Section 26.15
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal11.cfm#TOC16)
/ [**26.15
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal51.cfm#TOC67) -
[**Section 26.21
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal12.cfm#TOC17)
/ [**26.21
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC69)

Section 26.21

ARE RECIPIENTS REQUIRED TO COLLECT ALL BIDDERS\' LIST INFORMATION AT THE
TIME OF BID?

(Posted - 2/17/00)

**ANSWER:**

No

-   The regulation permits recipients to collect bidders\' list
    information in a variety of ways and at various times.

-   For example, it may be less burdensome on bidders if the recipient
    permits them to provide the names and addresses of firms a
    reasonable time after bids are due. The information provided at such
    a time may also be in a more easily usable form to the recipient.

-   Not all bidders\' list information need necessarily be collected
    through the bid process. For example, a recipient could conduct a
    survey of a sample of firms that have bid or quoted on its projects
    to determine the age and annual gross receipts of the firms on the
    bidders\' list.

[**Section 26.21
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal12.cfm#TOC17)
/ [**26.21
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC69)

Section 26.21(c)

CAN A NEW RECIPIENT BE ELIGIBLE TO RECEIVE FEDERAL FINANCIAL ASSISTANCE
IF IT DOES NOT HAVE AN APPROVED DBE PROGRAM?

(Posted - 4/12/99 - Edited 12/7/01)

**ANSWER**:

-   Section 26.21(c) provides that \"You are not eligible to receive DOT
    financial assistance unless DOT has approved your DBE program and
    you are in compliance with it and this part.\"

-   If you are a new recipient (e.g., a transit grantee beginning
    service for the first time, who has never had an approved DBE
    program), you must have an approved DBE program before you are
    eligible to begin receiving Federal financial assistance.

-   For example, if you are a new transit grantee, hoping to begin
    receiving FTA funds in the next fiscal year, you must have an
    FTA-approved DBE program conforming to part 26 before receiving
    those funds.

[**Section 26.21
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal12.cfm#TOC17)
/ [**26.21
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC69)

WHAT IMPACT DO STATE ANTI-AFFIRMATIVE ACTION LAWS HAVE ON THE DOT DBE
PROGRAM?

(Posted - 4/12/99)

**ANSWER**:

-   None. State laws regarding affirmative action do not pre-empt the
    Federal DBE statutes and regulations.

-   Some states have laws that prohibit the use of race-conscious
    affirmative action measures on state or locally funded contracts let
    by public agencies in the state (e.g., California). Such states must
    still implement the DOT DBE program, as a condition of receiving DOT
    financial assistance.

-   As a condition of eligibility for Federal financial assistance,
    recipients must take all actions required by this regulation with
    respect to DOT-assisted programs and contracts.

-   State anti-affirmative action laws of this kind typically have
    provisions that authorize state or local public agencies to comply
    with Federal affirmative action requirements that are a condition of
    Federal financial assistance. Consequently, compliance with part 26
    does not create any conflict with such state laws.

[**Section 26.29
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal16.cfm#TOC21)
/ [**26.29
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC73)

Section 26.29(a)

AT WHAT TIME DOES THE RULE REQUIRE PRIME CONTRACTORS TO RETURN RETAINAGE
TO SUBCONTRACTORS?

(Posted - 9/20/99)

**ANSWER**:

-   Some recipients hold back a certain percentage of the payment they
    owe the prime contractor (\"retainage\") until all the work of the
    prime contract has been satisfactorily completed.

-   In turn, prime contractors (and middle-tier subcontractors) often
    withhold a certain percentage of the payment they owe to
    subcontractors. In many cases, prime contractors\' traditional
    practice has been to hold these funds until the recipient has made
    final payment to the prime contractor, even though the
    subcontractor\'s work may have been satisfactorily completed months
    or years earlier. The prompt payment provision of the DBE rule is
    intended to change this practice.

-   The DBE rule requires recipients to mandate and enforce prompt
    payment of subcontractors, including the payment of retainage from
    the prime contractor to the subcontractor, as soon as
    subcontractor\'s work has been satisfactorily completed (i.e., all
    the tasks called for in the subcontract have been accomplished and
    documented as required by the recipient). The prompt payment
    provision is intended to apply to subcontractors at all tiers.

-   For example, suppose there is a prime contract that will take three
    years to complete. Subcontractor X satisfactorily completes its work
    at the end of year one. The prime contractor must pay the retainage
    it has held to Subcontractor X at the end of year one. The prime
    contractor cannot wait until the end of year three, when the prime
    contract has been completed and the recipient has paid its retainage
    to the prime contractor, to make this payment to Subcontractor X.

-   Recipients\' DBE programs must include contractual provisions that
    unambiguously require contractors to make retainage payments to
    their subcontractors as soon as the subcontractor\'s work has been
    satisfactorily completed. This is a race-neutral feature that
    applies to all subcontractors, not just DBEs. The Department will
    not approve a DBE program that lacks this feature.

-   In 2003, the Department amended Part 26 to require recipients to
    take steps to reduce retainage-related burdens on prime contractors,
    such as eliminating retainage or providing for "mini-final"
    acceptance of a subcontractor's portion of the work of a contract.

[**Section 26.29
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal16.cfm#TOC21)
/ [**26.29
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC73) -
[**Section 26.37
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal20.cfm#TOC25)
/ [**26.37
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC77)

Section 26.29; 26.37(a)

IN IMPLEMENTING THE REQUIRED PROMPT PAYMENT CLAUSE, MAY RECIPIENTS
REQUIRE PRIME CONTRACTORS TO PROVIDE EVIDENCE OF PAYMENT OF RETAINAGE TO
SUBCONTRACTORS?

(Posted - 4/12/99)

**ANSWER**:

•  Yes. The rule\'s prompt payment clause requirement specifically
applies to retainage (i.e., a portion of the payment owed by the prime
contractor to a subcontractor that is held pending completion of the
subcontractor\'s work).

•  In ensuring compliance with the prompt payment provision, recipients
may require prime contractors to provide information concerning payments
to subcontractors, including retainage.

[**Section 26.29
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal16.cfm#TOC21)
/ [**26.29
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC73) -
[**Section 26.37
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal20.cfm#TOC25)
/ [**26.37
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC77)

Section 26.29(a), 26.37(a)

MUST A RECIPIENT ENFORCE THE PROMPT PAYMENT CLAUSE REQUIRED BY THE RULE?

(Posted - 2/17/00)

**ANSWER:**

Yes.

-   Under 26.29(a), recipients are required to include a prompt payment
    clause in DOT-assisted contracts. This clause must require prime
    contractors to pay subcontractors and return any retainage within a
    certain number of days of satisfactory completion of the
    subcontractors\' work. This provision is a race-neutral requirement
    applying to DBE and non-DBE subcontractors alike.

-   As 26.37(a) provides, recipients must implement appropriate
    mechanisms to ensure compliance with Part 26 requirements -
    including prompt payment - by all program participants. To do so,
    recipients must use legal and contract remedies available under
    Federal, state, and local law.

-   26.29(a) (1) and (2) mention certain mechanisms a recipient may use
    to implement the prompt payment requirement (i.e., penalties, a
    requirement for the recipient\'s written consent for delays). The
    rule authorizes, but does not require, recipients to use these
    particular methods.

-   However, the fact that these two cited methods are not mandatory
    does not mean that enforcement of the prompt payment clause itself
    is optional. Under 26.29 and 26.37, recipients must use some
    effective means or other to ensure compliance with prompt payment
    requirements. If the recipient does not choose to use the two
    methods mentioned in 26.29(a) (1) and (2), then it must use other
    effective methods.

[**Section 26.29
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal16.cfm#TOC21)
/ [**26.29
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC73) -
[**Section 26.37
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal20.cfm#TOC25)
/ [**26.37
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC77)

Section 26.37(b), 26.55(g)

SHOULD RECIPIENTS KEEP TRACK OF DBE \"COMMITMENTS,\" \"ACHIEVEMENTS,\"
OR BOTH?

(Posted - 2/17/00)

**ANSWER:**

Both.

-   Section 26.37(b) requires recipients to have a mechanism to verify
    that the work committed to DBEs at contract award is actually
    performed by the DBEs. Obviously, recipients need to track both
    commitments and actual achievements in order to perform this task.

-   Final information on actual achievements will often not be available
    in the same year in which contracts are let. Recipients will often
    have to rely on commitments information in order to administer their
    programs (e.g., make needed adjustments with respect to the use of
    race-neutral and race-conscious measures).

-   On the other hand, keeping track of actual achievements is crucial
    to evaluating the operation of recipients\' programs. As 26.55(g)
    provides, actual achievements are not counted toward goals until
    DBEs receive payment for their work. If the actual achievements of
    particular contractors, or a recipient\'s program in general, falls
    short of commitments, this is an indication that corrective action
    should be taken to improve program performance.

-   The 2003 uniform reporting form provides for reporting both
    commitments and achievements to DOT.

[**Section 26.29
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal16.cfm#TOC21)
/ [**26.29
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC73) -
[**Section 26.37
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal20.cfm#TOC25)
/ [**26.37
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal52.cfm#TOC77)

DOES THE DEPARTMENT OF TRANSPORTATION ENCOURAGE RECIPIENTS TO ESTABLISH
MENTOR-PROTÉGÉ PROGRAMS?

(Posted - 2/17/00 - Edited 12/7/01)

**ANSWER:**

-   Yes

-   A well-run mentor-protégé program can be an important asset to a
    recipient\'s efforts to ensure equal opportunities for DBEs.

-   Besides providing important experience and training to emerging
    companies, such a program may be an additional source of
    race-neutral DBE participation to the recipient.

-   Part 26 explicitly authorizes recipients to establish mentor-protégé
    programs as a part of their DBE programs.

-   Under this authority, recipients may cooperate with private-sector
    mentor-protégé plans that are consistent with the safeguards against
    fronts and frauds established in Part 26.

[**Section 26.43
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal22.cfm#TOC27)
/ [**26.43
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC80)

Section 26.43

DOES THE RULE\'S LIMITATION ON THE USE OF SET-ASIDES APPLY TO
RACE-NEUTRAL SMALL BUSINESS SET-ASIDES?

(Posted - 2/23/99)

**ANSWER:**

-   The DBE rule defines a set-aside as \"a contracting practice
    restricting eligibility for the competitive award of a contract
    solely to DBE firms.\" (26.5)

-   The rule limits set-asides, defined in this way, to \"limited and
    extreme circumstances, when no other method could be reasonably
    expected to remedy egregious instances of discrimination.\"
    (26.43(b))

-   A race-neutral small business set-aside (i.e., in which a recipient
    sets aside certain contracts for competition only among small
    businesses, regardless of race or gender) does not restrict contract
    eligibility solely to DBEs.

-   For this reason, the rule\'s limit on DBE set-asides does not apply
    to a race-neutral small business set-aside.

-   If it will help achieve the objective of the DBE program, a
    recipient may use a small business set-aside as one of its
    race-neutral measures.

[**Section 26.45
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal23.cfm#TOC28)
/ [**26.45
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC81)

Section 26.45(a), 26.53                     

MUST A PRIMARY RECIPIENT'S DBE PROGRAM AND GOALS APPLY TO CONTRACTS LET
BY SUBRECIPIENTS?

(Posted - 9/1/05)

**ANSWER**:

The DBE program and overall goal of a primary recipient (e.g., a state
DOT) apply to all the Federal funds that will be expended in
DOT-assisted contracts.

-   This includes not only the Federal funds expended in contracts that
    the primary recipient itself lets, but also the Federal funds that
    subrecipients let in DOT-assisted contracts. 

-   The primary recipient is responsible for administering its DBE
    program and is legally accountable for expenditure of DOT financial
    assistance in accordance with Federal requirements.

-   Subrecipients do not have to have their own, independent DBE
    programs or overall goals, since the primary recipient's DBE program
    and overall goals cover the DOT-assisted contracting activities of
    the subrecipients.

-   However, if a subrecipient is letting a DOT-assisted contract with
    subcontracting possibilities, then part 26 provisions concerning
    contract goals apply to that contract.  These provisions include
    determining whether race-conscious measures are appropriate for a
    particular contract.  (Contract goals do not apply to certain kinds
    of contracts in any case, such as contracts for purchases of transit
    vehicles, or contracts in which there are no realistic
    subcontracting possibilities.)

-   In a case where it is appropriate for there to be a contract goal on
    a subrecipient's contract, , the primary recipient may establish the
    goal for the subrecipient.  Alternatively, the subrecipient may set
    the contract goal in consultation with the primary recipient.  In
    either case, the subrecipient would follow the contract award
    procedures of §26.53.

Section 26.45(c)(1)

HOW DOES A RECIPIENT OBTAIN CENSUS BUREAU DATA TO USE IN CALCULATING ITS
OVERALL GOAL?

(Posted - 4/12/99 - Edited 12/7/01)

**ANSWER**:

-   The regulation\'s first example of how a recipient can do Step 1 of
    the overall goal process involves using data from the Census
    Bureau\'s County Business Pattern (CBP) database.

-   You can obtain this data from the Census Bureau web site.

-   To access the data, go to
    [http://www.census.gov](http://www.census.gov/)

-   There are at least 2 areas of the site that have relevant CBP data.

    -   You can access them by going to the \"**Subjects A to Z**\"
        listing and:

    -   1\) Click on \"**C**\": then, under \"**County**\", click on
        \"**County Business Patterns**\", or paste the following URL
        into your web browser:

    -   <http://www.census.gov/epcd/cbp/view/cbpview.html>

    -   2\) Click on \"**B**\"; then, under \"**Business\", click on
        \"Statistics of United States Businesses (Tabulations by Size
        and Metropolitan Area)**\", or paste the following URL into your
        web browser:

    -   <http://www.census.gov/csd/susb/susb.htm>

-   Both pages offer ways to select particular data (i.e. state or
    county) and different compilations of useful CBP data, some of which
    can be downloaded for easy use in spreadsheet format.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Section 26.3(a), 26.55

WHAT TYPES OF CONTRACTS CAN BE COUNTED TOWARD DBE GOALS?

(Posted - 4/12/99)

**ANSWER**:

-   DBE participation can be counted toward goals for any contract let
    by the recipient in which Federal funds listed in 26.3(a)
    participate.

-   If a recipient lets a contract to any type of contractor, and
    Federal funds listed in 26.3 participate in that contract, then the
    DBE\'s participation would count toward the recipient\'s DBE goals.

-   Part 26 does not limit the type of contractors who can participate
    in the DBE program or the types of contracts appropriate for DBE
    participation. All DOT-assisted contracts, whether construction or
    non-construction (e.g., professional services, consulting, supplies)
    can be used for DBE participation.

-   Recipients should be aware that there may be some types of contracts
    that are not eligible for the Federal assistance specified in 26.3
    (e.g., contracts supporting transit operations for some FTA
    recipients). Participation by DBEs in such contracts does not count
    toward goals in the DBE program. Recipients should contact the
    concerned operating administration for further information about DBE
    participation in a particular contract or type of contract.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Sections 26.45(f)(4); 26.51(c), (e)(3)

AS A RECIPIENT, DO YOU HAVE TO WAIT FOR DOT APPROVAL OF YOUR OVERALL
GOAL BEFORE STARTING TO USE IT IN THE NEXT FISCAL YEAR?

(Posted - 2/17/00 - Edited 12/7/01)

**ANSWER:**

-   No. Prior concurrence of a DOT operating administration with your
    overall goal for the next fiscal year is not required.

-   However, if we determine that there are problems with the goal
    (e.g., it was not calculated properly, the method used to calculate
    it was inadequate), we will work with you to fix the problems and,
    if necessary, adjust the goal.

-   Note that your projections of your expected use of race-conscious
    and race-neutral measures to meet goals are subject to our approval
    (26.51(c)).

-   DOT operating administrations may review and approve or disapprove
    your contract goals, even if review of your overall goal is not
    complete.

-   For example, suppose you submit your overall goal for the next
    fiscal year to FHWA on August 1. FHWA identifies concerns about the
    overall goal itself or your projection of participation to be
    obtained by race-neutral and race-conscious means, respectively. You
    and FHWA are continuing to discuss the goal as the new fiscal year
    begins. If you are letting a contract during October, after the new
    fiscal year has begun, you could use the submitted overall goal as a
    reference point for setting a contract goal, but FHWA retains the
    discretion to review and approve or disapprove your contract goal.

[**Section 26.45
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal23.cfm#TOC42)
/ [**26.53
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal27.cfm#TOC32)

Section 26.45(f2); 26.53(e)

CAN A RECIPIENT OR RECIPIENTS SET A PROJECT OVERALL GOAL (e.g., FOR A
LARGE, MULTI-YEAR PROJECT)? HOW DOES SUCH A PROJECT GOAL RELATE TO
ANNUAL OVERALL GOALS? CAN SUCH A PROJECT GOAL CUT ACROSS MODAL LINES?

(**Posted - 2/12/02**)

**ANSWER:**

-   A recipient of DOT funds - whether from FAA, FTA, or FHWA - may set
    a project overall goal for a particular project. Typically, such a
    goal would be used for a large multi-year project.

-   The recipient\'s overall project goal for the project would be
    separate from the recipient\'s annual overall goal for the rest of
    its DOT-assisted contracting activities.

-   The recipient\'s submission of the overall project goal would have
    to meet the same requirements as for any other overall goal (see
    26.45(f)(3)), specifically including breakout of the participation
    anticipated through race-neutral and race-conscious means. DOT would
    review the goal submission just as it does in other cases.

-   With respect to its other DOT-assisted contracting activities, the
    recipient would also submit its regular annual overall goal for
    review. In so doing, the recipient, in calculating the annual
    overall goal for a given fiscal year, would not consider funds or
    contracting opportunities attributable to the project covered by the
    separate project goal.

-   For example, suppose a recipient will expend \$150 million on
    Project X in Years 1-3. The recipient will also expend \$40 million
    on other projects in each year during the same period. The recipient
    could submit a single project overall goal for Project X, based on
    the \$150 million to be expended over the life of the project. The
    recipient would also submit an overall goal each year for its other
    DOT-assisted contracting activities in Year 1, Year 2, and Year 3,
    based on the \$40 million the recipient was expending in each of
    those years.

-   A project overall goal can be used for a multi-modal project. For
    example, suppose FHWA Recipient W and FTA Recipient Z are
    cooperating on a project, which involves the expenditure of \$500
    million between them. Recipients W and Z can jointly submit a single
    overall project goal for the project. W and Z would also each submit
    regular annual overall goals for their other activities during the
    time that the project was under way.

-   Many large projects on which it could be useful to establish a
    project overall goal may be design-build projects. The overall
    project goal, in such a case, would serve as the goal for the master
    contractor. The master contractor would then establish contract
    goals on the contracts it is letting at a level appropriate to meet
    the race-conscious portion of the project overall goal.

-   Currently Part 26 explicitly authorizes the use of project goals in
    FAA and FTA projects. While nothing in the rule precludes the use of
    project goals in FHWA projects, the rule does not explicitly mention
    FHWA projects in this context. However, it is the Department\'s view
    that recipients of funds from all three operating administrations
    can make use of project goals.

[**Section 26.51
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal26.cfm#TOC31)
/ [**26.51
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC84)

Section 26.51

WOULD THE PROVISIONS OF PLANS OR SPECIFICATIONS FOR A PROJECT AT NO
CHARGE TO DBEs, WHEN OTHER FIRMS ARE CHARGED A FEE FOR THIS INFORMATION,
BE CONSIDERED A RACE-NEUTRAL MEASURE?

(Posted - 4/12/99)

**ANSWER**:

-   If plans and specifications are provided to DBEs without charge, but
    other firms are charged a fee for the same service, this would not
    be a race-neutral measure. This is because the DBE status of a firm
    determines whether or not the firm has to pay a fee for the
    information.

-   On the other hand, if such plans and specifications are provided
    free to all small businesses, or a subcategory of \"smaller\" small
    businesses, or to all new businesses (e.g., that have been in
    operation less than three years), or to all businesses in a
    particular field, etc., then no distinction is being made on the
    basis of DBE status. Such an approach would be race-neutral.

-   While this question concerns a measure that we view as
    race-conscious, there may be other measures used to facilitate
    increased DBE participation that we would consider to be
    race-neutral. For example, outreach or technical assistance measures
    aimed primarily at DBEs may be viewed as race-neutral.

[**Section 26.51
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal26.cfm#TOC31)
/ [**26.51
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC84)

WHAT REQUIREMENTS APPLY TO RECIPIENTS\' USE OF CONTRACT GOALS?

(Posted - 2/17/00)

**ANSWER:**

-   The most important regulatory requirements for recipients to
    consider in making decisions about using contract goals are the
    following:

    -   Recipients must meet as much as possible of their overall goals
        through race-neutral measures (26.51(a)).

    -   Recipients must project how much of their overall goals they can
        meet through race-neutral and race-conscious measures,
        respectively. Recipients must submit this projection and the
        basis for it to DOT along with their overall goals (26.51(c)).

    -   Recipients \"must establish contract goals to meet any portion
        of \[their\] overall goal \[they\] do not project being able to
        meet using race-neutral means\" (26.51(d)).

    -   Recipients are not required to set contract goals on every
        DOT-assisted contract, but must set contract goals that will
        cumulatively result in meeting any portion of overall goals
        recipients do not project meeting through the use of
        race-neutral means (26.51(d)(2)).

-   Decisions concerning the use of contract goals must be based on
    sound analysis. This analysis forms the basis for the projection of
    the portion of goals the recipient expects to meet through
    race-neutral or race-conscious means.

-   Recipients are not permitted to add their own MBE/WBE goals (i.e.,
    deriving from a state or local program) to a Federally-assisted
    contract. Only DBE goals are permitted on such a contract.

[**Section 26.51
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal26.cfm#TOC31)
/ [**26.51
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC84)

Section 26.51(a) - (d)

HOW DO RECIPIENTS PROJECT WHAT PORTION OF THEIR OVERALL GOAL THEY WILL
MEET THROUGH RACE-NEUTRAL MEANS?

(Posted - 2/17/00)

**ANSWER:**

-   It is important to keep in mind that a recipient must not only
    submit its projections to DOT, but also its basis for the
    projection. This consists of a sound analysis of the recipient\'s
    market and the race-neutral measures it employs, on the basis of
    which the recipient realistically can project attaining a certain
    amount of DBE particpation without the use of contract goals or
    other race-conscious measures.

-   The analysis cannot be simply guesswork or based on a hope or policy
    preference. It must rest on information about the real world of
    contracting in the recipient\'s contracting area.

-   Recipients know their own markets and the types of contracts most
    likely to be let. In determining the level of participation to be
    achieved through race-neutral means, the recipient should use its
    experience concerning the availability of DBEs in particular types
    of contracts in their market.

-   Here are some examples of questions recipients could ask in making
    this analysis:

    -   What is the participation of DBEs in the recipient\'s contracts
        that do not have contract goals?

    -   There may be information about state, local, or private
        contracting in analogous areas where contract goals are not used
        (e.g, in situations where a prior state/local affirmative action
        program was ended). What is the extent of participation of
        minority or women\'s businesses in programs without goals?

    -   What is the extent of race neutral efforts that the recipient
        will have in place for the next fiscal year?

    -   Are there firm, written, detailed commitments in place from
        contractors to take concrete steps sufficient to generate a
        certain amount of DBE participation through race-neutral means?

    -   To what extent have DBE primes participated in the recipient\'s
        programs in the past?

    -   To what extent has the recipient oversubscribed its DBE goals in
        the past?

-   Where there is not systematic data in existence, recipients could
    conduct quick, informal surveys and use the results as part of the
    basis for their projections.

-   Recipients should closely monitor DBE participation relative to
    their projections to determine whether mid-course corrections are
    needed.

Section 26.51 - 26.53

DO THE DBE PROGRAM AND DBE CONTRACT GOALS APPLY TO CHANGE ORDERS IN
CONTRACTS?

(Posted - 9/1/05)

**ANSWER**:

-   A recipient's DBE program applies to all its DOT-assisted
    contracting, including change orders to an existing contract which
    have more than a minimal impact on the contract amount.

```{=html}
<!-- -->
```
-   If there is a change order to a contract on which there is a DBE
    contract goal, then that contract goal applies to the change order
    as well as to the original contract.   This is true regardless of
    whether the recipient or the contractor initiates the change order. 

```{=html}
<!-- -->
```
-   For example, suppose that a recipient awards a \$1 million contract
    to Firm X.  The contract goal is 15 percent.  Firm X meets the
    contract goal by obtaining DBE participation from subcontractors or
    suppliers amounting to \$150,000.

-   Part way through performance of the contract, the recipient
    determines that additional work is necessary, and issues a change
    order that will add \$500,000 to the total contract price.  The 15
    percent contract goal applies to this additional \$500,000.

```{=html}
<!-- -->
```
-   To meet the contract goal as applied to the change order, Firm X
    would have to make good faith efforts to obtain an additional
    \$75,000 in DBE participation.  It could meet this obligation either
    by obtaining the additional \$75,000 in work by DBE subcontractors
    or suppliers or by documenting good faith efforts.  

```{=html}
<!-- -->
```
-   The recipient would determine, on a case-by-case basis, what would
    constitute good faith efforts in the context of a particular change
    order.  This could include modifying the contract goal amount
    applicable to the change order if circumstances warrant.

```{=html}
<!-- -->
```
-   There may be situations in which a change order has such a minimal
    effect on the overall contract amount or the expected DBE
    participation on a contract that it would not be sensible to alter
    DBE requirements affecting the contract.  If a recipient believes
    that a change order has such a minimal effect, the recipient should
    contact the relevant DOT operating administration for guidance on
    whether it is necessary to alter DBE requirements affecting the
    contract.

[**Section 26.51
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal26.cfm#TOC31)
/ [**26.51
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC84)

Section 26.53 Appendix A

MAY A RECIPIENT CONSIDER A BIDDER\'S \"TRACK RECORD\" IN USING DBEs AS
IT EVALUATES THE FIRM\'S GOOD FAITH EFFORTS?

(Posted - 2/17/00)

**ANSWER:**

-   The factors cited in Appendix A, section IV, concerning good faith
    efforts are not an exclusive list of the things a recipient may
    consider in determining whether a bidder has made good faith efforts
    on a contract.

-   It is permissible for a recipient, in evaluating the good faith of a
    bidder\'s efforts to meet a contract goal, to look at the \"track
    record\" of the firm in using DBEs in other situations.

-   For example, suppose that Contractor X has a long, documented
    history of making good, and frequent, use of DBEs not only on
    DOT-assisted contracts but on non-Federally-assisted contracts as
    well. Contractor Y does not have such a positive track record.

    -   In evaluating the efforts Contractor X has made to meet a
        particular contract goal, a recipient might conclude that the
        credibility of its efforts is improved by its history of DBE
        utilization.

    -   In a similar situation, the recipient might decide that the less
        positive history of DBE utilization by Contractor Y did not
        provide the same degree of credibility of its efforts to meet
        the goal.

[**Section 26.51
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal26.cfm#TOC31)
/ [**26.51
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC84)

Section 26.53(g)

HOW DO RECIPIENTS DETERMINE WHETHER A DBE PRIME CONTRACTOR HAS MET A
CONTRACT GOAL?

(Posted - 2/17/00)

**ANSWER:**

-   When a certified DBE firm bids on a contract that contains a
    contract goal, the DBE firm is responsible for meeting the goal or
    making good faith efforts to meet the goal, just like any other
    bidder.

-   However, recipients count toward DBE goals the value of work
    actually performed by DBEs (see 26.55(a)).

-   In most cases, this means that a DBE bidder on a prime contract will
    meet the contract goal by virtue of the work it performs on the
    prime contract with its own forces.

-   For example, suppose DBE Firm X is the apparent low bidder on a
    prime contract with a 10 percent contract goal. Firm X will perform
    30 percent of the work on the contract with its own forces (the
    minimum possible if a DBE is to perform a commercially useful
    function, see 26.55(c)(3)). This means that 30 percent of the
    contract amount counts toward the DBE contract goal. This exceeds
    the 10 percent contract goal. Therefore, Firm X meets the contract
    goal. (In this example, the entire 30 percent DBE participation on
    the contract would be counted as race-neutral participation, since
    Firm X obtained the contract solely on the basis of its low bid.)

-   There could be unusual situations in which a DBE prime contractor
    would have to provide some additional DBE participation through
    subcontracting. In the example above, suppose the contract goal is
    35 percent instead of 10 percent. Firm X is credited with 30 percent
    DBE participation on the basis of the work it does with its own
    forces. This leaves the firm 5 percent short of meeting the contract
    goal. Firm X would have to seek an additional 5 percent DBE
    participation through subcontracting with another DBE or document
    the good faith efforts it made in attempting to secure this
    additional participation.

-   It is appropriate to ask any prime contractor who has met its
    obligations to continue to make outreach efforts to additional DBEs.
    However, once a DBE prime contractor has met a contract goal through
    the work it performs with its own forces, recipients should not
    require the DBE prime to obtain additional DBE participation through
    use of DBE subcontractors or to document good faith efforts. DBE
    prime contractors are required to document good faith efforts only
    in situations, like those in the previous paragraph, where they do
    not fully meet contract goals through the work they perform with
    their own forces.

-   When any prime contractor who has met its contract goal obligations
    provides work to additional DBE subcontractors, the prime contractor
    is contractually obligated to meet its commitments to those firms.
    In this case, because the participation of the additional DBE
    subcontractors is over and above what is needed to meet the goal,
    the recipient would count it as race-neutral participation.

[**Section 26.53
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal27.cfm#TOC32)
/ [**26.53
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC85)

Section 26.53(f)

DO RECIPIENTS APPLY POST-AWARD GOOD FAITH EFFORTS REQUIREMENTS TO
CONTRACTS ON WHICH THERE IS NO CONTRACT GOAL?

(Posted - 2/12/02)

**ANSWER:**

-   No. The post-award good faith efforts requirements of ?26.53(f)
    apply only to contracts in which there is a contract goal.

-   These requirements (1) prohibit prime contractors from terminating a
    DBE for convenience and then substituting the prime contractor\'s
    own forces, and (2) require the prime contractor to make good faith
    efforts to replace a DBE firm that could not complete its contract
    with another DBE firm, to the extent needed to meet the contract
    goal.

-   These provisions are premised on there having been a contract goal
    that the prime contractor has committed itself to make good faith
    efforts to meet. When there is a contract goal, the provisions of
    ?26.53(f) are necessary to prevent a prime contractor from
    circumventing its good faith efforts obligation after the contract
    has been awarded.

-   Where there is no contract goal (i.e., a race-neutral procurement),
    these provisions are not relevant.

[**Section 26.55
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal28.cfm#TOC33)
/ [**26.55
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC86)

Section 26.55(c)(3)

HOW DOES THE PART 26 REQUIREMENT THAT A DBE FIRM MUST DO 30 PERCENT OF
THE WORK OF A CONTRACT WITH ITS OWN FORCES TO PERFORM A COMMERCIALLY
USEFUL FUNCTION RELATE TO SOME RECIPIENTS\' REQUIREMENTS THAT ALL FIRMS
PERFORM A GREATER PERCENTAGE (e.g., 50 PERCENT) OF THE WORK ON ALL
CONTRACTS?

(Posted - 4/12/99)

**ANSWER**:

-   A requirement that all firms perform at least 50 percent of the work
    of a contract with their own forces is a matter of recipient
    procurement policy that does not conflict with the DOT DBE rules.

-   For a recipient who has such a requirement, all contractors will
    necessarily perform more than 30 percent of the work of their
    contracts with their own forces.

-   Consequently, all DBE firms subject to this requirement will
    automatically meet the 30 percent requirement for performing a
    commercially useful function, since they have to be performing more
    than that amount of work with their own forces to get a contract in
    the first place.

[**Section 26.55
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal28.cfm#TOC33)
/ [**26.55
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC86) -
[**Section 26.73
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal35.cfm#TOC40)
/ [**26.73
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC94)

Section 26.55(d), 26.73 a)(1)

MAY A RECIPIENT REQUIRE THAT A DBE TRUCKING FIRM OWN MORE THAN ONE TRUCK
IN ORDER TO BE REGARDED AS PERFORMING A COMMERCIALLY USEFUL FUNCTION?

(Posted - 4/12/99)

**ANSWER**:

-   Section 26.55(d) provides that, to be regarded as performing a
    commercially useful function on a particular contract, a DBE
    trucking company must own at least one truck of its own (which is
    insured and operable) that is used on the contract.

-   Consequently, it would be inconsistent with part 26 for a recipient
    to require DBE trucking companies to own two or more trucks in order
    to be regarded as performing a commercially useful function.

-   This issue, like all issues involving the \"commercially useful
    function\" concept, focuses solely on counting DBE participation
    toward goals, and does not enter into certification decisions (see
    26.73(a)(1)).

[**Section 26.55
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal28.cfm#TOC33)
/ [**26.55
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC86) -
[**Section 26.53
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal27.cfm#TOC32)
/ [**26.53
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC85)

Section 26.55(e), (g); 26.53(f)(2)

WHAT SHOULD A RECIPIENT DO IN THE CASE OF A DBE MANUFACTURER WHO,
PARTWAY THROUGH A MULTI-YEAR CONTRACT, BECOMES A BROKER?

(Posted - 4/12/99)

**ANSWER**:

-   Under part 26 counting rules, 100 percent of the cost of the goods
    provided by a DBE manufacturer counts toward DBE goals. For
    \"brokers,\" only the DBE\'s fee or commission, and no part of the
    cost of the goods, count toward DBE goals.

-   Suppose that a prime contractor relied on goods from a DBE
    manufacturer to meet a portion of its contract goal. Halfway through
    the contract, the DBE ceases manufacturing the goods and begins to
    act as a broker who procures the goods from a non-DBE manufacturer
    and passes them on to the prime contractor. (For purposes of this
    hypothetical, we will assume that the DBE is not acting as a regular
    dealer.)

-   From the point where the DBE\'s role changed from that of a
    manufacturer to that of a broker, DBE credit that the recipient and
    prime contractor can claim is much reduced, since only its fees or
    commissions, rather than 100 percent of the cost of the goods, could
    count from that point forward.

-   This places the recipient and contractor in a position analogous to
    the situation where a DBE is decertified or drops out of the
    contract.

    -   The recipient cannot count the \"lost\" DBE participation toward
        its overall goal.

    -   The prime contractor would make good faith efforts to obtain DBE
        participation to make up for the \"lost\" participation from the
        former manufacturer, to the extent needed to continue meeting
        the contract goal (see 26.53(f)(2)).

[**Section 26.55
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal28.cfm#TOC33)
/ [**26.55
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal53.cfm#TOC86)

Section 26.55(e)(2)(ii)B)

THE COUNTING RULES SAY THAT TO BE A REGULAR DEALER, A SUPPLIER OF BULK
GOODS WHO SUPPLEMENTS ITS OWN DISTRIBUTION EQUIPMENT MUST DO SO BY A
LONG-TERM LEASE. HOW LONG IS LONG-TERM?

(Posted - 4/12/99)

**ANSWER**:

-   The key point is that a lease for trucks or other distribution
    equipment cannot be an *ad hoc* deal specific to the particular
    contract or distribution task.

-   The leased equipment should be used over an extended period of time
    to serve a variety of customers and/or contracts.

-   There is not a specific number of months or years that the
    Department believes it is useful to rely on in all cases. The
    scrutiny that a recipient gives a lease arrangement should become
    stricter the shorter the period of the lease is.

[**Section 26.65
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal31.cfm#TOC36)
/ [**26.65
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC90)

Section 26.65(a

HOW DO RECIPIENTS DETERMINE THE SIZE OF A FIRM THAT PERFORMS DIFFERENT
TYPES OF WORK?

(Posted - 2/12/02)

**ANSWER:**

-   In the DBE program, a firm may perform more than one type of work.
    For example, it may work as a general contractor on one project and
    a specialty subcontractor on another. For another example, a firm
    may perform one contract as an architect/engineer and another as an
    electrical subcontractor.

-   The Department\'s DBE rule provides that, as a recipient, you must
    apply current SBA size standards \"appropriate to the type(s) of
    work the firm seeks to perform in DOT-assisted contracts\"
    (?26.65(a)).

-   Suppose the size of Firm X (e.g., determined through looking at the
    firm\'s gross receipts) is \$5 million, and X is seeking
    certification as a DBE in classification codes yyyy and zzzz. The
    SBA small business size standards for these classifications are
    \$3.5 and \$7 million, respectively. Firm X would be a small
    business that could be certified as a DBE, and that could receive
    DBE credit toward goals, in code zzzz but not in code yyyy.

-   Likewise, suppose that the SBA size standard for a specialty
    subcontractor in a particular field is \$4 million. Firm Y sometimes
    performs work in that field, but other times acts as a general
    contractor. The SBA size standard for general contractors is in
    excess of the Department\'s \$17.42 million dollar statutory size
    cap. Firm Y\'s gross annual receipts are \$10 million. Firm Y can be
    certified as a DBE and receive DBE credit toward goals in its
    capacity as a general contractor. It cannot be certified as a DBE,
    and cannot receive DBE credit toward goals, in its capacity as a
    specialty contractor.

-   It is important for recipients to make these distinctions. It is not
    appropriate for a recipient to decline to certify a firm for all
    purposes when the firm meets SBA size standards with respect to some
    of its activities. However, recipients must be careful to award DBE
    credit to a firm only in those areas in which it does meet size
    standards.

[**Section 26.65
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal31.cfm#TOC36)
/ [**26.65
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC90) -
[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91) -
[**Section 26.85
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal38.cfm#TOC43)
/ [**26.85
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC98)

Section 26.65; 26.67(b);26.85(b)

AFTER A FIRM LOSES ELIGIBILITY FOR EXCEEDING SIZE LIMITS, OR AN
INDIVIDUAL\'S PRESUMPTION OF SOCIAL AND ECONOMIC DISADVANTAGE IS
REBUTTED FOR EXCEEDING THE PERSONAL NET WORTH CAP, CAN THE INDIVIDUAL OR
BUSINESS EVER PARTICIPATE IN THE DBE PROGRAM IN THE FUTURE?

(Posted - 2/12/02)

**ANSWER:**

-   When a firm is denied certification, the recipient must establish a
    waiting period of 12 months or less for reapplication. Once this
    waiting period has expired, the firm can reapply for certification.

-   This provision applies regardless of the basis for the denial of
    certification. A denial based on business size or personal net worth
    grounds is no different, for this purpose, from a denial based on
    ownership or control grounds.

-   For example, suppose a firm is denied certification in Year 1
    because it exceeds the business size standard, or because its owner
    has a personal net worth that exceeds \$750,000. In Year 2, after
    the recipient\'s reapplication waiting period expires, the firm
    applies for certification again. If the size of the business in Year
    2 is under the applicable standard, or the personal net worth of the
    owner has fallen below \$750,000, respectively, then the recipient
    would certify the firm, assuming it met all other certification
    requirements.

[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91)

Section 26.67 (a)

DOES A RECIPIENT SIMPLY ACCEPT AN OWNER\'S PNW STATEMENT? SHOULD THE
RECIPIENT INVESTIGATE?

(Posted - 4/12/99)

**ANSWER**:

-   A PNW statement is a signed representation to a DOT recipient that
    the information presented is true. Falsification can lead to
    criminal prosecution.

-   Recipients should first review a PNW statement to determine whether
    the individual\'s PNW is more than \$750,000.

-   In addition, recipients should review each PNW statement to
    determine if there are any obvious mistakes, omissions, or
    suspicious information. Where the recipient has a reasonable basis
    to believe that the PNW statement is incomplete or inaccurate, the
    recipient may \"look behind\" it, by seeking further information or
    conducting an investigation to clear up the issues. Recipients have
    discretion to devise procedures to obtain needed information in
    these cases.

-   The Department emphasizes that recipients are prohibited from using
    requests for additional information concerning PNW issues as a way
    of targeting, punishing, harassing, or discriminating against
    specific firms or classes of firms. We regard such misconduct as
    noncompliance with part 26 (see 26.7(b), 26.109(d)).

-   If there is a credible allegation that an owner has falsified a PNW
    statement, the recipient should investigate and/or refer the matter
    to the Department of Transportation\'s Office of Inspector General.

[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91) -
[**Section 26.109
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal56.cfm#TOC107)

Section 26.67. 26.109(a)(2)

HOW SHOULD A RECIPIENT RESPOND TO A REQUEST, UNDER A STATE FREEDOM OF
INFORMATION OR OPEN RECORDS LAW, FOR CONFIDENTIAL BUSINESS INFORMATION
SUBMITTED BY A DBE?

(Posted - 4/12/99 - Edited 12/7/01)

**ANSWER**:

-   Particularly in the certification process, firms provide recipients
    with much financial and other information that applicants may wish
    to safeguard from disclosure.

-   26.67(a)(2)(ii) provides that, with respect to personal financial
    information submitted in response to the personal net worth
    statement requirement of 26.67, part 26 specifically intends to
    pre-empt disclosure under state law. Recipients may not release
    these records to a third party (other than DOT in some
    circumstances) without the consent of the submitter.

-   A recipient must not release information that can reasonably be
    considered confidential business information to any third party
    (other than DOT in some circumstances) without the submitter's
    written consent. This provision is also intended to pre-empt
    disclosures under state law (e.g., a state open records or freedom
    of information statute).

-   The Federal Freedom of Information Act and Privacy Act apply only
    with respect to records in the possession of DOT and other Federal
    agencies (see 26.109(a)(1)), not records in the possession of state
    or local government agencies who receive Federal financial
    assistance.

-   If any provision of Federal law prohibits recipients from disclosing
    certain records in their possession, then that law would control.

[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91)

Section 26.67(a)(1)

WHEN SHOULD RECIPIENTS REQUIRE OWNERS OF A DBE FIRM TO SUBMIT A
STATEMENT OF DISADVANTAGE?

(Posted - 4/12/99)

**ANSWER**:

-   A \"statement of disadvantage\" is a signed, notarized certification
    by each presumptively disadvantaged owner of a firm that he or she
    meets part 26 standards for social and economic disadvantage.

-   This certification of disadvantage is a separate requirement from
    the requirement of 26.67(a)(2) for a statement of personal net
    worth.

-   When a recipient certifies the eligibility of a DBE firm,
    27.67(a)(1) requires recipients to obtain a certification of
    disadvantage from each disadvantaged owner of the firm.

-   By signing such a statement, the owner certifies that his or her net
    worth does not exceed \$750,000.

-   Unlike the separate personal net worth statement, part 26 does not
    require owners to submit any supporting documentation with the
    statement of disadvantage. Therefore, it would be contrary to the
    rule for a recipient to require DBE owners to submit a narrative
    supporting their certification as it applies to social disadvantage.

[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91) -
[**Section 26.87
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal39.cfm#TOC44)
/ [**26.87
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC99)

Section 26.67(a)(2) and (b)(1); 26.87

WHEN A RECIPIENT DETERMINES THAT AN OWNER OF A CERTIFIED DBE FIRM
EXCEEDS THE \$ 750,000 PERSONAL NET WORTH CAP, WHAT HAPPENS? MUST THE
FIRM BE DECERTIFIED? IF SO, MUST THE RECIPIENT USE THE PROCEDURES OF
26.87 TO DECERTIFY THE FIRM?

(Posted - 4/12/99)

**ANSWER**:

-   The PNW cap concerns the issue of whether a particular individual
    owner of a DBE firm is a socially and economically disadvantaged
    individual.

-   Under 26.67(b)(1), when an individual\'s PNW shows that his or her
    PNW exceeds \$750,000, it is not necessary to have a proceeding
    under 26.87 to conclusively rebut his or her presumption of economic
    disadvantage. No other hearing or proceeding is called for (see 64
    FR 5118, February 2, 1999).

-   Therefore, when the owner does not dispute that his or her owner\'s
    net worth, as shown in the PNW statement, exceeds \$750,000, the
    recipient need not hold further proceedings under 26.87 before
    determining that the owner is not a disadvantaged individual.

-   However, if there is dispute about the facts of a case (e.g., the
    individual owner challenges the recipient\'s determination that his
    or her PNW exceeds \$750,000), then a 26.87 proceeding is necessary
    to remove the disadvantaged status of the individual.

-   In any case in which the recipient determines that a DBE firm\'s
    owner is not a disadvantaged individual because his or her net worth
    exceeds \$750,000, the recipient must then determine whether the
    individual\'s loss of disadvantaged status causes the firm\'s
    ownership by disadvantaged individuals to fall below 51 percent.

-   For example, suppose that a DBE firm is owned by presumptively
    disadvantaged individuals X, Y, and Z, who respectively own 40
    percent, 15 percent, and 20 percent of the company.

    -   If either Y or Z exceeds the PNW cap, but the other two owners
        do not, the firm can still be certified, assuming that control
        and other requirements continue to be met, because the ownership
        interest of the other two disadvantaged owners combined is more
        than 51 percent.

    -   On the other hand, if either X or both Y and Z exceed the
        \$750,000 cap, then the firm cannot remain certified, because
        ownership by disadvantaged individuals will fall below 51
        percent.

-   When the disadvantaged ownership of a DBE falls below 51 percent as
    the result of an owner losing his or her status as a disadvantaged
    individual, the recipient should decertify the firm. If the firm
    does not dispute that its disadvantaged ownership has fallen below
    51 percent, the recipient should decertify the firm without a 26.87
    proceeding. If the firm contends that its disadvantaged ownership is
    still at or above 51 percent, then the recipient would conduct a
    26.87 proceeding.

-   If there were disputes both as to the PNW of an owner and the
    percentage of ownership remaining in the hands of disadvantaged
    owners, these issues could be decided in the same 26.87 proceeding.
    Two separate proceedings would not be necessary.

[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91)

Section 26.67(b)

IN CALCULATING PERSONAL NET WORTH, HOW SHOULD ASSETS HELD BY SPOUSES IN
JOINT OR COMMUNITY PROPERTY BE COUNTED?

(Posted - 2/17/00 - Edited 12/7/01)

**ANSWER:**

-   The basic principle in counting assets in the personal net worth
    calculation is to count the present value of assets attributable to
    the individual.

-   If an asset is held as community property, or jointly (including a
    tenancy by the entireties) between two people, 50 percent of the
    value of the asset is normally attributed to each person.

-   For example, suppose a woman owner of a firm applying for DBE
    certification has, with her husband, a \$100,000 joint savings
    account. Half of this asset \-- \$50,000 \-- would be counted toward
    her personal net worth. The recipient to which her firm applied
    would not count the full \$100,000 toward her personal net worth.

-   A legal instrument valid under state law can alter this normal
    attribution of assets between owners.

**Section 26.67(a)(2)(iii)(d)**

[**Section 26.67
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal32.cfm#TOC37)
/ [**26.67
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC91)

IN CALCULATING PERSONAL NET WORTH, HOW SHOULD RETIREMENT SAVINGS BE
COUNTED?

(Posted - 2/17/00 - Edited 12/7/01)

**ANSWER:**

-   The basic principle in counting assets in the personal net worth
    calculation is to count the present value of assets attributable to
    the individual.

-   Retirement savings or investment devices (e.g., a pension plan, IRA,
    401(k)) do count toward calculations of an individual\'s personal
    net worth. This is because these assets, even though generally not
    readily available as sources of financing for business operations,
    are part of an individual\'s overall wealth.

-   Recipients should count only the present value of a retirement
    savings or investment device toward the personal net worth
    calculation. That is, the recipient needs to determine how much the
    asset is actually worth today, not what its face value is or what
    the individual\'s return on it may be at some point in the future.

-   In making this present value determination, the recipient would
    subtract the interest or tax losses the individual would incur if he
    or she liquidated the asset today.

[**Section 26.73
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal35.cfm#TOC40)
/ [**26.73
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC94)

Section 26.73

CAN A NOT-FOR-PROFIT FIRM BE CERTIFIED AS A DBE?

(Posted - 2/23/99)

**ANSWER:**

-   No. Only a for-profit firm may be certified as a DBE.

-   However, a firm owned by an Indian tribe or Alaska Native
    Corporation as an entity may be certified as a DBE.

[**Section 26.73
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal35.cfm#TOC40)
/ [**26.73
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal54.cfm#TOC94)

Section 26.73 (h)(i)

HOW DO RECIPIENTS DETERMINE THE ELIGBILITY OF FIRMS OWNED BY AN INDIAN
TRIBE OR AN ALASKA NATIVE CORPORATION?

(Posted 2/12/02)

**ANSWER:**

-   Any Indian Tribe may own a DBE firm as an entity. It is not
    necessary, in these cases, that disadvantaged individuals (i.e.,
    natural persons) own the firm.

-   However, the firm must be controlled by socially and economically
    disadvantaged individuals (see 26.71). For example, suppose the CEO
    of a firm owned by an Indian Tribe is a non-disadvantaged white
    male, or that such persons effectively control the day-to-day
    business operations of the firm. The firm would not be an eligible
    DBE, because it is not controlled by socially and economically
    disadvantaged individuals.

-   The disadvantaged individuals who control the firm need not
    necessarily be members of the Tribe that owns the business. For
    example, the CEO of a tribally-owned business could be Hispanic.

-   One implication of the control requirement is that disadvantaged
    individuals involved in controlling the firm must meet personal net
    worth (PNW) standards (see ?26.67(a)(2); (b)). Not every member of
    the Indian Tribe has to meet these standards or complete a PNW
    statement. Only the disadvantaged officers, board members, CEO, etc.
    who actually control the firm must do so. These individuals would
    also be responsible for submitting the certification of disadvantage
    required by 26.67(a)(1).

-   Recipients would look to these same disadvantaged individuals who
    must submit PNW statements to determine whether the persons claiming
    to control the firm meet other requirements of 26.71 (e.g., with
    respect to expertise).

-   The firm must also meet the regulation\'s size standards (see
    ?26.65). These standards provide that the firm - including its
    affiliates \-- must meet SBA size standards and the statutory DBE
    size cap.

-   Affiliation is an important concept in the DBE program. It does
    apply to firms owned by Indian Tribes. If it did not, then these
    firms could enjoy a significant competitive advantage over other DBE
    firms, because they could have access to the sometimes plentiful
    resources of their affiliates. At the same time, the Department
    recognizes that Indian Tribes often own a variety of businesses that
    could be considered affiliates because of common ownership by the
    entity. Literal application of the affiliation rule might therefore
    result in precluding firms owned by Indian Tribes from participating
    in the DBE program.

-   Consequently, the Department interprets its rule to treat firms
    owned by Indian Tribes as entities as not being affiliated with
    other businesses owned by the entities if there is a firewall (i.e.,
    a legally binding mechanism) in place to prevent the firms from
    accessing the resources of the entities\' other businesses. For
    example, suppose an Indian Tribe owns a small construction company
    that is seeking DBE certification. The Tribe also owns several
    non-transportation related businesses. To avoid being considered an
    affiliate of the other businesses, the construction company would
    have to be subject to a legally binding provision precluding it from
    receiving any funds or other resources, directly or indirectly, from
    the other businesses.

-   Alaska Native Corporations (ANCs) are treated differently from
    Indian tribes, as the result of a legislative mandate.

-   An ANC-owned firm, if it has been certified by SBA under the 8(a) or
    Small Disadvantaged Business program, is an eligible DBE.

-   Such a firm is not required to meet size, ownership, or control
    requirements applicable to other DBEs.

[**Section 26.81
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal36.cfm#TOC41)
/ [**26.81
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC96)

Section 26.81

WOULD IT BE ACCEPTABLE FOR A MULTI-STATE UNIFIED CERTIFICATION PROGRAM
(UCP) TO BE FORMED BY STATES IN A REGION, SO THAT DBE FIRMS WOULD ONLY
NEED TO APPLY TO ONE OF THE UCPs INVOLVED?

(Posted - 4/12/99)

**ANSWER**:

•  If all UCPs in a region agreed to use the same form, process, and
procedure, and a firm certified by one recipient was accepted by all,
that would satisfy the \"one-stop shopping\" requirement of part 26.

•  The Department encourages recipients and UCPs to work together to
form regional UCPs or to have other reciprocity agreements. Doing so
will further reduce burdens on small businesses.

[**Section 26.81
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal36.cfm#TOC41)
/ [**26.81
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC96)

Section 26.81                      

WHEN A STATE MAKES A SIGNIFICANT CHANGE TO ITS UCP PLAN, IS IT REQUIRED
TO RESUBMIT THE PLAN TO DOT FOR APPROVAL?

(Posted - 9/1/05)

**ANSWER**:

1.  Yes.  It is similar to the requirement for a significant change to a
    DBE program.

```{=html}
<!-- -->
```
1.  Under § 26.21(b)(2), the recipient is not required to submit updates
    to its program, but any significant change must be submitted and
    approved by DOT.

2.  Similarly, recipients must submit significant changes to their UCP
    plans to DOT for approval.

3.  The following are examples of a significant change to a UCP plan

-   In a state\'s original plan, one agency was responsible for
    performing certifications.  In a time of state budget constraint,
    the legislature eliminates funding for the agency.  This would force
    the state to develop a new system for certification.

-   Different agencies within a state have different functions regarding
    certification.  For some reason, they believe it necessary to
    restructure and realign those agencies and their functions with
    regards to certification.

-   An important player in a UCP plan (e.g., an airport authority) wants
    to cease participating in the UCP.

 

Section
26.81                                                                                                                                      

 

WHAT HAPPENS IF A STATE FAILS TO RESPOND TO DOT COMMENTS ON ITS DRAFT
UCP?

(Posted - 9/1/05)

ANSWER:

-   The DBE rule requires all recipients in a state to participate in a
    UCP.  DOT must approve the UCP before the recipients in the state
    are regarded as complying with this requirement.

    -   If a state has submitted a draft UCP, on which the Department
        has commented,

> the state has an obligation to respond promptly with a revised UCP
> draft that accommodates the comments. 

-   If the state has not responded in a timely manner, DOT will send a
    letter directing the state to furnish the response within 60 days. 
    If the state does not

> respond as directed, then the recipients responsible for participating
> in the UCP
>
> will be regarded as being in noncompliance with the DBE regulation.

Section 26.81(a)

DO ALL RECIPIENTS HAVE TO PARTICIPATE IN UNIFIED CERTIFICATION PROGRAMS
(UCPs)?

(Posted - 2/12/02)

**ANSWER:**

-   Section 26.81(a) of the DBE regulation says to recipients that \"you
    and all other recipients in your state must enter into in a Unified
    Certification Program (UCP)\" (emphasis added).

-   The purpose of this provision is to ensure that DBEs and applicants
    (including airport concessionaires) will have \"one stop shopping\"
    on certification matters with respect to every recipient in the
    state. This is not possible unless all recipients with certification
    responsibilities are part of the UCP.

-   Recipients who are not required to have DBE programs do not have
    certification responsibilities. Therefore, they do not need to
    participate in a UCP.

-   All state DOTs must participate in the UCP. However, subrecipients
    of state DOTs do not have to be involved in the UCP formation
    process or sign the UCP agreement on their own. The state DOT is
    responsible for ensuring (e.g., through subgrant agreements) that
    its subrecipients comply with all provisions of the UCP (e.g., that
    they accept as DBEs firms that the UCP has certified).

-   Airports and transit properties that receive funds directly from FAA
    or FTA must also participate in the UCP. Since these recipients must
    participate in the UCP, it is vital that they have the opportunity
    to be involved in the discussions leading up to its formation (e.g.,
    that they get notice of meetings and working drafts of documents).
    No direct recipient who wishes to be involved in the work of
    developing the UCP may be excluded.

-   All parties who must participate in a UCP (i.e., state DOTs and
    airports and transit properties that receive funds directly from FAA
    or FTA) must commit in writing to participate.

Section 26.81(d), 26.83(i)
                                                                                                                

HOW DOES THE "HOME STATE FIRST" PROVISION OF THE DBE RULE WORK WHEN A
FIRM SEEKS OR HAS OBTAINED CERTIFICATION IN MORE THAN ONE STATE?

(Posted -- 9/1/05)

**ANSWER:**

-   Under §26.81(d), a UCP "is not required to process an application
    for certification from a firm having its principal place of business
    outside the state if the firm is not certified by the UCP in the
    state in which it maintains its principal place of business."

-   This provision is intended to prevent undue administrative burdens
    on certifying agencies.  Given resource limitations, it could be
    very difficult for certifying agency personnel to travel to other
    parts of the country to conduct on-site reviews of applicant firms
    based in other states. 

-   Suppose that Firm X has its principal place of business in State A. 
    It has never been certified there.  It applies for certification in
    State B.  State B's UCP is permitted to decline to consider its
    initial application.

-   If Firm X has been certified in Home State A and then applies for
    initial certification in State B, State B's UCP must process its
    application.  State A would transmit a copy of its on-site review
    report to State B for State B's consideration.

-   If Firm X  was originally certified in Home State A, was decertified
    there, and subsequently submitted an initial application for
    certification to State C, State C's UCP would be permitted to
    decline to consider its application, since the firm was not
    certified in its home state at the time it applied to State C. 

-   If Firm X was originally certified in Home State A, then became
    certified in State B, and was subsequently decertified in State A,
    the firm remains certified in State B until and unless State B
    decertifies the firm through a §26.87 proceeding conducted by State
    B.  Firm X does not lose its certification in State B automatically
    because it was decertified in Home State A. 

-   Certified DBEs have an obligation, under §26,83(i), to inform
    recipients in writing of any material change in their
    circumstances.  This includes a loss of eligibility in any state in
    which the firm has been certified.  Consequently, if Firm X is
    certified in its Home State A and in State B, and then is
    decertified in State A, it must notify State B of the
    decertification. 

-   In such a situation, State B should seriously consider whether to
    commence a §26.87 decertification action against the firm.  Once
    State B learns of State A's action, State B should contact State A
    for information about the decertification.  State B's UCP should use
    this and other available information in deciding whether to initiate
    a §26.87 decertification action. 

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Section 26.83

HOW DO RECIPIENTS RESPOND TO APPLICANTS FOR CERTIFICATION WHO ARE
CERTIFIED BY ANOTHER UCP?

(Posted - 2/23/99)

**ANSWER:**

-   You have the discretion to handle this situation in any of the
    following ways.

-   You can certify the firm in reliance on the certification decision
    of the other UCP.

-   You can make your own certification decision based on documentation
    provided by the other UCP.

-   You can require the applicant to go through your own certification
    process, without regard to the actions of the other UCP.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Section 26.83(c)1)

IS AN ON-SITE REVIEW OF A FIRM NECESSARY TO CERTIFY A FIRM? TO DENY
CERTIFICATION TO THE FIRM?

(Posted - 2/12/02)

**ANSWER:**

-   As a recipient, you are not permitted to certify a firm as an
    eligible DBE unless there has been an on-site review of its
    eligibility that you take into account in making your decision.
    There are no exceptions to this requirement, which is crucial to
    preventing DBE fraud and ensuring the integrity of the DBE program.

-   However, there are some situations in which you may deny
    certification to a firm without an on-site review.

-   Generally, these situations are ones in which the information
    contained in the firm\'s application, viewed in the light most
    favorable to the firm, precludes it from being certified.

-   Here are examples of these situations:

    -   The personal net worth statement of the sole owner of a firm
        exceeds the \$750,000 limit

    -   The firm exceeds the \$17.42 million cap on gross annual
        receipts, averaged over three years, or exceeds the applicable
        SBA business size standard

    -   The applicant fails to cooperate with the recipient\'s
        information requests (e.g., an owner refuses to supply necessary
        personal net worth information)

    -   It is clear from the application that disadvantaged individuals
        do not own or control the firm (e.g., that non-disadvantaged
        individuals own 60 percent of the stock, or that white males
        make all day-to-day business decisions of the company)

-   In other situations, there must be an on-site review before you deny
    a firm\'s application for certification.

Section 26.83(c)(1)

IS IT APPROPRIATE FOR UCPs TO REQUIRE OUT-OF-STATE APPLICANTS TO APPEAR
IN PERSON FOR AN INTERVIEW?

(Posted - 9/1/05)

**ANSWER:**

-   UCPs may appropriately rely on reports of on-site reviews conducted
    by the home state of an out-of-state applicant to meet the on-site
    review requirements of Part 26. 

-   UCPs should not routinely require all out-of-state applicants for
    certification to appear in person for an interview.  Such a
    requirement may impose unnecessary financial hardships on the
    applicant and his or her small business.

-   The information necessary for the UCP to make a certification
    decision should normally appear in the on-site review report of the
    applicant's home state.  This information typically includes the
    results of the home state's interview with the applicant.

-   However, there may be individual cases in which the UCP has reason
    to believe that the home state's on-site review report does not
    sufficiently address important substantive questions necessary for
    the UCP's consideration of  the firm's application. 

-   In such cases, the UCP has discretion to require the applicant to
    appear in person for an interview.  Before imposing such a
    requirement, the UCP should determine if other, less onerous, means
    can be used to obtain the needed information (e.g., sending
    documents, participating in a teleconference or videoconference).

-   When the UCP determines that the applicant must appear in person for
    an interview, the UCP should send a letter to the applicant
    explaining the reason for the requirement, including the information
    the UCP is seeking and the reasons why other means of obtaining it
    are impracticable.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Section 26.83(h)

MUST RECIPIENTS "RECERTIFY" FIRMS EVERY THREE YEARS?

(Posted - 4/12/99)

**ANSWER**:

-   No. The rule does not say that recipients [must]{.underline}
    recertify firms every three years. It says that recipients cannot
    require a firm to go through a recertification review process more
    frequently than once every three years.

-   Once recipients have determined that a firm is an eligible DBE, it
    remains certified unless and until its eligibility has been removed
    through 26.87 procedures.

-   Certifications do not "expire" after three years. Once certified, a
    firm remains an eligible DBE unless and until its eligibility has
    been removed under section 26.87.

-   DBEs\' \"no change\" affidavits and notices of change are intended
    to keep recipients current on the status of certified firms. If the
    facts on which the firm\'s certification was based change, the
    recipient can take action under 26.87 to remove eligibility.

-   Of course, a recipient can investigate a firm if there is reason to
    believe that its current information is incorrect or outdated, or
    that there are problems with the firm\'s status as an eligible DBE.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

WHAT ACTIONS DOES A RECIPIENT TAKE AFTER IT REQUESTS A CURRENTLY
CERTIFIED FIRM TO UNDERGO A RECERTIFICATION REVIEW?

(Posted - 9/22/00)

**ANSWER**:

-   When a recipient requires a currently certified firm to undergo a
    recertification review, the recipient should not treat the firm as
    though it were a new applicant.

-   While the firm must provide all requested information, the firm does
    not bear the burden of proving its eligibility, as it would upon
    initial application.

-   If the recipient determines, based on the information in the
    reapplication for certification, that there is reasonable cause to
    believe that the firm is no longer an eligible DBE, the recipient
    would begin a 26.87 proceeding to remove the firm\'s eligibility.

-   If the firm does not provide the requested information in a timely
    manner, the recipient could begin a 26.87 proceeding to remove the
    firm\'s eligibility on the ground of failure to cooperate (see
    26.109(c)).

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Section 26.83(i)

WHAT IS A \"NOTICE OF CHANGE\" AND WHEN SHOULD RECIPIENTS REQUIRE DBE
FIRMS TO SUBMIT ONE?

(Posted - 4/12/99)

**ANSWER**:

-   A \"notice of change\" is a written affidavit that DBE firms must
    provide to the recipient within 30 days of any change in their
    circumstances affecting their ability to meet part 26 eligibility
    standards regarding size, disadvantage, ownership and control.

-   A notice of change must include documentation describing the change
    in detail.

-   Recipients should ensure that all currently certified DBEs are aware
    of their obligation to submit notices of change.

-   For purposes of this notice requirement, a \"change\" in the firm\'s
    circumstances includes a change in an owner's situation that affects
    the firm\'s eligibility. For example, if a disadvantaged owner's
    personal net worth exceeds the \$750,000 cap, the firm is obligated
    to file a notice of change.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97)

Section 26.83(j)

WHAT IS A \"NO CHANGE\" AFFIDAVIT AND WHEN SHOULD RECIPIENTS REQUIRE DBE
FIRMS TO SUBMIT ONE?

(Posted - 4/12/99 - Edited 12/7/01)

**ANSWER:**

-   A \"no change\" affidavit is an affidavit each DBE firm must provide
    to the recipient annually on the anniversary date of the firm\'s
    certification. The affidavit affirms that there have been no changes
    in the firm\'s circumstances affecting its ability to meet part 26
    size, disadvantage, ownership, and control standards (except for
    changes about which the firm has submitted a \"notice of change\" to
    the recipient).

-   With a \"no change\" affidavit, the rule requires a firm to submit
    supporting documentation concerning its size and gross receipts.

-   For purposes of this notice requirement, \"no change\" in the
    firm\'s circumstances means, among other things, that changes in an
    owner's situation have not affected the firm\'s eligibility. For
    example, by submitting a \"no change\" affidavit, the owner of a DBE
    firm is affirming that his or her personal net worth does not exceed
    \$750,000. Recipients should ensure that currently certified DBEs
    are aware of this obligation.

[**Section 26.83
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal37.cfm#TOC42)
/ [**26.83
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC97) -
[**Section 26.89
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal40.cfm#TOC45)
/ [**26.89
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC100)

Section 26.83 - 26.89

MUST A RECIPIENT HAVE AN INTERNAL APPEAL SYSTEM FOR APPLICANTS WHO ARE
DENIED CERTIFICATION OR DECERTIFIED? IF THERE IS SUCH A PROCESS, MUST IT
INCLUDE PROVIDING A VERBATIM TRANSCRIPT OF THE ORIGINAL PROCEEDING TO
THE FIRM FOR PURPOSES OF THE INTERNAL APPEAL?

(Posted - 4/12/99)

**ANSWER**:

-   No. There is no requirement for recipients to establish an internal
    appeal system. Recipients have the discretion to establish such a
    system, however.

-   Once a recipient has made an administratively final denial or
    decertification decision (i.e., one that means the firm cannot
    participate in the recipient\'s DOT-assisted contracts as a DBE),
    the firm may appeal the result to DOT under 26.89.

-   If a recipient has established an internal appeals system, a firm is
    not required to exhaust this remedy before appealing an
    administratively final decision to DOT under 26.89. However, if a
    firm chooses to appeal through the recipient\'s internal appeal
    process, the Department will not act on a 26.89 appeal until
    completion of the recipient\'s proceeding.

-   The details of any internal appeal process a recipient establishes
    should be part of the recipient\'s revised DBE program. DOT will
    look at the process to make sure that it is fair.

-   A vebatim record is required in decertification actions (see
    26.87(d)(2)). For denials of applications for certification, part 26
    does not require a verbatim record. Either a verbatim record or
    another means that gives the appellant the opportunity to review the
    record of the initial proceeding in detail is permissible. This is
    important to a fair appeal proceeding, since it gives the appellant
    the opportunity to make effective arguments about the initial
    proceeding.

[**Section 26.87
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal39.cfm#TOC44)
/ [**26.87
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC99) -
[**Section 26.89
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal40.cfm#TOC45)
/ [**26.89
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC100)

Section 26.87 - 26.89

Section 26.87      

ARE THERE ANY CIRCUMSTANCES IN WHICH A RECIPIENT MAY REMOVE THE
ELIGIBILITY OF CERTIFIED DBE FIRMS WITHOUT GOING THROUGH THE PROCEDURES
OF §26.87?

(Posted - 9/1/05)

**ANSWER**:

There is only one situation in which a recipient may remove the
eligibility of a certified DBE firm without a §26.87 decertification
proceeding.  That is when the DBE firm does not dispute that the
personal net worth of an owner necessary to its certification exceeds
\$750,000.

-   In ALL other cases, without exception, a recipient is not permitted
    to remove the eligibility of a certified firm without a §26.87
    decertification proceeding.

-   In particular, a recipient is not permitted to automatically remove
    the eligibility of a firm without a §26.87 decertification
    proceeding because the firm has not responded to the recipient's
    request for recertification information or has failed to submit an
    affidavit of no change in a timely manner.

-   In such cases, the recipient would begin a §26.87 decertification
    proceeding on the ground that the firm has failed to cooperate (see
    §26.109(c)).  This could be an administrative "default judgment"
    process in which, if the firm also did not respond to the notice
    initiating the §26.87 action, the recipient could issue a notice
    decertifying the firm without further proceedings. 

               

-   If a recipient has mistakenly removed the eligibility of a firm
    without a §26.87 decertification proceeding, the recipient must
    immediately restore the firm to the list of certified DBEs and then,
    if appropriate, pursue a §26.87 proceeding.  A recipient who fails
    to do so is in noncompliance with Part 26. 

-   While there are numerous reasons for which a firm's certification
    can be lost or its DBE eligibility terminated, it is important to
    note that there is no such thing in the DBE program as the
    "expiration" of a certification (i.e., a "term limit" of a certain
    number of years on the firm's eligibility).  Once certified, a firm
    remains certified until and unless it is decertified. 

[**Section 26.87
Preamble**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal39.cfm#TOC44)
/ [**26.87
Regulation**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cfinal%5Cfinal55.cfm#TOC99)

Prev \|
[**Index**](../../../../../../../../C:%5Cbusiness%5Cdbe%5Cdbeqna.cfm) \|
Next

The DBE Final Rule