Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 25815 

SUBSTITUTES THAT ARE ACCEPTABLE SUBJECT TO USE CONDITIONS—Continued 

End use Substitute Decision Use conditions Further information 

(c) ‘‘CAUTION—Risk of Fire or Explosion. 

Flammable Refrigerant Used. Consult Repair Manual/Owner’s Guide Before Attempting To Service This Product. All 

Safety Precautions Must be Followed.’’ 

(d) ‘‘CAUTION—Risk of Fire or Explosion. 

Dispose of Properly In Accordance With 

Federal Or Local Regulations. Flammable 

Refrigerant Used.’’ 

(e) ‘‘CAUTION—Risk of Fire or Explosion 

Due To Puncture Of Refrigerant Tubing; 

Follow Handling Instructions Carefully. 

Flammable Refrigerant Used.’’ This marking shall be provided near all exposed refrigerant tubing. 

The marking described in clause (a) above 

shall be permanently attached on or near 

any evaporators that can be contacted by 

the consumer. The markings described in 

clauses (b) and (c) above shall be located 

near the machine compartment. The 

marking described in clause (d) above 

shall be permanently attached on the exterior of the refrigerator. The marking described in clause (e) above shall be permanently attached near any and all exposed refrigerant tubing. All of these 

markings shall be in letters no less than 

6.4 mm (1⁄4 inch) high. 

Retail Food Refrigeration (stand-alone 

only) New Only.

Propane, R–290, as a 

substitute for CFC– 

12 and HCFC–22.

Acceptable subject to 

use conditions.

7. Retail food refrigeration using R–290 

must have fittings colored red as described above in use condition number 

four and which differ from fittings used in 

equipment or containers using non-flammable refrigerant. ‘‘Differ’’ means that either the diameter must differ by at least 

1⁄16 inch or the thread direction must be 

reversed (i.e., right handed vs. left handed). The unique fittings must be permanently affixed to the unit, and may not be 

accessed with an adaptor, until the endof-life of the unit; 

8. R–290 may not be sold as a refrigerant in 

containers containing less than five 

pounds (2.8 kg) of refrigerant. 

Note: In accordance with the limitations provided in Section 310(a) of the Clean Air Act (42 U.S.C. 7610(a)), nothing in this table shall affect the Occupational Safety and Health Administrations’ authority to promulgate and enforce standards and other requirements under the Occupational Safety and Health Act of 1970 (29 

U.S.C. 651 et seq.) 

[FR Doc. 2010–10959 Filed 5–7–10; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

49 CFR Part 26 

[Docket No. OST–2010–0118] 

RIN 2105–AD75 

Disadvantaged Business Enterprise: 

Program Improvements 

AGENCY: Office of the Secretary (OST), 

DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: This notice of proposed 

rulemaking (NPRM) would propose to 

improve the administration of the 

Disadvantaged Business Enterprise 

(DBE) program by increasing 

accountability for recipients with 

respect to good faith efforts to meet 

overall goals, modifying and updating 

certification requirements, adjusting the 

personal net worth (PNW) threshold for 

inflation, providing for expedited 

interstate certification, adding 

provisions to foster small business 

participation and improve post-award 

oversight, and addressing other issues. 

DATES: Comments on this proposed rule 

must be received by July 9, 2010. 

ADDRESSES: You may submit comments 

(identified by the agency name and DOT 

Docket ID Number OST–2010–0118) by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov and follow 

the online instructions for submitting 

comments. 

• Mail: Docket Management Facility: 

U.S. Department of Transportation, 1200 

New Jersey Avenue, SE., West Building 

Ground Floor, Room W12–140, 

Washington, DC 20590–0001 

• Hand Delivery or Courier: West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue, SE., between 

9 a.m. and 5 p.m. ET, Monday through 

Friday, except Federal holidays. 

• Fax: 202–493–2251 

Instructions: You must include the 

agency name (Office of the Secretary, 

DOT) and Docket number (OST–2010– 

0118) for this notice at the beginning of 

your comments. You should submit two 

copies of your comments if you submit 

them by mail or courier. Note that all 

comments received will be posted 

without change to http:// 

www.regulations.gov including any 

personal information provided and will 

be available to internet users. You may 

review DOT’s complete Privacy Act 

Statement in the Federal Register 

published on April 11, 2000 (65 FR 

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25816 Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 

19477) or you may visit http:// 

DocketsInfo.dot.gov. 

Docket: For internet access to the 

docket to read background documents 

and comments received, go to http:// 

www.regulations.gov. Background 

documents and comments received may 

also be viewed at the U.S. Department 

of Transportation, 1200 New Jersey Ave, 

SE., Docket Operations, M–30, West 

Building Ground Floor, Room W12–140, 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: 

Robert C. Ashby, Deputy Assistant 

General Counsel for Regulation and 

Enforcement, U.S. Department of 

Transportation, 1200 New Jersey 

Avenue, SE., Washington, DC, 20590, 

Room W94–302, 202–366–9310, 

bob.ashby@dot.gov. 

SUPPLEMENTARY INFORMATION: The 

Department of Transportation issued an 

advance notice of proposed rulemaking 

(ANPRM) on April 8, 2009, concerning 

several DBE program issues (74 FR 

15904). The first concerned counting of 

items obtained by a DBE subcontractor 

from its prime contractor. The second 

concerned ways of encouraging the 

‘‘unbundling’’ of contracts to facilitate 

participation by small businesses, 

including DBEs. The third was a request 

for comments on potential 

improvements to the DBE application 

form and personal net worth (PNW), 

and the fourth asked for suggestions 

related to program oversight. The fifth 

concerned potential regulatory action to 

facilitate certification for firms seeking 

to work as DBEs in more than one state. 

The sixth concerned additional 

limitations on the discretion of prime 

contractors to terminate DBEs for 

convenience, once the prime contractor 

had committed to using the DBE as part 

of its showing of good faith efforts. The 

Department received approximately 30 

comment letters concerning these 

issues. This NPRM makes regulatory 

proposals concerning many of these 

issues. 

In addition, since the ANPRM was 

published, both the House of 

Representatives and the Senate have 

passed their versions of a Federal 

Aviation Administration (FAA) 

reauthorization bill. These bills include 

a provision requiring an inflationary 

adjustment to the current $750,000 

personal net worth (PNW) cap. Because 

the timing of the enactment of an FAA 

reauthorization bill is not yet clear, and 

the provisions of the bill do not apply 

to the Department’s highway and transit 

programs in any case, the Department 

has decided to propose an inflationary 

adjustment of the PNW cap to $1.3 

million, the figure that would result 

from the House and Senate bills. 

Finally, the Department is proposing 

amendments to the certification-related 

provisions of the DBE regulation. These 

proposals result from the Department’s 

experience in dealing with certification 

issues and certification appeal cases 

during the years since the last major 

revision of the DBE rule in 1999. The 

amendments are intended to clarify 

issues that have arisen and avoid 

problems with which recipients (i.e., 

state highway agencies, transit 

authorities, and airport sponsors who 

receive DOT grant financial assistance) 

and the Department have had to grapple 

over the last 11 years. 

Accountability for Recipients With 

Respect to Overall Goals 

Section 26.47 of the rule states that a 

recipient cannot be penalized for failing 

to meet overall goals. To penalize a 

recipient simply for failing to ‘‘hit a 

number’’ could create an impermissible 

quota system. Nonetheless, recipients 

are required to implement their DBE 

programs in good faith in order to 

remain in compliance with Part 26. 

The Department takes this ‘‘good faith 

implementation’’ requirement very 

seriously. Accountability is the key to 

ensuring effective program 

implementation, and the Department 

believes that it is useful to add a new 

provision to increase the accountability 

of recipients with respect to overall 

goals and their attainment. 

An overall goal is the recipient’s 

estimate of the ‘‘level playing field’’ 

amount of DBE participation that it 

would expect to achieve in the absence 

of discrimination or its effects. Failing 

to meet the overall goal means that the 

measures the recipient has employed in 

carrying out its DBE program have not 

fully created that level playing field, 

and that discrimination or its effects 

have not fully been remedied. In order 

to implement its program in good faith, 

a recipient should make strong efforts to 

understand the reasons why it has not 

met its overall goal and to figure out 

what it can do to correct the situation. 

For this reason, the Department is 

proposing to add a new paragraph (c) to 

§ 26.47. If at the end of a fiscal year (FY) 

1, (e.g., September 30), a recipient has 

failed to meet its overall goal for that 

FY, the recipient must do two things: (1) 

Thoroughly analyze why it fell short of 

meeting its overall goal for FY1 and (2) 

establish specific steps and milestones 

for correcting identified problems so 

that the recipient will meet its overall 

goal in FY2 and subsequent years. State 

highway agencies, the largest 50 transit 

authorities as designated by FTA, and 

Operational Evaluation Airports and 

other airports designated by FAA would 

have to submit this material to FHWA, 

FTA, or FAA, as applicable. The NPRM 

proposes a period of 60 days to submit 

this material. The Department seeks 

comment on this process. Other FTA 

and FAA recipients would retain the 

information, so that DOT officials 

conducting program or compliance 

reviews could review it. 

This section also proposes that, if a 

recipient fails to take actions required 

under the new provisions, the recipient 

could be regarded as in noncompliance 

with § 26.47 and hence subject to the 

remedies stated in § § 26.101 through 

26.105 or other applicable regulations. 

These remedies include suspension or 

termination of Federal assistance, 

refusal to approve projects, payments, 

grants, or contracts, or other action at 

the discretion of the operating 

administration involved. 

Goal Submission 

On February 2010, the Department 

amended § 26.45 to allow recipients to 

submit overall goals every three years, 

rather than annually (75 FR 5535). This 

change was intended to reduce 

administrative burdens for recipients, as 

well as to permit DOT staff to give 

greater scrutiny to recipients’ 

submissions. In this NPRM, we propose 

a clarification of this amendment. While 

the recipient need only submit a new 

goal every three years, it is still 

responsible for good faith 

implementation of that goal in each 

year. 

In carrying out the accountability 

provision discussed above, the 

Department would hold recipients 

responsible for each year’s 

implementation activity. For example, 

suppose that a recipient has a 12 

percent goal for FY 1–3. If the recipient 

fell short of 12 percent in FY 1, the 

§ 26.47 requirements for analysis of the 

shortfall and steps to remedy the 

problems in FY 2 would apply. The 

recipient would not be able to say, in 

effect, ‘‘We don’t need to worry about 

our FY 1 shortfall because we’ll catch 

up in FY 3.’’ 

It is possible, however, that a 

recipient might anticipate a funding 

stream for projects that would in fact 

differ from one year to the next. For 

example, an airport with a 12 percent 

goal might expect, given the projects, 

FAA assistance, and DBE availability 

that it anticipates, that it would have 6 

percent DBE participation in FY 1, 18 

percent in FY 2, and 12 percent in FY 

3. The Department seeks comment on 

whether a recipient could, if it wished, 

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Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 25817 

provide a year-to-year projection of its 

likely DBE participation within the 

framework of a goal and methodology 

submitted only every three years, with 

the result that in applying the 

accountability provision of proposed 

§ 26.47, those year-to-year projections, 

rather than the three-year overall goal 

number, would be the benchmark for 

determining whether the analysis/ 

corrective action requirements would be 

triggered. This could increase flexibility, 

but could undercut, to an extent, the 

purpose of the three-year goal 

submission interval. We anticipate that 

this approach would be relevant 

primarily, or perhaps only, in FAA 

programs, where Federal funding is 

more likely to change from year to year 

than in the FHWA and FTA programs. 

Improving Oversight 

The ANPRM asked for suggestions on 

how to improve program oversight. The 

Department received 17 comments. 

Several recipients commented to the 

effect that additional resources, 

including Federal assistance, would be 

necessary if they were to conduct 

additional oversight. Other commenters 

suggested that additional training and 

information in areas like contract 

compliance and close-out enforcement 

could be useful. A DBE organization 

noted that training for recipient 

executive-level officials, as well as 

operating-level staff, would be helpful. 

This commenter also wanted to 

emphasize the need for a direct DBE 

Liaison Officer connection to the top 

official of the organization. Other 

comments simply supported the 

concept of better oversight, without 

specifying how this could best be 

accomplished. 

Program oversight is not a new 

concept in the DBE program. Existing 

§ 26.37 requires monitoring and 

enforcement mechanisms. To strengthen 

these existing provisions, the 

Department is proposing to add a 

sentence to § 26.37(b), calling on 

recipients to make a written certification 

that they have reviewed contracting 

records and monitored the work on-site 

to ensure that DBEs have actually 

performed the work in question on each 

contract involving DBE participation 

counted toward contract or overall 

goals. To comply with this requirement, 

the recipient would have to make one 

such certification for every contract on 

any contract with DBE participation. 

This sentence would simply make more 

explicit a requirement that the 

Department believes is implicit in the 

existing regulatory language. 

Existing § 26.25 already requires that 

the DBE liaison officer (DBELO) must 

have direct, independent access to the 

Chief Executive Officer (CEO) of the 

recipient’s organization concerning DBE 

program matters. This means that the 

DEBLO must not be required to get 

anyone’s consent or sign-off, or ‘‘go 

through channels,’’ to talk and write 

personally to the CEO about DBE 

program matters. The Department does 

not believe that additional regulatory 

language is needed on this point: the 

existing provision is already explicit. 

We also call attention to the last 

section of § 26.25, which requires that 

the recipient have adequate staff to 

administer the DBE program. In times of 

budget stringency, it may be tempting to 

cut back on staff and other resources 

needed for certification, program 

oversight, and other key DBE program 

functions. This sentence emphasizes 

that it is a requirement of Federal law 

that the DBE program be adequately 

staffed to ensure compliance with Part 

26. 

Personal Net Worth 

The personal net worth (PNW) 

criterion has been a perennially 

controversial subject in the DBE rule. It 

is intended to ensure that only 

economically disadvantaged individuals 

participate in the DBE program, lest the 

program become overinclusive. The 

$750,000 PNW ‘‘cap,’’ taken from SBA 

materials dating to 1989 or earlier, has 

been criticized by DBEs as penalizing 

success and imposing a glass ceiling on 

the growth and competitiveness of DBE 

firms. At the same time, the PNW cap 

has been a part of the package of narrow 

tailoring features that has helped the 

Department to defend the DBE program 

successfully against court challenges. 

As noted above, the House and Senate 

versions of the currently pending FAA 

reauthorization bills both call for an 

inflationary adjustment in the PNW cap, 

relating back to 1989. Based on these 

provisions, the Department did a 

straight-line inflationary adjustment 

using the Consumer Price Index (CPI), 

which suggests a 73 percent inflation 

since 1989. This results in an adjusted 

PNW cap of $1.31 million. It is very 

important to understand that this does 

not represent an increase in the actual 

personal net worth which DBE owners 

may have, viewed in real dollar terms. 

Rather, $1.31 million today has the 

same value, in real dollar terms, as 

$750,000 in 1989. The inflationary 

adjustment simply maintains the 

economic status quo. 

The Department is aware that there 

are a number of methodologies and 

approaches to making inflationary 

adjustments. The Department seeks 

comment on whether the straight-line 

CPI approach used in the NPRM is 

appropriate, or whether there are other 

approaches or techniques that would be 

better or more accurate. Also, it would 

not make sense for the Department to 

have one PNW number for FAA 

programs and another for FTA and 

FHWA programs. Therefore, the 

Department’s proposal would apply the 

$1.31 million PNW cap to all programs 

covered by Part 26. 

The pending FAA bills address 

another issue related to PNW, 

concerning the handling of retirement 

savings. Under the Department’s current 

regulation, assets in retirement savings 

plans are regarded as part of an 

individual’s wealth, and hence are 

counted as assets for PNW purposes. 

Some DBEs have long objected to this 

approach, saying that it is inappropriate 

to count these assets, which are not 

liquid and therefore not readily 

available for purposes of an owner’s 

business. While giving the Department a 

degree of regulatory discretion, the 

pending FAA reauthorization bills 

direct the Department not to count such 

assets toward the PNW cap. 

If these provisions are enacted, the 

Department will need to devise 

implementing rules. We seek comment 

on how best to do so. What sort of 

retirement savings should be covered by 

a new provision (e.g., 401(k)s, IRAs, 

Roth IRAs, Keough Plans, stocks and 

bonds, certificates of deposit or savings 

plans, life insurance, etc.)? Should there 

be any limitation on the amount of 

money that could be eliminated from 

counting toward the PNW cap by being 

in a retirement savings product? Is there 

a potential problem of abuse, in which 

DBE owners could shelter assets from 

PNW consideration in inappropriate 

ways? If so, how would the Department 

attempt to deal with such a problem? 

Would the eliminating consideration of 

these assets have unintended 

distributive consequences across the 

breadth of the DBE program (e.g., 

helping more affluent firms at the 

expense of smaller DBEs without such 

assets, having a racially disparate 

impact)? We seek comment on how we 

should shape the details of a future rule 

implementing the pending statutory 

provisions. 

Interstate Certification and Related 

Issues 

Under the current DBE rule, 

certification occurs on a statewide basis. 

The Unified Certification Program (UCP) 

in each state ensures ‘‘one-stop 

shopping’’ for DBE applicants within 

that state. The UCP requirement, which 

came into effect in 1999, has simplified 

certification by making it unnecessary 

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25818 Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 

for recipients to apply multiple times 

for certification by various transit 

authorities, airports, and highway 

departments within a given state. 

The present structure, however, does 

not address problems that occur when 

DBEs certified in their home state 

attempt to become certified in other 

states. As we mentioned in the ANPRM, 

DBEs and prime contractors have 

frequently expressed frustration at what 

they view as unnecessary obstacles to 

certification by one state of firms 

located in other states. They complain 

of unnecessarily repetitive, duplicative, 

and burdensome administrative 

processes and what they see as the 

inconsistent interpretation of the DOT 

rules by various UCPs. There have been 

a number of requests for nationwide 

reciprocity or some other system in 

which one certification was sufficient 

throughout the country. 

The Department believes that more 

should be done to facilitate interstate 

certification. Interstate reciprocity has 

always been authorized under Part 26 

(see § 26.81 (e) and (f)), and in 1999 we 

issued a Q&A encouraging this 

approach. To further encourage such 

efforts, the Department issued another 

Q&A in 2008, suggesting an approach to 

facilitating interstate certifications. In 

the ANPRM, we asked for comment on 

proposing a regulatory provision based 

on this guidance, or, in the alternative, 

whether some version of the nationwide 

certification reciprocity or Federalizing 

the certification process would be 

desirable. We pointed out that 

nationwide reciprocity could raise 

concerns about firms engaging in forum 

shopping to find the ‘‘easy graders’’ 

among certifying agencies. Federalizing 

certification, such as having a unitary 

certification system operated by DOT, 

would likely raise significant resource 

issues. Such an approach could also 

result in less local ‘‘on the ground’’ 

knowledge of the circumstances of 

applicant firms, which can be a valuable 

part of the certification process. The 

Department asked for comment on how, 

if at all, these issues could be addressed, 

and whether there is merit in one or 

another nationwide approach to 

certification. 

There were about 30 comments on 

this subject. Most of them favored taking 

steps to make interstate certification 

easier. Thirteen commenters favored 

one variety or another of national 

reciprocity, with eight of these 

suggesting that, where a UCP had 

qualms about an out-of-state firm’s bona 

fides, the UCP could remove the firm’s 

certification after the fact. That is, a firm 

certified in its home state, State A, 

would send its certification to State B. 

State B would immediately put the firm 

on its list of certified firms, and the firm 

would become eligible immediately to 

participate as a DBE. However, State B 

could subsequently decertify the firm if 

it appeared that the certification in State 

A was obtained by fraud or was 

otherwise invalid. One comment 

endorsed the rebuttable presumption 

approach suggested in the Department’s 

Q&A. Three favored one version or 

another of Federalizing certification, 

either by having the Department 

maintain a centralized certification 

database or having the Department make 

certification decisions other than, 

perhaps, the initial decision in each 

case. 

Other commenters expressed some 

concerns about reciprocity. Three 

commenters favored using paperwork 

submitted to other states to reduce 

administrative burdens, but reserving to 

each state the right to make its own 

decision. Another four commenters 

opposed or had serious doubts about 

reciprocity, expressing concerns such as 

the possibility of forum shopping or 

variations in state laws that might affect 

the validity of State A’s certification in 

State B. Three commenters emphasized 

the necessity for better and more 

uniform training, without which, some 

thought, reciprocity would be unlikely 

to work. 

As the Department stated in the 

ANPRM, we favor making interstate 

certification easier and reducing 

burdens on small businesses seeking to 

work in more than one state. Before 

1999, businesses had to make multiple 

applications in each state if they wanted 

to work as a DBE for more than one DOT 

recipient. The Department dealt 

successfully with that problem by 

creating the UCP system in the 1999 

revision to the DBE regulation. National 

reciprocity or one-stop shopping for a 

single nationwide certification system 

are worthwhile goals to discuss, but the 

Department believes that an incremental 

approach is more likely to be 

practicable. 

It is important to keep in mind that 

certification has two purposes. One is to 

foster and facilitate DBE participation 

by as many firms as can be determined 

to be eligible. The other is to preserve 

the integrity of the program, a strong 

certification system being the first line 

of defense against program fraud. To 

some extent, these goals can be in 

tension with one another. We believe 

that the concerns expressed by 

commenters about issues like forum 

shopping, training, and variations in 

state laws have validity. Recipients’ 

concerns about having the integrity of 

their programs damaged by having to 

accept what they view as poorlyconsidered certification decisions made 

elsewhere are also important. The 

Department’s task is to balance, as best 

we can, the desire to make interstate 

certification less onerous for small 

businesses with the imperative of 

maintaining the integrity of the 

program. 

A seamless, nationwide, one-stopshopping eligibility process for all firms 

is, in a sense, the ‘‘holy grail’’ of 

certification. The Department does not 

believe we are currently in a position to 

make this objective a reality. As 

commenters pointed out, better 

nationwide uniform training (which has 

been proposed in Congress as a 

requirement in pending FAA 

reauthorization legislation) and 

considerable additional resources at the 

Federal level (e.g., for the database and 

staff that would likely be necessary to 

make a more centralized certification 

system practical) are not yet in place. 

Given what the Department views as the 

very real concerns about forum 

shopping and variations in the quality 

of certifications that commenters and 

participants in DOT stakeholder 

meetings have expressed, we believe 

that moving at this time to a nationwide 

reciprocity approach would be 

premature and could endanger the 

integrity of the program. 

As noted above, several commenters 

favored a slightly modified national 

reciprocity approach in which a firm 

certified in its home state would 

automatically be certified in ‘‘State B,’’ 

immediately eligible to participate as a 

DBE in State B’s contracts. However, if 

State B determined that the firm had 

obtained its home state certification by 

fraud, or other information questioning 

its eligibility came to State B’s attention, 

State B could remove the firm’s 

certification. In our view, this approach 

does not differ significantly from a 

straight national reciprocity approach, 

in that the ability to decertify a certified 

firm already exists. Moreover, the 

‘‘certify first and ask questions later’’ 

tenor of this approach does not inspire 

confidence: by the time the questions 

got asked, and a dubious firm removed 

from the eligible list, it could have 

received contracts in place of genuinely 

eligible firms. As a practical matter, it is 

hard to imagine how a certification 

agency in, say, Utah, would learn in a 

timely fashion about fraud or other 

problems with a firm originally certified 

in, for example, Florida. 

Having considered the comments, the 

Department believes the best course is 

to propose a ‘‘rebuttable presumption’’ 

approach akin to the Department’s 

recent guidance Q&A. Proposed 

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Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 25819 

regulatory language to carry out this 

approach is found in §§ 26.84 through 

26.85 of the NPRM. Under this 

approach, a firm certified in its home 

state would not have to create a second 

application package. It would send its 

home state application package, together 

with other existing documentation (e.g., 

its affidavits of no change submitted to 

the home state since the time of the 

firm’s original certification), to State B. 

State B would obtain a copy of the onsite review report from the home state. 

State B would be required to certify the 

firm within 30 days from the date it 

received this information unless State B 

had good cause to object to the home 

state’s certification. If it objected, State 

B would hold a proceeding similar to a 

decertification proceeding in this case, 

in which State B would bear the burden 

of proof to show that the firm should 

not be certified in State B, 

notwithstanding its certification in State 

A. The Department seeks comment on 

the burden of proof in such a 

proceeding: Should the firm, rather than 

State B, bear this burden? This latter 

approach would be more consistent 

with the usual rule that the applicant 

carries the burden of proof with respect 

to eligibility matters, but it could limit 

the extent to which the new procedures 

would actually facilitate interstate 

certification. 

This approach is a significant 

incremental step toward nationwide 

reciprocity, which would significantly 

reduce burdens and obstacles in the 

path of firms seeking certification 

outside their home states. Within 30 

days of providing copies of existing 

documentation to State B and receiving 

a copy of State A’s on-site review report, 

the firm would either be certified in 

State B or be on notice of specific 

problems with its eligibility that State B 

had found. The opportunity for a 

hearing would have to take place within 

the next 30 days, with a decision issued 

30 days after that. The Department 

expects that, because providing notice 

and a hearing and issuing a decision on 

this ‘‘fast track’’ basis is not something 

that UCPs would do lightly, UCPs 

would not overuse their authority to 

delay certification pending this process. 

Of course, as is now the case, UCPs 

could accept the home state’s 

certification without further review. 

The Department seeks comment on 

whether the 30-day period for initial 

review of an out-of-state certification, 

and a decision on whether to accept it, 

is an appropriate time period. Would 

this period place unwarranted pressure 

on State B to accept State A’s 

certification, even if it were not 

warranted? On the other hand, would a 

longer period defeat the purpose of the 

proposed interstate certification 

process? Again, the question goes to 

achieving the best balance between the 

two purposes of the proposed process. 

The Department seeks comment on 

one potential technical problem in this 

proposed system. When it is asked by 

State B to send an on-site review of a 

firm certified in State A, State A is 

supposed to send a copy of the report 

to State B within seven days. In this era 

of e-mail and pdf documents, doing so 

should be quick and easy. However, 

what happens if State A does not 

provide a timely response? Proposed 

§ 26.84(e) would say that if State B has 

not received the report by 14 days after 

State B’s request, State B may hold 

action on the firm’s application in 

abeyance pending receipt of State A’s 

report. State B would need to inform the 

firm of the situation. The Department 

seeks comment on what, if anything, the 

Department should do in a final rule to 

address situations in which a State A’s 

response to a request for an on-site 

report is delayed. 

In proposing these new provisions to 

the DBE rule, the Department is also 

proposing to make certain changes to 

existing rules. We would remove 

§ 26.83(e), which is no longer needed in 

light of the proposed new § 26.84 

interstate certification procedures. We 

would also amend § 26.83(h) to put to 

rest a misunderstanding that has 

continued to exist, despite the 

Department’s efforts to clarify it. Once a 

firm is certified as a DBE, it stays 

certified unless and until it is 

decertified using the procedures of 

§ 26.87, the rule’s decertification 

procedure. There is no periodic 

‘‘recertification’’ or ‘‘reapplication’’ 

procedure required or even authorized. 

Certifications do not lapse after a given 

number of years. However, UCPs can, 

and, in our view, should, review each 

existing certified firm’s eligibility, 

including a new on-site review, from 

time to time. The Department seeks 

comment on the most appropriate 

interval for such reviews (comments to 

the ANPRM suggested periods of 

between three and six years). 

One phenomenon the Department’s 

staff has noticed in recent years is the 

withdrawal by applicants of their 

applications before a UCP has made a 

decision in the matter. In some cases, 

this may reflect ‘‘games-playing’’ by 

applicants of dubious merit, as they 

seek repeatedly to revise their 

organizations to avoid problems that 

come up in the UCP’s review of the 

application, without triggering the 

waiting period for reapplication that 

follows a denial of the application. 

However, in other cases, there can be 

innocent explanations for a withdrawal. 

The Department seeks comment on 

whether the rule should be amended to 

authorize recipients to apply to firms 

withdrawing an application the same 

reapplication waiting period that they 

can apply after a denial. This would 

reduce administrative burdens on 

certifying agencies. However, doing so 

might also penalize firms with 

legitimate reasons for withdrawing and 

resubmitting an application or create the 

perception or reality that recipients 

might act inconsistently, seeming to 

favor some firms over others with 

respect to applying the reapplication 

period. 

Current §§ 26.84 and 26.85 relate to a 

1999 memorandum of understanding 

(MOU) between DOT and SBA 

concerning DBE certification of SBA 

8(a) and 8(d) firms and 8(a) and 8(d) 

certifications of certified DBEs. This 

MOU lapsed in 2004 and has not been 

renewed. Consequently, much of the 

existing material in these sections has 

become outdated. Proposed § 26.85 

would continue a portion of the current 

provisions. If an 8(a) firm applies to a 

DOT UCP, the 8(a) firm could submit its 

SBA application package in lieu of a 

new DBE application package. The UCP 

would have to do the statutorilymandated on-site review of the firm, 

since on-site reviews are not normally 

part of the 8(a) application process. The 

UCP could also request additional 

information from the applicant to 

ensure that all Part 26 requirements are 

met and that all information has been 

updated. The UCP would have to certify 

the firm unless information from the onsite review and other information 

received by the UCP demonstrates that 

the firm does not meet Part 26 eligibility 

criteria. If the 8(a) firm is not from the 

UCP’s state, the UCP would not have to 

process the application in the absence of 

the home state’s on-site review report, 

which it would obtain in the same way 

as it obtains such reports under the 

‘‘rebuttable presumption’’ system of 

proposed § 26.84(d)(1). 

The proposed § 26.84 contains the 

proposed rebuttable presumption 

reciprocity system. When this section 

refers to State A (a firm’s home state) or 

State B, it means the UCP of that state. 

As under the current rule, a UCP always 

has the option of accepting, without 

further ado, a certification by another 

state’s UCP. The only new element this 

provision would add is a basic 

requirement for the UCP to verify that 

the out-of-state certification presented 

by the applicant is genuine. 

The main obligation of a firm seeking 

to get certified outside its home state is 

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to provide ‘‘State B’’ with a full package 

of all relevant existing documentation, 

including its home state application, 

affidavits of no change, reports of 

changes, decisions or correspondence 

relating to certification matters from 

other states, certification appeal 

decisions, etc. Any prudent company 

would keep photocopies or electronic 

versions of all this documentation, and 

firms would send in copies of this 

documentation, rather than generating 

new documents. There would have to be 

an affidavit, under penalty of perjury, 

that the documents were full, complete, 

and unaltered. 

When State B receives this full 

package of information, it contacts the 

home state and requests the on-site 

review report. It is crucial to the 

operation of this system that the home 

state respond promptly; otherwise, the 

certification of the firm can be delayed 

(see proposed paragraph 26.84(e)). State 

B must certify the firm within 30 days, 

unless it finds good cause to believe that 

the firm should not be certified. If State 

B fails to respond within 30 days, the 

Department would regard the firm as 

having been certified. 

Good cause to object to a reciprocal 

certification could arise from a number 

of sources: evidence that the home state 

certification had been obtained 

fraudulently or if there was new 

evidence not available to the home state; 

differences in state law (e.g., home state 

does not require a professional license 

for the person controlling a given type 

of company; State B law does impose 

such a requirement); or the information 

the applicant provided was inadequate 

or insufficient or otherwise not meet the 

rule’s requirements (e.g., the applicant 

failed to disclose a denial or 

decertification in another state). 

One of the proposed bases to find 

good cause bears a bit more discussion. 

The proposed language would permit 

State B to find good cause if the home 

state’s certification was factually 

erroneous or inconsistent with Part 26. 

For example, suppose State B reviews 

the documentation used by the home 

state to certify Firm Y and finds an 

outcome-determinative fact about Firm 

Y that the home state overlooked, or 

State B notices that the home state had 

based its decision on what is clearly a 

misreading or misinterpretation by the 

home state of Part 26 or DOT guidance. 

In these cases, under the proposal, State 

B could find good cause to begin a 

proceeding to deny reciprocal 

certification. On the other hand, it is 

often the case that reasonable people 

can differ in their conclusions about 

whether the facts surrounding a firm’s 

application demonstrate that the firm 

meets Part 26 criteria. We would not 

want this provision simply to become a 

way for what amounts to no more than 

differences of opinion to obstruct 

interstate certification. We seek 

comment on how, if at all, the language 

of this provision should be refined to 

avoid that result. 

Where the UCP finds good cause, it 

must so notify the firm, and provide the 

reasons for its finding. The firm must 

have the opportunity, within 30 days, 

for a proceeding—including a hearing, if 

the firm wants it—that is essentially the 

same as a decertification hearing. 

Importantly, as in a decertification 

proceeding, the burden of proof is on 

the UCP to demonstrate that the firm is 

ineligible. The UCP must render its 

decision within another 30 days. The 

Department proposes these short time 

frames in the belief that reciprocal 

certification actions should be on a fast 

track, lest the ability of a firm to become 

certified outside its home state becomes 

overly subject to bureaucratic delay. 

One of the issues that arises in 

discussions of reciprocity of 

certifications is how to handle denials 

of certification and decertifications. If 

firm X is certified in its home state, 

reciprocally certified in State B, and 

then decertified in his home state, what 

is State B supposed to do? If, in the 

‘‘rebuttable presumption’’ process 

described above, the home state certifies 

Firm X, but State B rejects the firm’s 

certification after the hearing process, 

what is State C supposed to do when 

Firm X applies for certification there? 

In this NPRM, we are proposing to 

have UCPs send to the Departmental 

Office of Civil Rights (DOCR) online 

database information about firms whose 

applications have been denied, which 

have been decertified, or which have 

been rejected for reciprocal certification 

after the rebuttable presumption process 

described above, as well as the date of 

the action and a very brief summary of 

the reason for the action. UCPs would 

be responsible for checking the DOCR 

Web site to see if any applicant for 

certification or currently certified firm 

appears on the list. For example, if State 

D’s UCP saw Firm X (which State D had 

certified) on the list as having been 

decertified by State F’s UCP, State D’s 

UCP would request from the State F’s 

UCP a copy of State F’s decertification 

decision. State F’s UCP would promptly 

provide the copy. State D’s UCP would 

take the information in State F’s 

decision into account in determining 

what action, if any, to take with respect 

to Firm X. The Department seeks 

comment not only on the merits of this 

proposal but also on any other measures 

that would address this overall issue. 

The Department intends that this 

interstate certification process apply to 

airport concessions DBEs as well as 

those DBEs who seek work on 

Federally-assisted contracts. 

Consequently, we will subsequently 

propose a conforming amendment to 49 

CFR Part 23. 

Fostering Small Business Participation 

One of the matters discussed in the 

ANPRM was the issue of ‘‘unbundling,’’ 

as well as other ways of reducing 

barriers to the participation of small 

businesses, including DBEs, on DOTassisted contracts. The relatively small 

number of comments on this subject 

generally suggested that while 

unbundling was a good thing, it was 

difficult to achieve, and recipients 

should have discretion concerning 

whether and how to implement 

initiatives in this area. 

The Department believes that 

fostering small business participation in 

a race-neutral way is an important 

component of a successful DBE 

program. For that reason, we are 

proposing to require recipients to create 

a small business element of their DBE 

programs, that could include a number 

of different approaches. The NPRM, in 

§ 26.39, proposes a menu of strategies 

that are neither exhaustive nor 

mandatory to include in this program 

element. The Department seeks 

comment on this overall approach, as 

well as on the individual menu items 

proposed. Are there additional strategies 

that should be considered? How much 

time should recipients be given to 

amend their DBE program plans to 

include a small business element? 

As noted in a March 2010 DBE 

conference held by the Department’s 

Office of Small and Disadvantaged 

Business Utilization, some states (e.g., 

Missouri, Wisconsin) have devised 

innovative approaches to increasing 

small business and DBE participation. 

The Department seeks comment on the 

extent to which this experience can be 

generalized and on whether any 

elements of these approaches should be 

included as recommended or required 

practices in the DBE regulation. 

The pending FAA reauthorization 

legislation mentioned above would 

direct the Department to issue rules to 

prohibit discriminatory or excessive 

bonding practices. The Department 

seeks comment on whether there are 

such practices, what they are, and how 

DOT rules could best be crafted to 

implement such a statutory 

requirement, if it is enacted. For 

example, we have heard in stakeholder 

meetings that prime contractors 

sometimes require subcontractors to be 

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bonded at a level well above the amount 

of the subcontract or in a way that 

duplicates bonding that has already 

been provided to the project owner. Do 

such practices exist, and, if so, are they 

common? 

Terminations and Substitutions of DBE 

Subcontractors 

The Department had noted some 

concerns about termination and 

substitution practices by prime 

contractors that negatively impacted 

DBE subcontractors committed during 

the contract award process and sought 

comment on whether § 26.53(f)(1) 

should be modified. There was 

overwhelming support to revise the 

section by recipients and DBE trade 

groups in their response to this inquiry. 

They supported requiring recipients to 

concur in terminations and 

substitutions of DBE subcontractors who 

are being used for DBE credit on a 

contract, with concurrence to be 

provided only if the action was for good 

cause. Prime contractors and their 

respective trade groups took a contrary 

view and wanted to retain their 

independent authority. These 

commenters suggested that recipients 

should have no say regarding a change 

or termination of a DBE subcontractor in 

instances where the change does not 

impact DBE goal achievement. 

Many recipients commented that they 

currently do require prime contractors 

to receive written approval from the 

recipient prior to the prime substituting 

DBE subcontractors. In addition, some 

comments recommended that the 

Department adopt a regulation 

containing a standard similar to that 

required under California Law PCC 

4107, which requires notice prior to 

termination. 

The Department is cognizant of the 

prime contractors’ position that primes 

should have the ability to remove a 

nonperforming or poorly performing 

subcontractor. However, the Department 

does not believe a revision to this 

section of the rule requiring a recipient’s 

approval prior to termination of a DBE 

subcontractor for other than good cause 

would undermine this authority or 

insert an onerous burden on prime 

contractors. Moreover, based on the 

comments from recipients, this change 

would formalize a practice already 

undertaken by many recipients. 

Accordingly, the Department is 

proceeding with the proposed revision, 

proposed to be located in § 26.53(f), in 

order to maintain program integrity and 

ensure a more meaningful commitment 

to a particular DBE firm that the prime 

contractor listed as part of the contract 

award process. The proposed section 

includes a list of actions that would 

constitute good cause for this purpose. 

We seek comment on whether there 

should be any additions or changes to 

this list. 

Counting Issue 

The ANPRM discussed the 

background of this issue in some detail 

(see 74 FR 15905). For convenience of 

readers, we are summarizing that 

discussion here. Section 26.55(a)(1) of 

the Department’s DBE rule provides as 

follows: 

(a) When a DBE participates in a 

contract, you count only the value of the 

work actually performed by the DBE 

toward DBE goals. 

(a)(1) Count the entire amount of that 

portion of a construction contract (or 

other contract not covered by paragraph 

(a)(2) of this section) that is performed 

by the DBE’s own forces. Include the 

cost of supplies and materials obtained 

by the DBE for the work of the contract, 

including supplies purchased or 

equipment leased by the DBE (except 

supplies and equipment the DBE 

subcontractor purchases or leases from 

the prime contractor or its affiliate. 

The preamble discussion of this 

provision said the following: 

The value of work performed by DBEs 

themselves is deemed to include the 

cost of materials and supplies 

purchased, and equipment leased, by 

the DBE from non-DBE sources. For 

example, if a DBE steel erection firm 

buys steel from a non-DBE 

manufacturer, or leases a crane from a 

non-DBE construction firm, these costs 

count toward DBE goals. There is one 

exception: if a DBE buys supplies or 

leases equipment from the prime 

contractor on its contract, these costs do 

not count toward DBE goals. Several 

comments from prime contractors 

suggested these costs should count, but 

this situation is too problematic, in our 

view, from an independence and 

commercially useful function (CUF) 

point of view to permit DBE credit. 64 

FR5115–16, February 2, 1999. 

This provision creates an intentional 

inconsistency between the treatment of 

purchases or leases of items by DBEs 

from non-DBE sources. If a DBE 

contractor buys or rents items from a 

non-DBE source other than the prime 

contractor, the recipient counts those 

items for DBE credit on the contract. If 

a DBE subcontractor buys or rents the 

same items from the prime contractor 

for the DBE’s subcontract, the recipient 

does not award DBE credit for the items. 

The policy rationale for this 

provision, as the preamble quotation 

notes, is that permitting the prime 

contractor to provide an item to its own 

DBE subcontractor, and then claim DBE 

credit for the value of that item, raises 

issues concerning whether the DBE is 

actually independent and performing a 

CUF. The rule regards the item as 

having been provided by the prime 

contractor to the project and, 

consequently, not as part of the ‘‘work 

actually performed by the DBE.’’ 

Therefore, the rule does not permit it to 

be counted for DBE credit. 

Some prime contractors and DBE 

contractors have objected to this 

provision, both in correspondence with 

the Department and in stakeholder 

meeting discussions. They assert that 

26.55(a)(1) prevents DBE firms from 

successfully competing for projects 

involving the purchase of commodities 

like asphalt, concrete, or quarried rock, 

since the DBE credit they could bring to 

the project would be limited to the 

installation and labor costs of the job 

(likely a relatively small percentage of 

the overall contract). This is particularly 

true, they say, when there are only one 

or two suppliers of the commodity 

within a reasonable distance of the DBE, 

and those suppliers are owned by or 

affiliated with a prime contractor. 

Participants in the stakeholder 

meeting discussions also suggested that 

the current rule could lead to 

competitive inequities between prime 

contractors. For example, suppose 

Prime Contractor A has an asphalt 

plant—the only one in the area—and 

Prime Contractor B does not. Both are 

bidding on a highway construction 

contract on which there is a DBE goal. 

Prime Contractor A cannot count for 

DBE credit the asphalt that a DBE 

paving contractor buys, while Prime 

Contractor B can. This makes it easier 

for B to meet the DBE goal on the 

contract. 

The ANPRM asked for comments on 

four alternatives: (1) No change; (2) keep 

current rule in place, but allow 

recipients to make exceptions in limited 

circumstances; (3) permit items 

obtained by DBEs for a contract to be 

counted for DBE credit regardless of 

their non-DBE source; or (4) prohibit 

items obtained by a DBE from any nonDBE source to be counted for DBE 

credit. Twenty-eight comments 

addressed this issue, and each of the 

options attracted support (11 favored 

option 1, 6 favored option 2, 7 favored 

option 3, and 4 favored option 4). 

The Department believes that the 

basic policy objective of the current 

regulation—preventing items actually 

supplied by prime contractors from 

counting for DBE credit by being passed 

through their DBE subcontractors—is a 

sound one. Simply allowing such items 

to count toward DBE goals in all 

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situations, as option 3 would provide, is 

too contrary to this objective for the 

Department to consider further. Option 

2’s authorization of exceptions to this 

general rule could lead to very 

inconsistent, and arguably arbitrary, 

results within and among states. Option 

4 establishes consistency in how items 

obtained by DBEs are treated, but would 

likely result in reduced dollar amounts 

overall DBE participation. Option 1, 

which received at least plurality support 

among commenters and prevents prime 

contractors from counting as DBE 

participation items that they themselves 

contribute to a project, appears the best 

approach. Consequently, the 

Department is not proposing to change 

this section. We will continue to 

consider comments on the issue, 

however. 

Application and PNW Forms 

The ANPRM asked for comments on 

potential improvements to the rule’s 

application and personal net worth 

(PNW) forms. This is an important 

matter, and one requiring detailed 

attention as well as thorough analysis of 

the information collection burdens 

involved. For this reason, while the 

Department is currently working on 

revised forms, we are deferring 

proposing new forms to a subsequent 

NPRM. 

Certification-Related Provisions 

This NPRM also proposes a number of 

modifications to the certification 

provisions of the rule, based primarily 

on the Department’s experience in 

certification appeals cases and other 

issues that have come to the 

Department’s attention. The Department 

is continuing to review and update 

certification provisions, and we 

anticipate proposing several additional 

modifications in the subsequent NPRM 

that will also propose revised PNW and 

application forms. Minor technical 

changes to references within the 

existing definitions are also proposed. 

Section 26.71 What rules govern 

determinations concerning control? 

‘‘Generic’’ certification of a firm as a 

DBE is not proper in the program. Under 

§ 26.71(n), DBEs are certified by 

recipients and UCPs only with respect 

to specific types of work in which the 

certifying agency has determined that 

the socially and economically 

disadvantaged owners control. When 

applying for certification, an applicant 

is asked to describe the ‘‘primary 

business and professional activities the 

firm is engaged in.’’ The types of work 

a firm can perform (whether on initial 

certification or when a new type of work 

is added) should be described in terms 

of six-digit North American Industry 

Classification System (NAICS) codes, or 

another classification scheme of 

equivalent detail and specificity. In 

order to meet its burden of proof, a firm 

must provide detailed information the 

certifying agency needs and/or requests 

so that the certifying agency may make 

an appropriate NAICS code designation. 

Firms are also responsible for ensuring 

that the NAICS codes cited in a 

certification are up-to-date and 

accurately reflect work which the UCP 

has determined the firm’s owners can 

control. To assist recipients and firms 

address these issues, the Department is 

proposing an amendment to § 26.71(n), 

which would codify the substance of a 

guidance Q & A the Department issued 

in 2009. 

Section 26.73 What are other rules 

affecting certification? 

The Department has learned, through 

the Department’s certification appeal 

process and from oversight of recipients’ 

DBE programs, that some recipients may 

deny certification to firms on the basis 

that they do not appear prepared to 

perform a particular project, are newly 

formed, or lack employees or specific 

pieces of equipment. We have learned 

that recipients are taking this action 

after perceiving the firm incapable of 

success later down the road. This is 

somewhat of a premature determination 

and akin to a finding that a firm’s work 

would not be counted for DBE credit 

sometime in the future. We have 

consistently held that counting issues 

are separate from certification; and we 

continue to hold that firms should be 

evaluated based on their present 

circumstances. The Department 

therefore, is restating § 26.73(b), which 

prohibits a recipient from refusing to 

certify a firm solely on the basis that it 

is a newly formed firm; and adding a 

section (b)(2) to emphasize also that 

recipients should not refuse to certify a 

firm that has not completed contracts or 

projects at the time of its application, 

has not yet realized profits from its 

activities, or has not demonstrated a 

potential for success. We stress that if 

the firm meets the size, ownership, and 

control requirements of this part, the 

firm is eligible for certification. 

A firm must be a going concern in 

order to be certified. It is not realistic to 

expect a recipient, for example, to 

conduct an on-site review of a business 

plan that exists only on paper. 

Nevertheless, given that one of the 

primary purposes of the DBE program is 

to serve as an incubator for start-up 

businesses, recipients should not create 

unauthorized or unnecessary barriers to 

the participation of newer firms. For 

example, it would be contrary to this 

section for a certifying agency to insist 

on two years of business tax returns 

from a firm that had only been in 

business six months. 

Section 26.83 What procedures do 

recipients follow in making certification 

decisions? 

The Department wants to 

reemphasize, in § 26.83(h), that once a 

firm is certified, is stays certified unless 

and until its certification is removed 

under § 26.87. Certifications do not 

expire or lapse, whether after three 

years or any particular number of years. 

Firms cannot be required to reapply for 

certification. However, recipients may 

properly conduct certification reviews 

of certified firms, including a new onsite review, three years from the date of 

the most recent certification of the firm 

or sooner if changed circumstances 

relating to the firm’s ownership, control, 

size or disadvantaged status warrant. In 

addition, recipients may conduct on-site 

visits on an unannounced basis at the 

firm’s offices and job sites if information 

comes to a recipients’ attention 

regarding the firm’s eligibility. The 

Department seeks comment on whether 

periodic new on-site reviews should be 

conducted (e.g., every three or five 

years) to ensure that information about 

certified firms is up-to-date and that 

firms have not changed in ways that 

adversely impact their eligibility? 

Would such a requirement make the 

interstate certification process work 

better? What would the resource 

implications be? 

One of the problems that the 

Department has seen is that on-site 

reviews, once conducted, are not 

periodically updated by some certifying 

agencies. The result may be that the 

information in an on-site review report 

may be stale. This is a particular 

concern given the interstate certification 

provisions of proposed § 26.84, in 

which a ‘‘State B’ must rely on the onsite report of the applicant firm’s home 

state. If the on-site report is 5 or 10 years 

old, can other states safely rely on the 

information? If not, should we require 

updated on-site reviews to be conducted 

by firms’ home states at a given interval 

(e.g., every three years)? Should states 

be permitted to charge user fees to firms 

for updated on-site reviews? Are there 

ways of reducing burdens of on-site 

reviews (e.g., by use of 

videoconferencing or other 

technologies)? Could the need for 

updated on-site reviews be mitigated if 

firms had to submit additional annual 

update information (e.g., PNW 

statements, tax returns, data about the 

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firm’s finances and transactions)? The 

Department seeks comment on this 

topic. 

The Department has learned, through 

the Department’s certification appeal 

process and oversight of recipients’ DBE 

programs, of instances in which 

applicants may have been unaware that 

their application lacked the necessary 

information, through either a 

misunderstanding of the process and/or 

submitting some, but not all, of the 

information a recipient needs to make a 

decision. It is therefore useful for 

recipients to inform each applicant 

within 20 business days after receiving 

an application, whether the application 

is complete and ready for evaluation, 

and if not, what additional information 

or action is required. Many recipients 

engage in this practice and promptly 

notify firms, either by e-mail or certified 

mail of their need for additional 

information. The addition of a 

requirement to this effect, therefore, 

does not seem onerous and we added a 

new lead sentence in paragraph (l) to 

reflect this addition. 

Other Provisions 

The Uniform Report of DBE Awards 

or Commitments and Payments, found 

in Appendix B of Part 26, has long been 

required to be submitted by DOT 

recipients. The form itself states that 

FHWA and FTA recipients submit the 

form twice a year, while FAA recipients 

submit it annually. It was called to our 

attention, however, that body of the 

regulation does not specifically 

reference the form. To remedy this 

situation, we propose adding such a 

reference to § 26.11. There is no change 

to the existing requirement for 

submission of the form and no 

additional information collection 

burden involved. 

In § 26.45, the NPRM would clarify 

requirements concerning project overall 

goals and the implementation of the 

recent amendment calling for 

submission of overall goals on a 

triennial, rather than annual, basis. In 

§ 26.51, the NPRM would clarify that, if 

a recipient had an all race-neutral 

overall goal, it nevertheless would use 

race-conscious contract goals if, part 

way through the year, it became 

necessary to do so in order to have a 

reasonable opportunity to meet the 

overall goal. This proposed amendment 

is related to the proposed 

‘‘accountability’’ mechanism in 

proposed § 26.47. Finally, an obsolete 

citation to suspension and debarment 

rules would be replaced by the current 

citation in § 26.107. 

Regulatory Analyses and Notices 

Executive Order 12866 and DOT 

Regulatory Policies and Procedures 

This is a nonsignificant regulation for 

purposes of Executive Order 12866 and 

the Department of Transportation’s 

Regulatory Policies and Procedures. The 

proposals involve administrative 

modifications to several provisions of a 

long-existing and well-established 

program, designed to improve the 

program’s implementation. The 

proposals, if made final, would not alter 

the direction of the program, make 

major policy changes, or impose 

significant new costs or burdens. 

Regulatory Flexibility Act 

A number of provisions of the NPRM 

would reduce small business burdens or 

increase opportunities for small 

business, notably the interstate 

certification process and the small 

business DBE program element 

proposals. Small recipients would not 

be required to prepare or transmit 

reports concerning the reasons for 

overall goal shortfalls and corrective 

action steps to be taken. Only State 

DOTs, the 50 largest transit authorities, 

and the 30–50 airports receiving the 

greatest amount of FAA financial 

assistance would have to file these 

reports. The task of sending copies of 

on-site review reports to other 

certification entities fall on UCPS, 

which are not small entities, and in any 

case can be handled electronically by emailing PDF copies of the documents. 

While all recipients would have to input 

information about decertifications and 

denials into a DOT database, this would 

be a quick electronic process that would 

not be costly or burdensome. The NPRM 

would not make major policy changes 

that would cause recipients to expend 

significant resources on program 

modifications. For these reasons, the 

Department certifies that the NPRM, if 

made final, would not have a significant 

economic effect on a substantial number 

of small entities. 

Federalism 

A rule has implications for federalism 

under Executive Order 13132, 

Federalism, if it has a substantial direct 

effect on State or local governments and 

would either preempt State law or 

impose a substantial direct cost of 

compliance on them. We have analyzed 

this proposed rule under the Order and 

have determined that it does not have 

implications for federalism, since it 

merely makes administrative 

modifications to an existing program. It 

does not change the relationship 

between the Department and State or 

local governments, pre-empt State law, 

or impose substantial direct compliance 

costs on those governments. 

Paperwork Reduction Act 

As required by the Paperwork 

Reduction Act of 1995, DOT will submit 

Information Collection Requests (ICRs) 

to the Office of Management and Budget 

(OMB). Before OMB decides whether to 

approve these proposed collections of 

information and issue a control number, 

the public must be provided 30 days to 

comment. Organizations and 

individuals desiring to submit 

comments on the collection of 

information should direct them to the 

Office of Management and Budget, 

Attention: Desk Officer for the Office of 

the Secretary of Transportation, Office 

of Information and Regulatory Affairs, 

Washington, DC 20503. We also request 

that a copy of such comments be sent 

to the docket for this NPRM. OMB is 

required to make a decision concerning 

the collection of information 

requirements contained in this rule 

between 30 and 60 days after 

publication of this document in the 

Federal Register. Therefore, a comment 

is best assured of having its full effect 

if OMB receives it within 30 days of 

publication. 

The items in this NPRM for which 

DOT intends to seek Paperwork 

Reduction Act approvals are the 

following: 

Proposed § 23.39(b): Submission of 

small business program element. 

Proposed § 26.47 (c): Submission of 

analysis of reasons for falling short of 

overall goal corrective actions. 

Proposed § 26.84(c)(4): Affidavit 

concerning information of 

certification information. 

Proposed § 26.84(f): Submission of 

certification information to DOT 

database. 

List of Subjects in 49 CFR Part 26 

Administrative practice and 

procedure, Airports, Civil rights, 

Government contracts, Grantprograms—transportation, Mass 

transportation, Minority businesses, 

Reporting and record keeping 

requirements. 

Issued This Day of May, 2010, at 

Washington DC. 

Ray Lahood, 

Secretary of Transportation. 

For the reasons set forth in the 

preamble, the Department of 

Transportation proposes to amend 49 

CFR part 26 as follows: 

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25824 Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 

PART 26—PARTICIPATION BY 

DISADVANTAGED BUSINESS 

ENTERPRISES IN DEPARTMENT OF 

TRANSPORTATION FINANCIAL 

ASSISTANCE PROGRAMS 

1. The authority citation for part 26 

continues to read as follows: 

Authority: 23 U.S.C. 324; 42 U.S.C. 2000d, 

et seq. ; 49 U.S.C 1615, 47107, 47113, 47123; 

Sec. 1101(b), Pub. L. 105–178, 112 Stat. 107, 

113. 

2. Add § 26.11(a) to read as follows: 

§ 26.11 What records do recipients keep 

and report? 

(a) You must transmit the Uniform 

Report of DBE Awards or Commitments 

and Payments, found in Appendix B to 

this part, at the intervals stated on the 

form. 

* * * * * 

3. Revise § 26.31 to read as follows: 

§ 26.31 What information must you include 

in your DBE directory? 

You must maintain and make 

available to interested persons a 

directory identifying all firms eligible to 

participate as DBEs in your program. In 

the listing for each firm, you must 

include its address, phone number, and 

the types of work the firm has been 

certified to perform as a DBE. 

4. Revise § 26.37 (b) to read as 

follows: 

§ 26.37 What are a recipient’s 

responsibilities for monitoring the 

performance of other program participants? 

* * * * * 

(b) Your DBE program must also 

include a monitoring and enforcement 

mechanism to ensure that work 

committed to DBEs at contract award or 

subsequently (e.g., as the result of 

modification to the contract) is actually 

performed by the DBEs to which the 

work was committed, where the DBEs’ 

work is intended to count toward DBE 

goals. This mechanism must include a 

written certification for each such 

contract that you have reviewed 

contracting records for and monitored 

the work on-site for the contract to 

ensure that DBEs have actually 

performed the work in question. 

* * * * * 

5. Add a new § 26.39 to subpart B, to 

read as follows: 

§ 26.39 Fostering small business 

participation. 

(a) Your DBE program must include 

an element to structure contracting 

requirements to facilitate competition 

by small business concerns, taking all 

reasonable steps to eliminate obstacles 

to their participation, including 

unnecessary and unjustified bundling of 

contract requirements that may preclude 

small business participation in 

procurements as prime contractors. 

(b) This element must be submitted to 

the appropriate DOT operating 

administration for approval as a part of 

your DBE program. As part of this 

program element you may include, but 

are not limited to, the following 

strategies: 

(1) Establishing a race-neutral small 

business set-aside for prime contracts 

under a stated amount (e.g., $1 million). 

(2) In multi-year design-build 

contracts or other large contracts (e.g., 

for ‘‘meagprojects’’) requiring bidders on 

the prime contract to specify elements 

of the contract or specific subcontracts 

that are of a size that small businesses, 

including DBEs, can reasonably 

perform. 

(3) On prime contracts not having 

DBE contract goals, requiring the prime 

contractor to provide subcontracting 

opportunities of a size that small 

businesses, including DBEs, can 

reasonably perform, rather than selfperforming all the work involved. 

(4) Identifying alternative acquisition 

strategies and structuring procurements 

to facilitate the ability of consortia or 

joint ventures consisting of small 

businesses, including DBEs, to compete 

for and perform prime contracts. 

(5) If you are implementing your 

overall goal wholly through race-neutral 

measures,, ensuring that a reasonable 

number of prime contracts are of a size 

that small businesses, including DBEs, 

can reasonably perform. 

6. Revise § 26.45(e)(2), (e)(3), (f)(1), 

and (f)(2) to read as follows: 

§ 26.45 How do recipients set overall 

goals? 

* * * * * 

(e) * * * 

(2) If you are an FTA or FAA 

recipient, as a percentage of all FTA or 

FAA funds (exclusive of FTA funds to 

be used for the purchase of transit 

vehicles) that you will expend in FTA 

or FAA-assisted contracts in the three 

forthcoming fiscal years. 

(3) In appropriate cases, the FHWA, 

FTA or FAA Administrator may permit 

you to express your overall goal as a 

percentage of funds for a particular 

grant or project or group of grants and/ 

or projects. Like other overall goals, a 

project goal may be adjusted to reflect 

changed circumstances, with the 

concurrence of the appropriate 

operating administration. 

(i) A project goal is an overall goal, 

and must meet all the substantive and 

procedural requirements of this section 

pertaining to overall goals. 

(ii) A project goal covers the entire 

length of the project to which it applies. 

(iii) The project goal should include a 

projection of the DBE participation 

anticipated to be obtained during each 

fiscal year covered by the project goal. 

(iv) The funds for the project to which 

the project goal pertains are separated 

from the base from which your regular 

overall goal, applicable to contracts not 

part of the project covered by a project 

goal, is calculated. 

(f)(1)(i) If you set your overall goal on 

a fiscal year basis, you must submit it 

to the applicable DOT operating 

administration by August 1 at three-year 

intervals, based on a schedule 

established by the FHWA, FTA, or FAA, 

as applicable, and posted on that 

agency’s Web site. 

(ii) You must submit to the operating 

administration for approval any 

significant adjustment you make to your 

goal during the three-year period based 

on changed circumstances. The 

operating administration may direct you 

to undertake a review of your goal if 

necessary to ensure that the goal 

continues to fit your circumstances 

appropriately. 

(iii) While you are required to submit 

an overall goal to FHWA, FTA, or FAA 

only every three years, the overall goal 

and the provisions of § 26.47(c) apply to 

each year during that three-year period. 

(2) If you are a recipient and set your 

overall goal on a project or grant basis 

as provided in paragraph (e)(3) of this 

section, you must submit the goal for 

review at a time determined by the 

FHWA, FTA or FAA Administrator, as 

applicable. 

* * * * * 

7. Add new paragraph (c) and (d) to 

§ 26.47, to read as follows: 

§ 26.47 Can recipients be penalized for 

failing to meet overall goals? 

* * * * * 

(c) If the awards and commitments 

shown on your Uniform Report of 

Awards or Commitments and Payments 

at the end of any fiscal year are less than 

the overall goal applicable to that fiscal 

year, you must do the following in order 

to be regarded by the Department as 

implementing your DBE program in 

good faith: 

(1) Analyze in detail the reasons for 

the difference between the overall goal 

and your awards and commitments in 

that fiscal year; 

(2) Establish specific steps and 

milestones to correct the problems you 

have identified in your analysis and to 

enable you to meet fully your goal for 

the new fiscal year; 

(3) (i) If you are a State highway 

agency; one of the 50 largest transit 

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Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 25825 

authorities as determined by the FTA; or 

an Operational Evolution Partnership 

Plan airport or other airport designated 

by the FAA, you must submit, within 60 

days of the end of the fiscal year, the 

analysis and corrective actions 

developed under paragraphs (c)(1) and 

(2) of this section to the appropriate 

operating administration for approval. If 

the operating administration approves 

the report, you will be regarded as 

complying with the requirements of this 

section for the remainder of the fiscal 

year. 

(ii) As a transit authority or airport 

not meeting the criteria of paragraph 

(c)(3)(i) of this section, you must retain 

analysis and corrective actions in your 

records for three years and make it 

available to FTA or FAA on request for 

their review. 

(4) FHWA, FTA, or FAA may impose 

conditions on the recipient as part of its 

approval of the recipient’s analysis and 

corrective actions including, but not 

limited to, modifications to your overall 

goal methodology, changes in your race 

conscious/race neutral split, or the 

introduction of additional race-neutral 

or race-conscious measures. 

(5) You may be regarded as being in 

noncompliance with this Part, and 

therefore subject to the remedies in 

§§ 26.103 or 26.105 of this part and 

other applicable regulations,for failing 

to implement your DBE program in good 

faith if any of the following things 

occur: 

(i) You do not submit your analysis 

and corrective actions to FHWA, FTA, 

or FAA in a timely manner as required 

under paragraph (c)(3) of this section; 

(ii) FHWA, FTA, or FAA disapproves 

your analysis or corrective actions; or 

(iii) You do not fully implement the 

corrective actions to which you have 

committed or conditions that FHWA, 

FTA, or FAA has imposed following 

review of your analysis and corrective 

actions. 

(d) If, as recipient, your 6-month 

Uniform Report of DBE Awards or 

Commitments and Payments (for FHWA 

and FTA recipients) or other 

information coming to the attention of 

FTA, FHWA, or FAA, demonstrates that 

you are falling short of the DBE awards 

and commitments that would be 

necessary to allow you to meet your 

overall goal at the end of the fiscal year, 

FHWA, FTA, or FAA, as applicable, 

may require you to make further good 

faith efforts, such as by modifying your 

race-conscious/race neutral split or 

introducing additional race-neutral or 

race-conscious measures for the 

remainder of the fiscal year. 

8. Revise § 26.51(b)(1), (f)(1), and the 

example to paragraph (f)(1), to read as 

follows: 

§ 26.51 What means do recipients use to 

meet overall goals? 

* * * * * 

(b) Race-neutral means include, but 

are not limited to, the following: 

(1) Arranging solicitations; times for 

the presentation of bids, quantities, 

specifications, and delivery schedules 

in ways that facilitate participation by 

DBEs and other small businesses and by 

making contracts more accessible to 

small businesses, by means such as 

those provided under § 26.39 of this 

part. 

* * * * * 

(f) * * * 

(1) If your approved projection under 

paragraph (c) of this section estimates 

that you can meet your entire overall 

goal for a given year through raceneutral means, you must implement 

your program without setting contract 

goals during that year, unless it becomes 

necessary to do so to avoid falling short 

of our overall goal. 

Example to Paragraph (f)(1): Your overall 

goal for Year 1 is 12 percent. You estimate 

that you can obtain 12 percent or more DBE 

participation through the use of race-neutral 

measures, without any use of contract goals. 

In this case, you do not set any contract goals 

for the contracts that will be performed in 

Year 1. However, if part way through Year 1, 

your DBE awards or commitments are not at 

a level that would permit you to achieve your 

overall goal for Year 1, you would begin 

setting race-conscious DBE contract goals 

during the remainder of the year as part of 

your obligation to implement your program 

in good faith. 

* * * * * 

9. In § 26.53, redesignate paragraph (g) 

as paragraph (i), redesignate paragraphs 

(f)(2) and (3) as paragraphs (g) and (h) 

respectively, revise paragraph (f)(1), and 

add new paragraphs (f)(2) through (5) to 

read as follows: 

§ 26.53 What are the good faith efforts 

procedures recipients follow in situations 

where there are contract goals? 

* * * * * 

(f)(1) You must require that a prime 

contractor not terminate a DBE 

subcontractor listed in response to 

paragraph (b)(2) of this section (or an 

approved substitute DBE firm) without 

your written concurrence This includes, 

but is not limited to, instances in which 

a prime contractor seeks to perform 

work originally designated for a DBE 

subcontractor with its own forces or 

those of an affiliate, a non-DBE firm, or 

with a substitute DBE firm. 

(2) You may provide such written 

consent only if you agree, for reasons 

stated in your concurrence document, 

that the prime contractor has good cause 

to terminate the DBE firm. 

(3) For purposes of this paragraph, 

good cause includes the following 

circumstances: 

(i) The listed DBE subcontractor fails 

or refuses to execute a written contract; 

(iii) The listed DBE subcontractor fails 

or refuses to perform its subcontract; 

(iv) The listed DBE subcontractor fails 

to perform its work on the subcontract 

in a way that is acceptable to you; 

(v) The listed DBE subcontractor fails 

or refuses to meet the prime contractor’s 

reasonable bond requirements; 

(vi) The listed DBE subcontractor 

becomes bankrupt, insolvent, or exhibits 

credit unworthiness; 

(vii) The listed DBE subcontractor is 

ineligible to work on public works 

projects because of suspension and 

debarment proceedings pursuant 2 CFR 

Parts 180, 215 and 1200 or applicable 

state law; 

(viii) You have determined that the 

listed DBE subcontractor is not a 

responsible contractor; 

(ix) The listed DBE subcontractor 

voluntarily withdraws from the project 

and provides to you written notice of its 

withdrawal; 

(x) The listed DBE is ineligible to 

receive DBE credit for the type of work 

required; 

(xi) A DBE owner dies or becomes 

disabled with the result that the listed 

DBE contractor is unable to complete its 

work on the contract. 

(xii) Other good cause that you 

determine compels the termination of 

the DBE subcontractor, with the 

concurrence of FHWA, FTA, or FAA, as 

applicable. 

(3) Before transmitting to you its 

request to terminate and/or substitute a 

DBE subcontractor, the prime contractor 

must give notice in writing to the DBE 

subcontractor, with a copy to you, of its 

intent to request to terminate and/or 

substitute, and the reason for the 

request. 

(4) The prime contractor must give the 

DBE 5 days to respond to the prime 

contractor’s notice and advise you and 

the contractor of the reasons, if any, 

why it objects to the proposed 

termination of its subcontract and why 

you should not approve the prime 

contractor’s action. 

(5) In addition to post-award 

terminations, the provisions of this 

section apply to preaward deletions of 

or substitutions for DBE firms put 

forward by offerors in negotiated 

procurements. 

* * * * * 

10. Revise § 26.67 (a)(2)(i) to read as 

follows: 

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25826 Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 

§ 26.67 What rules determine social and 

economic disadvantage? 

(a) * * * 

(2)(i) You must require each 

individual owner of a firm applying to 

participate as a DBE (except a firm 

applying to participate as a DBE airport 

concessionaire under 49 CFR part 23) 

whose ownership and control are relied 

upon for DBE certification to certify that 

he or she has a personal net worth that 

does not exceed $1.3 million. 

* * * * * 

11. Revise § 26.71(n) to read as 

follows: 

§ 26.71 What rules govern determinations 

concerning control? 

* * * * * 

(n) You must grant certification to a 

firm only for specific types of work in 

which the socially and economically 

disadvantaged owners have the ability 

to control the firm. To become certified 

in an additional type of work, the firm 

need demonstrate to you only that its 

socially and economically 

disadvantaged owners are able to 

control the firm with respect to that type 

of work. You may not, in this situation, 

require that the firm be recertified or 

submit a new application for 

certification, but you must verify the 

disadvantaged owner’s control of the 

firm in the additional type of work. 

(1) The types of work a firm can 

perform (whether on initial certification 

or when a new type of work is added) 

must be described in terms of NAICS 

codes or a classification scheme of 

equivalent detail and specificity. A 

correct NAICS code is one that 

describes, as specifically as possible, the 

principal goods or services which the 

firm would provide to DOT recipients. 

Multiple NAICS codes may be assigned, 

where appropriate. Program participants 

must rely on, and not depart from, the 

plain meaning of NAICS code 

descriptions in determining the scope of 

a firm’s certification. 

(2) Firms and recipients must check 

carefully to make sure that the NAICS 

codes cited in a certification are kept 

up-to-date and accurately reflect work 

which the UCP has determined the 

firm’s owners can control. The firm 

bears the burden of providing detailed 

company information the certifying 

agency needs to make an appropriate 

NAICS code designation. 

(3) If a firm believes that there is not 

a NAICS code that fully or clearly 

describes the type(s) of work in which 

it is seeking to be certified as a DBE, the 

firm may request that the certifying 

agency, in its certification 

documentation, supplement the 

assigned NAICS code(s) with a clear, 

specific, and detailed narrative 

description of the type of work in which 

the firm is certified. A vague, general, or 

confusing description is not sufficient 

for this purpose, and recipients should 

not rely on such a description in 

determining whether a firm’s 

participation can be counted toward 

DBE goals. 

(4) A certifier is not precluded from 

changing a certification classification or 

description if there is a factual basis in 

the record. However, certifiers should 

not make after-the-fact statements about 

the scope of a certification, not 

supported by evidence in the record of 

the certification action. 

* * * * * 

12. Revise § 26.73(b) to read as 

follows: 

§ 26.73 What are other rules affecting 

certification? 

* * * * * 

(b)(1)You must evaluate the eligibility 

of a firm on the basis of present 

circumstances. You must not refuse to 

certify a firm based solely on historical 

information indicating a lack of 

ownership or control of the firm by 

socially and economically 

disadvantaged individuals at some time 

in the past, if the firm currently meets 

the ownership and control standards of 

this part. 

(2) You must not refuse to certify a 

firm solely on the basis that it is a newly 

formed firm, has not completed projects 

or contracts at the time of its 

application, has not yet realized profits 

from its activities, or has not 

demonstrated a potential for success. If 

the firm meets disadvantaged, size, 

ownership, and control requirements of 

this Part, the firm is eligible for 

certification. 

* * * * * 

§ 26.81 [Amended] 

13. Amend § 26.81(g) by removing the 

period at the end of the last sentence 

and adding the words ‘‘and shall revise 

the print version of the Directory at least 

once a year.’’ 

14. In § 26.83, remove and reserve 

paragraph (e), revise paragraph (h), and 

add a new paragraph (l) to read as 

follows: 

§ 26.83 What procedures do recipients 

follow in making certification decisions? 

* * * * * 

(h) Once you have certified a DBE, it 

shall remain certified until and unless 

you have removed its certification, in 

whole or in part, through the procedures 

of § 26.87. You may not require DBEs to 

reapply for certification. However, you 

may conduct a certification review of a 

certified DBE firm, including a new onsite review, three years from the date of 

the firm’s most recent certification, or 

sooner if appropriate in light of changed 

circumstances (e.g., of the kind 

requiring notice under paragraph (i) of 

this section), a complaint, or other 

information concerning the firm’s 

eligibility. If information comes to your 

attention that leads you to question the 

firm’s eligibility, you may conduct an 

on-site review on an unannounced 

basis, at the firm’s offices and jobsites. 

* * * * * 

(l) As a recipient or UCP, you must 

advise each applicant within 20 

business days from your receipt of the 

application whether the application is 

complete and suitable for evaluation 

and, if not, what additional information 

or action is required. 

15. Revise § 26.84 to read as follows 

§ 26.84 Interstate certification. 

(a) This section applies with respect 

to any firm that is currently certified in 

its home State. 

(b) When a firm currently certified in 

its home State (‘‘State A’’) applies to 

another State (‘‘State B’’) for DBE 

certification, State B may, at its 

discretion, accept State A’s certification 

and certify the firm,. without further 

procedures. 

(1) To obtain certification in this 

manner, the firm must provide to 

State B a copy of its certification notice 

from State A. 

(2) Before certifying the firm, State B 

must confirm that the firm has a current 

valid certification from State A. State B 

can do so by reviewing State A’s 

electronic directory or getting written 

confirmation from the home State. 

(c) In any situation in which State B 

chooses not to accept State A’s 

certification of a firm as provided in 

paragraph (b) of this section, as the 

applicant firm you must provide the 

following information in paragraphs 

(c)(1) through (4) of this section to 

State B. 

(1) You must provide to State B a 

complete copy of the application form, 

all supporting documents, and any other 

information you have submitted to State 

A related to your firm’s certification. 

This includes affidavits of no change 

(see § 26.83(j) and any notices of 

changes (see § 26.83(i) that you have 

submitted to State A, as well as any 

correspondence you have had with State 

A’s UCP or any recipient concerning 

your application or status as a DBE firm. 

(2) You must also provide to State B 

any notices or correspondence from 

states other than State A relating to your 

status as an applicant or certified DBE 

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Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 25827 

in those states. For example, if you have 

been denied certification or decertified 

in State C, or subject to a decertification 

action there, you must inform State B of 

this fact and provide all documentation 

concerning this action to State B. 

(3) If you have filed a certification 

appeal with DOT (see § 26.89), you must 

inform State B of the fact and provide 

your letter of appeal and DOT’s 

response to State B. 

(4) You must submit an affidavit 

sworn to by the firm’s owners before a 

person who is authorized by State law 

to administer oaths or an unsworn 

declaration executed under penalty of 

perjury of the laws of the United States. 

This affidavit must affirm that you have 

submitted all the information required 

by 49 CFR 26.84(c) and the information 

is complete and, in the case of the 

information required by § 26.84(c)(1), an 

identical copy of the information 

submitted to State A. 

(d) As State B, when you receive from 

an applicant firm all the information 

required by paragraph (c) of this section, 

you must take the following actions: 

(1) Immediately contact State A and 

request a copy of the site visit review 

report for the firm (see § 26.83(c)(1)), 

any updates to the site visit review, and 

any evaluation of the firm based on the 

site visit. As State A, you must transmit 

this information to State B within seven 

days of receiving the request. 

(2) Determine, within 30 days, 

whether there is good cause to believe 

that State A’s certification of the firm is 

erroneous or should not apply in your 

State. Reasons for making such a 

determination may include, but are not 

limited to, the following: 

(i) Evidence that State A’s 

certification was obtained by fraud; 

(ii) New information, not available to 

State A at the time of its certification, 

indicating that the firm does not meet 

all eligibility criteria; 

(iii) State A’s certification was 

factually erroneous or was inconsistent 

with the requirements of this part; 

(iv) The State law of State B leads to 

a result different from that of the State 

law of State A. 

(v) The information provided by the 

applicant firm did not meet the 

requirements of paragraph (c) of this 

section. 

(3) If, as State B, unless you have 

determined that there is good cause to 

believe that State A’s certification is 

erroneous or should not apply in your 

State, you must, no later than 30 days 

from the date on which you received 

from the applicant firm all the 

information required by paragraph (c) of 

this section, send to the applicant firm 

a notice that it is certified and place the 

firm on your directory of certified firms. 

(4) If, as State B, you have determined 

that there is good cause to believe that 

State A’s certification is erroneous or 

should not apply in your State, you 

must, no later than 30 days from the 

date on which you received from the 

applicant firm all the information 

required by paragraph (c) of this section, 

send to the applicant firm a notice 

stating the reasons for your 

determination. 

(i) This notice must meet the 

requirements of § 26.87(b) of this part 

and offer the firm the opportunity for a 

hearing meeting the requirements of 

§ 26.87(d), (e)(2), and (g) of this part. 

(ii) If the firm elects to have a hearing, 

you must ensure that it takes place 

within 30 days, and your decision must 

be issued within 30 days after the date 

of the hearing. 

(iii) Consistent with the provisions of 

§ 26.87(d)(1) and (3) of this part, you 

bear the burden of proving, by a 

preponderance of the evidence, that the 

firm does not meet the certification 

standards of this part. 

(iv) The firm’s application for 

certification is stayed pending the 

outcome of this proceeding. 

(v) The firm may appeal the outcome 

of this proceeding to DOT as provided 

in § 26.89 of this part. 

(e) As State B, if you have not 

received from State A a copy of the site 

visit review report by a date 14 days 

after you have made a timely request for 

it, you may hold action required by 

paragraphs (d)(2) through (4) of this 

section in abeyance pending receipt of 

the site visit review report. In this event, 

you must, no later than 30 days from the 

date on which you received from an 

applicant firm all the information 

required by paragraph (c) of this section, 

notify the firm in writing of the delay in 

the process and the reason for it. 

(f)(1) As a UCP, when you deny a 

firm’s application, reject the application 

of a firm certified in State A or any other 

State in which the firm is certified, 

through the procedures of paragraph 

(d)(4) of this section, or decertify a firm, 

in whole or in part, you must make an 

entry to the Department of 

Transportation Office of Civil Rights’ 

(DOCR’s) Ineligibility Determination 

online database. You must enter the 

following information: 

(i) The name of the firm; 

(ii) The name(s) of the firm’s owner(s); 

(iii) The type and date of the action; 

(iv) The reason for the action. 

(2) As a UCP, you must check the 

DOCR Web site at least once every 

month to determine whether any firm 

that is applying to you for certification 

or that you have already certified is on 

the list. 

(3) For any such firm that is on the 

list, you must promptly request a copy 

of the listed decision from the UCP that 

made it. As the UCP receiving such a 

request, you must provide a copy of the 

decision to the requesting UCP within 7 

days of receiving the request. As the 

UCP receiving the decision, you must 

then consider the information in the 

decision in determining what, if any, 

action to take with respect to the 

certified DBE firm or applicant. 

16. Revise § 26.85 to read as follows: 

§ 26.85 Certification of SBA 8(a)-certified 

firms. 

(a) As a recipient or UCP, if a firm 

certified by SBA under its 8(a) program 

applies to you for certification as a DBE, 

you must follow the procedures of this 

section. 

(b) When an SBA 8(a)-certified firm 

applies for certification, you must 

accept the certification applications, 

forms and packages submitted by a firm 

to the SBA for 8(a) program 

certification, in lieu of requiring the 

applicant firm to complete your own 

application forms and packages. The 

applicant may submit the package 

directly, or may request that the SBA 

forward the package to you. 

(c) Before certifying a firm based on 

its SBA 8(a) certification, you must 

conduct an on-site review of the firm 

(see § 26.83(c)(1)). You may also request 

additional relevant information from the 

firm to ensure that the requirements of 

this Part for DBE certification have been 

met. If the SBA application package 

presented by the firm is more than two 

years old, you must obtain updated 

information from the applicant. 

(d) Unless you determine, based on 

the on-site review and other information 

obtained in connection with the firm’s 

application that the firm does not meet 

the eligibility requirements of subpart D 

of this part, you must certify the firm. 

(e) For an SBA 8(a) firm that you 

certify under this section, you must 

determine, based on the on-site and 

other information you have gathered, 

the NAICS codes in which the firm may 

participate in your contracts as a DBE. 

(f) You are not required to process an 

application for certification from an 

SBA-certified firm having its principal 

place of business outside the State(s) in 

which you operate unless there is a 

report of a ‘‘home State’’ on-site review 

on which you may rely. 

(g) If the SBA 8(a) firm applying to 

you is already certified as a DBE by 

another State’s UCP, you must use the 

procedures of § 26.84 of this part, rather 

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25828 Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules 

than those of this section, for 

considering its eligibility. 

§ 26.81 [Amended] 

17. In § 26.107 (a) and (b), remove ‘‘49 

CFR part 29’’ and add in its place, ‘‘2 

CFR parts 180 and 1200.’’ 

[FR Doc. 2010–10968 Filed 5–6–10; 3:00 pm] 

BILLING CODE 4910–9X–P 

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