Companion Guide to Video August 2012

www.fhwa.dot.gov/federal-aidessentials

The Disadvantaged Business Enterprise 

Program—or DBE program—requires recipients of 

Federal funds to establish DBE participation goals. 

DBE goals are expressed as a percentage. For 

example, a goal may state that "7% of the contract 

value is to be performed by DBEs."

To count toward the DBE goal, a DBE firm’s work 

must serve a commercially useful function or CUF. 

This means that the DBE has a necessary and 

useful role in the project. For example, the DBE 

supplies the materials and performs, manages and 

supervises the work. If the DBE serves only to 

provide the appearance of DBE participation, the 

work is not a commercially useful function and 

cannot count toward the DBE goal.

CUF violations can lead to a possible loss of 

Federal funding. Additionally, violations may 

indicate possible fraud and abuse of public funds, 

inaccurately inflate DBE participation, or result in 

the loss of contracting opportunities for other DBEs.

So local public agencies, or LPAs, need to 

understand what qualifies as DBE participation and 

how much of the work can count toward the DBE 

goal.

Once either your State department of 

transportation, or State DOT, or LPA determines 

that the work qualifies as a CUF, it then calculates 

the amount it can count toward its DBE goal. 

Generally, only the value of the work actually 

performed by the DBE counts toward the goal. 

Depending on the nature of the work, different 

guidance applies.

Here we will review the guidance for 

counting participation when the DBE 

firm is :

• A contractor or consultant

• A trucking firm

• Acting as regular dealer or

• A manufacturer

Civil Rights

Disadvantaged Business Enterprise

Commercially Useful Function

Federal-aid recipients must only count the value of a Disadvantaged 

Business Enterprise firm’s work when the DBE performs a commercially 

useful function
Federal-aid Essentials for Local Public Agencies

When a DBE firm is a contractor or consultant, the 

firm must perform at least 30 percent of its 

contract using its own employees, equipment, 

materials and resources. When this condition is 

met, all DBE work performed counts toward the 

DBE goals. However, work subcontracted to nonDBE firms does not count towards the goal.

For example, let’s assume a DBE firm performs 

$200,000, or 4 percent, of a $5 million contract by 

installing cable median barrier and guardrail. 

According to the proposal documents, the 

contractor will:

• Negotiate the price and purchase the 

materials that will be installed

• Provide the necessary installation 

equipment

• Supervise and supply the personnel to 

drive the guardrail posts and assemble the 

rails, as well as install the cable median 

barrier, according to specifications

• Subcontract special crash cushions and 

barrier end treatments at bridges to a nonDBE firm for $20,000

After verifying that the DBE contractor has 

performed at least 30 percent of the work with its 

own employees, equipment and materials, the 

agency considers the effort a commercially useful 

function. The agency counts $180,000 toward the 

DBE contract goal, the value of the firm’s effort 

excluding work subcontracted to a non-DBE firm.

When a DBE is a trucking firm, it must oversee the 

entire portion of the work it is committed to perform 

and use at least one of its own trucks. When these 

conditions are met, the portion of services provided 

using the firm’s truck plus any fees for leasing 

additional trucks count toward the goal. 

The value of services performed with leased trucks 

can also count depending on the situation. For 

example, when another DBE firm provides those 

leased trucks, an LPA can count the entire value. 

However, an LPA can only count non-DBE trucks 

up to the number of the DBE trucks used.

For example, a DBE trucking firm will contribute 

toward a 5-percent participation goal by delivering 

aggregate for $50,000. According to the proposal 

documents, the firm will:

• Dispatch the trucks and manage the 

operations

• Provide two of its own dump trucks and 

operators for $25,000

• Lease, from a non-DBE firm, two additional 

dump trucks for $25,000

Because the DBE trucking firm will oversee the 

entire operation and provide more than one truck, 

the effort qualifies as a CUF. In this case, the 

entire value of the two non-DBE trucks can be 

counted because there are also two trucks from the 

DBE firm. Therefore, the agency counts $50,000 

toward the DBE contract goal, the combined value 

of both the DBE and non-DBE trucks.

Check with your State DOT regarding options for 

counting non-DBE trucks.
Federal-aid Essentials for Local Public Agencies

A regular dealer typically has a store or 

warehouse out of which it sells or leases products 

to the public. If the DBE firm is acting as a regular 

dealer, 60 percent of the value of items sold to the 

project counts toward the DBE goals.

For example, a dealer will provide drainage pipe 

for $100,000. Because the DBE firm regularly 

sells this product as a part of its business, the 

agency counts $60,000 toward the DBE 

participation goal, or 60 percent of the value of the 

items provided. 

A DBE manufacturer produces, on its premises, 

materials or equipment used for a project. Onehundred percent of the value of manufactured 

materials and equipment counts toward the DBE 

goals.

LPAs must regularly monitor contract activities and 

certify in writing that the DBEs are performing a 

CUF. From a review of project-related documents 

and on-site observations, LPAs confirm that the 

DBE: has negotiated and ordered the supplies and 

materials, is managing the work, employing and 

supervising workers, and supplying the necessary 

equipment.

The documents LPAs gather during a review are 

used to support the required written certification 

and any necessary compliance and enforcement 

actions. 

Your State DOT’s DBE plan 

provides guidance on steps your 

LPA can take to ensure all program 

requirements are met.
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

DTFH61-11-D-00025 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. 

Web Resources

• Regulation on how DBE participation is counted toward goals

http://www.ecfr.gov/cgi/t/text/textidx?c=ecfr;sid=92d9b02a789cc3908c21c7fde2363b70;rgn=div5;view

=text;node=49%3A1.0.1.1.20;idno=49;cc=ecfr#49:1.0.1.1.20.3.16.8

• Link to a section of U.S. DOT Office of Small Disadvantaged and 

Business Utilization DBE Program Web site covering program 

requirements

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