Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

Civil Rights

Disadvantaged Business Enterprise

Project Contract Administration

If you advertise and award a Federal-aid 

contract, as a local public agency (LPA) you 

have the responsibility to manage Federal 

Disadvantaged Business Enterprise (DBE) 

Program requirements.

 

Failure to properly manage the DBE program 

could lead to project termination or potential 

delay due to complaints or lawsuits. 

To avoid this, the Federal Highway 

Administration (FHWA) requires you to follow 

your State’s federally approved DBE program in 

which your key responsibility is DBE contract 

administration. While the specific requirements 

within each State’s DBE program may vary, your 

main responsibility is DBE contract 

administration.

To keep it simple, let’s separate contract 

administration into two phases: pre-award and 

post-award. Let’s talk about the pre-award 

phase first. In the pre-award phase of a Federalaid contract, you are expected to address 

administrative elements of the contract. For 

every contract, you must include the following 

clauses: 

• Assurances. The required DBE assurances 

are found in the Federal DBE regulations. 

These assurances are contract provisions 

that hold the prime contractor, the 

subcontractors, and you, the LPA, 

accountable to your State’s approved DBE 

program guidelines.

• Prompt Payment. The prompt payment 

clause ensures that the sub-contractors, 

including DBEs, receive payment for work 

performed within 30 days of the prime 

contractor receiving its payment.

• Compliance and Enforcement.

Compliance and enforcement provisions 

may be termed differently in your State’s 

DBE Program. However, if prime, sub-, or 

DBE contractors do not comply with 

program requirements, these provisions 

serve as a guide for action by LPAs and 

State departments of transportation.

You will also need to determine if your State’s 

program includes a retainage provision. 

Retainage is the withholding of a portion of 

payments until the contractor’s work is 

completed and accepted. If the answer to this 

question is “yes,” you will need to ensure the 

Disadvantaged Business Enterprise Program requirements must be 

met to receive Federal-aid
Federal-aid Essentials for Local Public Agencies

return of retainage verbiage is included in the 

contract. A return of retainage clause ensures 

all subcontractors, including DBEs, receive 

retained monies due to them upon the 

completion of their part of the contract. The LPA 

is responsible for enforcing the return of 

retainage clause.

Also in the pre-award phase, we also must 

address the DBE goal. This goal ensures DBE 

participation. If a DBE goal is included in the 

advertisement of the Federal-aid contract, you 

have these responsibilities:

1. Review the prime contractor’s response to 

ensure they are:

a. Able to meet the goal, or if not,

b. Review and evaluate the prime 

contractor’s good-faith efforts. Goodfaith efforts are the actions that prove 

that, even if the contractor was unable 

to meet all or part of the DBE goal, it 

took all necessary and reasonable steps 

to do so.

2. Obtain a written list of the DBEs named by the 

prime contractor. This should include a 

description of the type of work and the dollar 

amount of the subcontract.

a. Ensure that DBEs identified on the 

Federal-aid contract are certified for the 

type of work they are performing using 

your State’s certified DBE directory.

b. Ensure that the dollar amount listed for 

the work the DBE is to perform is 

consistent with the actual value of that 

work.

3. You must verify the prime contractor’s 

commitment to the DBE firms. To do this, obtain

a written confirmation of the commitment from 

the listed DBEs to ensure the information 

obtained from the prime contractor is accurate. 

This written confirmation must identify the name 

of the DBE, the type of work the DBE will 

perform and the subcontract award amount the 

DBE is expected to receive.

Our key points for the pre-award phase were:

• Ensure your contract includes the 

required DBE Program provisions

• If DBE goals apply, confirm the prime 

contractor has complied with the 

program requirements.

In the post-award phase of contract 

administration for a Federal-aid contract, you are 

responsible for monitoring the project to ensure 

DBE Program compliance.

After a Federal-aid contract has been awarded, 

your responsibilities are to:

1. Conduct project-level monitoring. This means 

you are expected to visit the project site and to 

confirm and document that the listed DBEs are:

a. Performing the type of work specified in 

the contract 

b. Performing a commercially useful 

function. This means the DBEs are 

using their own resources, including 

employees, equipment, materials.

You must also get confirmation from the DBE 

that the prime contractor is adhering to the 

specific contract provisions for the DBE 

Program, such as prompt payment, and return of 

retainage, if applicable.

2. Maintain records and reports. This means 

collecting payment, DBE participation, and other 

data for submission as required by your State 

DOT.

If you answered “yes” to the DBE goal in the 

pre-award phase, you have another 

responsibility in the post-award phase. You must 

ensure that the DBEs listed by the prime 

contractor in the pre-award contract phase, are 

actually awarded a subcontract for the type of 
Federal-aid Essentials for Local Public Agencies

work and dollar amount (award amount) that 

was listed.

You must also ensure that the prime contractor 

does not terminate or substitute the DBE without 

your written approval.

The simplest way to sum up your responsibilities 

for a contract with DBE goals is to think of

Commitment Award Payment, or CAP. By 

carefully and effectively monitoring your 

projects, the project CAP will always be straight. 

The prime contractor must notify you, the LPA, if 

the CAP is no longer equal and why prior to any 

change.

In other words, the DBE (or contract) goal 

commitment made by the prime contractor in the 

pre-award phase should equal the actual award 

made to DBE subcontractors. And finally, in the 

post award phase payments made to DBE 

subcontractors should equal the DBE goal 

commitment and award amounts. In essence, 

there should be no surprises at the end of a 

Federal-aid project and your CAP should always 

be straight. In other words: 

Commitment = Award = Payments

Compliance and enforcement are essential to all 

aspects of contract administration. As an LPA, 

you are expected to monitor Federal-aid projects 

to ensure that prime, sub-, and DBE contractors 

comply with DBE Program provisions.

Finally, as an LPA, you want to guarantee 

compliance with these responsibilities to ensure 

your project is reimbursed for funds that may 

have already been expended on a Federal-aid 

contract. By complying with your State’s 

approved DBE Program, you will prevent project 

delays due to complaints, lawsuits, withholdings, 

or suspensions. You will also ensure successful 

project closeout and prevent termination or loss

of State DOT funds.

Remember, these are your key responsibilities 

for the DBE Program: 

• Follow your State’s federally approved program

• You have contract administration 

responsibilities in two phases:

Pre-award – ensure your contracts 

include DBE Program provisions 

Post-award – monitor and enforce DBE 

Program provisions

If you do these things, you will successfully 

complete your Federal-aid projects.
Federal-aid Essentials for Local Public Agencies

The content of this 

document is not a 

substitute for 

information obtained 

from State departments 

of transportation, 

appropriate FHWA 

Division Offices, and 

applicable laws. 

Scenarios have been 

simplified for emphasis 

and do not necessarily 

reflect the actual range of 

requirements applicable 

to the scenario or this 

topic. This document

was created under 

contract number

DTFH63-11-D-00066 by 

the Federal Highway 

Administration, U.S. 

Department of 

Transportation, and is 

offered to the public to 

heighten and focus 

awareness of Federal-aid 

requirements within the 

local public agencies 

community and 

reinforces the 

importance of these 

necessary policies, 

procedures, and 

practices.

This companion resource 

is the script content for 

the video production of 

the same name. 

Additional Resources

• Information regarding the DBE program requirements for Federal -aid 

projects

http://www.osdbu.dot.gov/dbeprogram/dbeqna.cfm

• Regulation for participation by Disadvantaged Business Enterprises in the 

U.S. DOT program

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr&tpl=/ecfrbrowse/Title49/49cfr26_main_02.tpl