# Presentation: 010411

## Disadvantaged Business Enterprise ProgramGoal Setting Process

## Background

- The Department of Transportation (DOT) has had in effect for more than 20 years a policy of helping small businesses owned and controlled by socially and economically disadvantaged individuals, including minorities and women, in participating in contracting opportunities created by DOT financial assistance programs. The Department, through its Operating Administrations, distributes in excess of $20 billion annually to help finance thousands of projects across the country. Approximately 85% of the assistance dollars is for construction. The major portion of the construction funds is allocated to State highway and transportation agencies for highway construction. The balance is provided to local public transit and airport authorities for mass transit and airport facilities.

- In 1983, Congress enacted the first disadvantaged business enterprise (DBE) statutory provision. This provision required the Department to ensure that at least 10% of the funds authorized for the highway and transit financial assistance programs be expended with DBEs. In 1987, Congress re-authorized and amended the statutory DBE program. In the transportation legislation of that year, Congress, among other changes, added women to the groups presumed to be disadvantaged. Since 1987 DOT has established a single DBE goal, encompassing both firms owned by women and minority group members.
- Primarily three major DOT Operating Administrations are involved in the DBE program. They are the Federal Highway Administration, the Federal Aviation Administration and the Federal Transit Administration. The DOT DBE program is carried out by state and local transportation agencies under the rules and guidelines in the Code of Federal Regulations (Title 49, Part 26).

**Notes:**
In 1983, Congress enacted the first disadvantaged business enterprise (DBE) statutory provision. This provision required the Department to ensure that at least 10% of the funds authorized for the highway and transit financial assistance programs be expended with DBEs. In 1987, Congress re-authorized and amended the statutory DBE program. In the transportation legislation of that year, Congress, among other changes, added women to the groups presumed to be disadvantaged. Since 1987 DOT has established a single DBE goal, encompassing both firms owned by women and minority group members.
Primarily three major DOT Operating Administrations are involved in the DBE program. They are the Federal Highway Administration, the Federal Aviation Administration and the Federal Transit Administration. The DOT DBE program is carried out by state and local transportation agencies under the rules and guidelines in the Code of Federal Regulations (Title 49, Part 26).
In 1983, Congress enacted the first disadvantaged business enterprise (DBE) statutory provision. This provision required the Department to ensure that at least 10% of the funds authorized for the highway and transit financial assistance programs be expended with DBEs. In 1987, Congress re-authorized and amended the statutory DBE program. In the transportation legislation of that year, Congress, among other changes, added women to the groups presumed to be disadvantaged. Since 1987 DOT has established a single DBE goal, encompassing both firms owned by women and minority group members.
Primarily three major DOT Operating Administrations are involved in the DBE program. They are the Federal Highway Administration, the Federal Aviation Administration and the Federal Transit Administration. The DOT DBE program is carried out by state and local transportation agencies under the rules and guidelines in the Code of Federal Regulations (Title 49, Part 26).

## Objectives of the DBE Program

- To ensure nondiscrimination in the award and the administration of DOT-assisted contracts in the Department’s financial assistance programs;
- To create a level playing field on which DBEs can compete fairly for DOT-assisted contracts;
- To ensure that the Department’s DBE program is narrowly tailored in accordance with applicable law;
- To ensure that only firms that fully meet this part’s eligibility standards are permitted to participate as DBEs;
- To help remove barriers to the participation of DBEs in DOT-assisted contracts:
- To assist the development of firms that can compete successfully in the marketplace outside the DBE program; and
- To provide appropriate flexibility to recipients of Federal financial assistance in establishing and providing opportunities for DBEs.

## Who must submit an Annual DBE Goal?

**If you are an FTA recipient who reasonably anticipates awarding (excluding transit vehicle purchases) more then $250,000 in FTA funds in prime contracts in a Federal fiscal year, you are required to develop an overall goal for FTA for that fiscal year.   **
**49 CFR 26.45(a)(2)**

## How do recipients set overall goals?

**49 CFR 26.45**

## Goal Setting Methodology

_**Methodology:**_** **
**The goal must be based on demonstrable evidence of the availability of ready, willing and able DBEs relative to all businesses ready, willing and able to participate on your DOT­assisted contracts.**
**The goal must reflect what you could expect the level of DBE participation would be absent the effects of discrimination. You cannot simply rely on either the 10 percent aspirational goal or past DBE participation rates in your program.**

## Goal Setting

**DOT does not approve your goal and recipients are not required to achieve a minimum goal. **
**However, DOT does review and approve the methodology used to establish the goal.**

## Goal Setting

**Goal setting is a two-step process:  **
**Develop a Base Figure**
**Adjust your Base Figure**

## Step One – Develop a Base Figure

**To begin the goal setting process, the recipient must first develop a base figure for the relative availability of DBEs. The relative availability of DBEs is the total number of ready, willing and able DBE firms divided by the total number of all firms for the types of contracts you anticipate awarding.**
_**	**__**	**__**	**__**DBE’s**__**	**__**	**__**      **_
**All firms (including DBE’s)**

## Example

***XDOT has two FTA funded projects (other than a bus procurement) in the coming fiscal year.  One project is to pave the bus parking lot and the second is to haul dirt.***
***There are 300 concrete contractor firms in XDOT’s area, 44 of which are DBEs.  There are 150 trucking firms in XDOT’s area, 14 of which are DBEs.  ***

## What is XDOT’s Base figure?

- (Number of DBE’s/Total number of firms)= Base Figure
- (44 concrete contractor DBEs/300 concrete contractors) + (14 trucking DBEs/150 trucking firms) =

- 12.8%

## Step One (continued)

**Did not use past participation as your base figure.**
**Use the most refined data available. Identify DBEs eligible under the current standards, beyond those listed in your directory (other DOT org).**
**Use all available data (census bureau; bidders list; disparity study; other DOT recipients) in your area.**
**Ensure that percentages reflect actual contracting opportunities; use weighting whenever possible.**

## Weighting your Base Figure 

***The total project budget is $1 million.  $900,000, or 90%, of the project will go towards the paving project, while the remaining $100,000, or 10% will go towards the dirt hauling project.***
- (Percent of total project budget) (Number of DBE’s/Total number of firms)= Base Figure
- .9(44 concrete contractor DBEs/300 concrete contractors) + .1(14 trucking DBEs)/150 trucking firms) = 13.20% +0.93% = 14.13% or 14%

## Step Two - Adjust Base Figure:

**Once you have calculated a base figure, you must examine all of the evidence available in your area to determine what adjustment, *****if any, *****is needed to the base figure to arrive at your overall goal.**
**Types of Evidence to Consider:**
**Current capacity of DBEs to perform the work . **
**Disparity studies (if not used in Step One). **
**Adjustments for your market if your Step One goal is that of another DOT recipient. Statistical data on the ability of DBEs to get financing, bonding, insurance, etc..**
**Input from interested parties (e.g, local chambers of commerce, NAACP, minority business associations, majority contractor associations).**

## Using Past Participation

**You can use past participation, IF... contracting opportunities are similar to past years. You must first determine median past participation and then average the past participation with your Step One Base Figure.**
**The historical median is the middle number of a group of numbers-For example, if your past participation were: 18%; 12%; and 10% - the average would be approx. 13% -- the median is 12%.**
**(12%+14%)/2= 13%**

## Means of Meeting Overall Goals

_**Race-Neutral Means**_
**You must meet the maximum feasible portion of your overall goal by using race-neutral means of achieving DBE participation. Race-neutral DBE participation occurs when a DBE wins a contract or subcontract that did not have contract specific goals, or when the DBE status was not considered in making the award.**
**Race-neutral *****does not *****mean that no efforts are made to facilitate DBE participation. **

## Race-NeutralExamples

- 1) Arranging solicitations, times for the presentation of bids, quantities, specifications, and delivery schedules in ways that facilitate DBE, and other small businesses, participation (e.g., unbundling large contracts to make them more accessible to small businesses, requiring or encouraging prime contractors to subcontract portions of work that they might otherwise perform with their own forces);
- (2) Providing assistance in overcoming limitations such as inability to obtain bonding or financing (e.g., by such means as simplifying the bonding process, reducing bonding requirements, eliminating the impact of surety costs from bids, and providing services to help DBEs, and other small businesses, obtain bonding and financing);
- (3) Providing technical assistance and other services;
- (4) Carrying out information and communications programs on contracting procedures and specific contract opportunities
- (5) Implementing a supportive services program to develop and improve immediate and long-term business management, record keeping, and financial and accounting capability for DBEs and other small businesses;
- (6) Providing services to help DBEs, and other small businesses, improve long-term development, increase opportunities to participate in a variety of kinds of work, handle increasingly significant projects, and achieve eventual self-sufficiency;
- (7) Establishing a program to assist new, start-up firms, particularly in fields in which DBE participation has historically been low;
- (8) Ensuring distribution of your DBE directory, through print and electronic **means**, to the widest feasible universe of potential prime contractors; and

## Race-Conscious Means

**You must establish contract goals to meet any portion of your overall goal you do not project being able to meet using race-neutral means. **_**Contract goals are considered race-conscious means.**_** The following rules apply:**
**Contract goals may only be used on DOT-assisted contracts with subcontracting opportunities (set-asides are NOT allowed).**
**Goals are not required on all contracts, nor must they match your overall goal.**
**You may NOT set contract goals at all if you project meeting your entire goal through race-neutral means. **
**You must reduce contract goals if you project during the year that you will EXCEED your overall goal. **
**Conversely, if you expect to fall short of your overall goal, you should add contract goals, as appropriate. **

## Race-Conscious Means

**When submitting your annual goal, you must include your projection of the portions of the overall goal you expect to meet through race-neutral and race-conscious measures.**
**If the DBE participation you have obtained by race-neutral means alone meets or exceeds your overall goals for two consecutive years, you are not required to submit a breakdown of your goal.**
**If you exceed your goal for two consecutive years through the use of contract goals, you must reduce the use of contract goals proportionately in the following years.**

## Western States Paving Co. v. United States & Washington State Department of Transportation407 F. 3d 983 (9th Cir. 2005) 

- Disadvantaged Business Enterprises; Western States Guidance for Public Transportation Providers. 56 Fed. Reg. 14775, March 23, 2006.

## What did the Court say?

**The Court of Appeals for the 9****th**** Circuit reviewed DOT’s DBE program and held that 49 CFR Part 26 and the authorizing statute for the DBE Program in TEA-21 are Constitutional.  The Court upheld Congressional determination that there is a compelling need for the DBE Program and that the DOT Rules at Part 26 are narrowly tailored to meet that need.**
**However, the 9****th**** Circuit held that the DBE Program administered by the Washington State Department of Transportation was not narrowly tailored because the evidence of discrimination supporting the use of race-conscious measures in the program was inadequate.  **

## Who does this apply to?

- Recipients of Federal financial assistance from the Federal Highway Administration (FHWA), Federal Transit Administration (FTA), and Federal Aviation Administration (FAA) located in the states comprising the 9th Federal Judicial Circuit.
- 9th Circuit states include California, Oregon, Washington, Alaska, Arizona, Idaho, Montana, Nevada, and Hawaii.

## Case Study

- Abbeville City Transit (ACT) provides transit service in Abbeville, TX.  ACT is a department of the City of Abbeville, which has a population of $250,000.  ACT operates a bus only system of 50 peak vehicles.  ACT does not receive FTA operating assistance and does not use FTA funding for preventive maintenance or ADA.  ACT has four FTA funded projects (other than a bus procurement) in the coming Fiscal Year.

## Step 1:  Find your Weighted Base Figure

- (Weight) X (Base Figure)= Weighted Base Figure

| Project | Type of Firm/NAICS Code | Amount | % Of Total (Weight) |
| --- | --- | --- | --- |
| Design Transfer Center | 54133- Design and Engineering | $100,000.00 |  |
| Rewire the Office | 23531- Electrical Contractor | $40,000.00 |  |
| Haul Dirt | 48411- Trucking | $4,000.00 |  |
| Build Addition to Shop | 23411- Construction | $256,000.00 | 
 |
| Total DOT Assisted Contracts |  | $400,000.00 |  |

- .25
- (100,000/400,000)

- .1

- .01

- .64

| Project | Type of Firm/NAICS Code | Amount | % Of Total (Weight) |
| --- | --- | --- | --- |
| Design Transfer Center | 54133- Design and Engineering | $100,000.00 | 25% |
| Rewire the Office | 23531- Electrical Contractor | $40,000.00 | 10% |
| Haul Dirt | 48411- Trucking | $4,000.00 | 1% |
| Build Addition to Shop | 23411- Construction | $256,000.00 | 64% |
| Total DOT Assisted Contracts |  | $400,000.00 | 100% |

## Base Figure 

- Number of DBEs/Number of All Firms
- ACT operates in Potter and Randall Counties.  Let’s look at Census County Business Patterns for those two Counties to determine the total number of all firms in the area.  We can use our DBE Directory or other available data to determine the total number of DBE’s in the area.

| Project | Type of Firm/NAICS Code | Number of DBEs | Number of All Firms
 | Relative Availability | Weight |  |
| --- | --- | --- | --- | --- | --- | --- |
| Design Transfer Center | 54133- Design and Engineering | 4 | 415 |  |  |  |
| Rewire the Office | 23531- Electrical Contractor | 13 | 562 |  |  |  |
| Haul Dirt | 48411- Trucking | 11 | 173 |  |  |  |
| Build Addition to Shop | 23411- Construction | 42 | 562 |  |  |  |
| Combined Totals |  | 70 | 1712 |  |  |  |

- 3/562=
**.0231**

- 11/173=
**.0636**

- 42/562=
**.0747**

- .1

- .01

- .64

- 4/415=
**.0096**

- .25

| Project | Type of Firm/NAICS Code | Number of DBEs | Number of All Firms
 | Relative Availability  (Base Figure)
 | Weight |
| --- | --- | --- | --- | --- | --- |
| Design Transfer Center | 54133- Design and Engineering | 4 | 415 | .0096
 | 25% |
| Rewire the Office | 23531- Electrical Contractor | 13 | 562 | .0231
 | 10% |
| Haul Dirt | 48411- Trucking | 11 | 173 | .0635
 | 1% |
| Build Addition to Shop | 23411- Construction | 42 | 562 | .0747
 | 64% |
| Combined Totals |  | 70 | 1712 |  | 100% |

## Calculating ACT’s Weighted Base Figure

- .

-   .0531 or 5.31%

- (Weight) X (Base Figure) = Weighted Base Figure

-  + (.1)(.0231)=.00231;

- (.25)(.0096)=.0024;

- + (.01)(.0635)=.000635;

- + (.64)(.0747)=.047808 =

## ACT’s Weighted Base Figure

**	****	****	****	****	****5%**

## Step 2: Determine if Adjustments are Necessary 

- During the previous three years ACT has increased DBE participation in FTA assisted contracts and leases through community outreach efforts.  There are several active minority contracting associations and other business organizations in the area.  In the past three years, ACT has achieved the following DBE participation for similar type projects:

- 2007-  12%
- 2006- 8%
- 2005- 6%

- Historical median is 8%.

**Notes:**
Therefore, the historical median for this type of work is 8%.  If the conditions are unchanged, e.g., similar number of DBE firms, etc., then you could adjust your goal as follows:

## Adjusting your Base Figure

- Calculate your adjusted goal by averaging your base figure and the historical median.

- ACT’s Adjusted FY 08 Goal= **7%**

- (5% base goal)

- + (8% median) / 2

- = 6.5 or 7%

## Race-Neutral and Race Conscious Splits

- In FY 2007 ACT’s overall goal was 10%.  They projected obtaining half (or 5%) of their goal by race-neutral means.  They actually achieved a goal of 12% DBE participation.
- Assuming contracting opportunities are similar, how much of ACT’s FY 2008 7% goal should be race-neutral?

## One Method:

- In FY 2007 ACT achieved 7% of their goal through race neutral methods—(5% projected and an additional 2%).
- 7% of 12% (total DBE participation in FY2006)= 58%
- (7÷12= 58%)
- 58% of 7% (Projected FY2008 goal)= 4%
- (58 x 7% = 4.06)
- 4% could be achieved through Race Neutral and 3% through Race Conscious

## What do I submit?

- A letter stating your overall goal is ____% for FY 200X and that you will achieve ____% of that goal through race neutral means and ____% through race conscious means.
- Attach a copy of your published notice.
- Attach a worksheet, similar the one discussed today, showing your methodology.

## When do I need to submit my Annual Goal?

**Overall goals must be submitted to FTA on August 1****st ****of each year for the upcoming Federal Fiscal Year.  Project or grant goals must be submitted at the time determined by the FTA Administrator. **

## Remember:

- Before you submit to FTA, you must publish your proposed overall goal, informing the public that the proposed goal and its rational are available for inspection during normal business hours at your principal office for 30 days following the date of the notice, and informing the public that you and the Department will accept comments on the goals for 45 day s from the date of the notice.
*	**	**See* 49 CFR 26.45(g)(2).
- To timely submit your Annual Goal, FTA recommends you publish your annual goals by June 15th every year.

## Where to go for more info:

- _[www.osdbu.gov](http://www.osdbu.gov/)_
- National Transit Institute – Disadvantage Business Course Training –
- http://www.ntionline.com/CourseInfo.asp?CourseNumber=ID016

- If you have any questions or concerns, feel free to contact me:
- Thomas C. Harris
- Regional Civil Rights Officer
- US Department of Transportation
- Federal Transit Administration
- 901 Locust, Rm 404
- Kansas City, MO 64108
- (816) 329-3928
- Thomas.harris@dot.gov