15904 Federal Register / Vol. 74, No. 66 / Wednesday, April 8, 2009 / Proposed Rules 

the proposed provision regarding census 

reporting would be difficult because 

many educational radio broadcasters do 

not have automated playlists but rather 

their playlists are created manually by 

disc jockeys as they play the music. See, 

e.g., Comments of WSOU–FM at 1–2. 

The Judges seek comment on the 

percentage of broadcasters that do not 

use automated playlists. Assuming 

playlists are completely automated, is 

the cost of preparing a Report of Use 

likely to rise for a Service which moves 

from the current 2-weeks per quarter 

sampling period to full census? If so, by 

how much will such costs rise? What 

specifically accounts for any such 

increase? 

For those entities that do not use 

automated playlists, what means do 

they use for complying with current 

reporting requirements? Is all 

programming on college and other 

educational stations done manually? Do 

such stations currently have automated 

playlist capabilities in place? In other 

words, does manual programming occur 

simply as a matter of creative choice? 

Where a college radio station does not 

currently have an automated playlist 

capability, what is the cost of obtaining 

such a capability? What technologies, if 

any, are currently employed in 

complying with the current 

requirements? Which companies offer 

them and at what cost? What changes, 

if any, would be required to comply 

with the proposed census reporting 

requirement? What are the likely costs 

that would be required to move from the 

current reporting methodology to one 

that would be required under the 

proposal? Is technology currently 

available that would permit entities that 

do not use automated playlists to 

comply with the proposed census 

provision? If so, what companies 

provide such capabilities and at what 

cost? If such technology is not currently 

available, what would be the costs of 

developing it? 

Dated: April 3, 2009. 

James Scott Sledge, 

Chief, U.S. Copyright Royalty Judge. 

[FR Doc. E9–7950 Filed 4–7–09; 8:45 am] 

BILLING CODE 1410–72–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

49 CFR Part 26 

[Docket No. OST–2009] 

RIN 2105–AD75 

Disadvantaged Business Enterprise 

Program; Potential Program 

Improvements 

AGENCY: Office of the Secretary (OST), 

DOT. 

ACTION: Advance notice of proposed 

rulemaking (ANPRM). 

SUMMARY: This advance notice of 

proposed rulemaking (ANPRM) 

provides interested parties with the 

opportunity to comment on five matters 

of interest to participants in the 

Department of Transportation’s 

disadvantaged business enterprise (DBE) 

program. The first concerns counting of 

items obtained by a DBE subcontractor 

from its prime contractor. The second 

concerns ways of encouraging 

‘‘unbundling’’ of contracts to facilitate 

participation by small businesses, 

including DBEs. The third is a request 

for comments on potential 

improvements to the DBE application 

form, and the fourth asks for suggestions 

related to program oversight. The fifth 

concerns potential regulatory action to 

facilitate certification for firms seeking 

to work as DBEs in more than one state. 

The sixth concerns 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. 

DATES: Comments on this proposed rule 

must be received by July 7, 2009. 

ADDRESSES: You may submit comments 

(identified by the agency name and DOT 

Docket ID Number OST–2009) 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–2009) 

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 

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 20590–0001, 

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– 

0001, Room W94–302, 202–366–9310, 

bob.ashby@dot.gov. 

SUPPLEMENTARY INFORMATION: The 

Department is holding a series of 

stakeholder meetings to bring together 

prime contractors, DBEs, and state and 

local government representatives to 

discuss ways of improving 

administration of the DBE program. As 

a result of these discussions, the 

Department has issued, and will 

continue to consider, guidance 

Questions and Answers to help 

participants better understand and carry 

out their responsibilities. Addressing 

other issues raised in the discussions, 

however, may require changes to the 

DBE rules themselves (49 CFR Parts 23 

and 26). This ANPRM concerns five 

such issues: (1) Counting of DBE credit 

for items obtained by DBE 

subcontractors from other sources, 

particularly the prime contractor for 

whom they are working on a given 

contract; (2) ways of encouraging 

recipients to break up contracts into 

smaller pieces that can more easily be 

performed by small businesses like 

DBEs, known as ‘‘unbundling;’’ (3) 

potential ways of improving the DBE 

application and personal net worth 

(PNW) forms; (4) potential ways of 

improving program oversight, and (5) 

potential ways of reducing burdens on 

firms seeking certification as DBEs in 

more than one state. 


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Federal Register / Vol. 74, No. 66 / Wednesday, April 8, 2009 / Proposed Rules 15905 

Counting Credit for Items Obtained by 

DBEs From Non-DBE Sources 

Section 26.55(a)(1) of the 

Department’s DBE rule provides as 

follows: 

(a) When a DBE participates in a contract, 

you [i.e., the recipient] count only the value 

of the work actually performed by the DBE 

toward DBE goals. 

(1) Count the entire amount of that portion 

of a construction contract 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 nonDBE 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. Suppose Prime Contractor A owns 

an asphalt plant and sells asphalt for a 

highway construction project to DBE X. 

Prime Contractor A then claims the 

value of the asphalt, which its own 

plant manufactured, for DBE credit. In 

the Department’s view at the time the 

final rule was adopted, the asphalt 

represented a contribution to the project 

by Prime Contractor A, not DBE X. The 

rule treats the asphalt as material 

provided by the prime contractor to the 

project and, consequently, not part of 

the ‘‘work actually performed by the 

DBE.’’ Therefore, the rule does not 

permit it to be counted for DBE credit. 

In 2007, the Department received a 

request from the Ohio Department of 

Transportation for a program waiver of 

this provision. The Department’s 

response stated the following reason for 

denying the request: 

In reviewing a waiver request, the key 

point the Department considers is whether 

granting the request would, in fact, achieve 

the objectives of the DBE regulation. In this 

case, the Department believes that it would 

be contrary to the rule’s objectives for the 

prime contractor to claim DBE credit for the 

value of its own asphalt, just because the 

asphalt has passed through the hands of the 

DBE subcontractor. The asphalt, in this 

situation, would not represent a contribution 

to the project by the DBE, but rather part of 

the prime contractor’s work on the project. 

Such a result would be contrary to a 

primary purpose of 49 CFR 26.55, which is 

to ensure that DBE credit is given only for the 

contribution to a project that the DBE itself 

makes. While granting the waiver might 

permit DBE subcontractors, prime 

contractors, and ODOT to report higher DBE 

participation numbers than would otherwise 

be the case, the reported participation would 

represent value added by the prime 

contractor/asphalt manufacturer, not the DBE 

subcontractor. Doing so would have the effect 

of permitting prime contractors to meet DBE 

goals while minimizing the actual 

contributions they need to obtain from DBEs. 

Some prime contractors and DBE 

contractors have objected to this 

provision, both in correspondence with 

the Department and in the 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. Given 

that there is a growing perception that 

independent suppliers of commodities 

of this kind are being acquired by larger 

companies, many of whom are prime 

contractors, many stakeholders believe 

that this scenario is becoming more 

widespread. 

Participants in the stakeholder 

meeting discussions also suggested that 

the current rule could also 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. 

In thinking about this issue, we have 

a question about normal industry 

practices on which we invite comment. 

Suppose, on a project in which counting 

DBE participation is not at issue (e.g., a 

Federal-aid highway contract that has 

no DBE contract goal, a state-funded 

project to which the DBE program does 

not apply, a purely private-sector 

contract), a prime contractor has a 

subcontractor who will be doing 

installation work (e.g., paving, concrete 

work). If the prime contractor has a 

manufacturing or distribution facility 

for the commodity involved, does the 

prime contractor commonly sell the 

commodity to the subcontractor, who 

then is reimbursed by the prime 

contractor for the sale price as part of 

the subcontract price? Alternatively, 

does the prime contractor typically 

simply make the commodity available 

on the job site, hiring the subcontractor 

just to do the installation work? What 

considerations may affect a decision on 

this matter? 

In response to the concerns that have 

been expressed at the stakeholder 

meetings and elsewhere, the Department 

is seeking comment on four options. All 

these options focus on the language of 

the regulation. We do not believe that it 

is possible to make a reasonable 

interpretation of the existing regulation 

that would change the situation about 

which some DBEs and prime contractors 

have expressed concern. For example, 

we do not believe that drawing a 

distinction between ‘‘supplies’’ and 

‘‘materials,’’ as some have suggested, is 

viable. In the absence of ‘‘term of art’’ 

definitions of these words in the 

regulation, we rely on their common 

meanings, which do not differ 

significantly. Moreover, the policy 

rationale of section 26.55(a)(1) referred 

to above applies equally well to asphalt 

and other bulk commodities, 

construction equipment, and other 

items used on a project. 

Option 1: No change. Leave the 

language of section 26.55(a)(1) as it is. 

Option 2: Leave the basic structure of 

section 26.55(a)(1) intact, maintaining 

the intentional inconsistency between 

items provided to a DBE by the prime 

contractor on a given project and items 

provided by another non-DBE source. 

However, permit recipients to make 

exceptions based on criteria stated in an 


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15906 Federal Register / Vol. 74, No. 66 / Wednesday, April 8, 2009 / Proposed Rules 

amendment to the rule. The exceptions 

would allow counting of items provided 

by a prime contractor to its DBE 

subcontractor under limited 

circumstances. For example, one 

criterion for granting an exception might 

be the absence of sources for an item in 

a given geographic area other than a 

prime contractor bidding on a project. 

Another might be a determination by 

the recipient that allowing items 

provided by a prime contractor to count 

for DBE credit is necessary to ensure fair 

competition among prime contractors. 

The Department seeks comment on 

what criteria the Department should 

propose if we pursue this option, as 

well as what procedures an amended 

rule should provide for recipients’ 

exception processes. 

Option 3: Amend the rule to permit 

items obtained by DBEs for a contract to 

be counted for DBE credit regardless of 

their non-DBE source. This option 

would eliminate the current intentional 

inconsistency by permitting items 

obtained by a DBE from its prime 

contractor to count for DBE credit in the 

same manner as items obtained from 

other non-DBE sources. This approach 

would satisfy the objections of some 

DBEs and prime contractors to the 

existing counting provision. It would 

result in a level competitive playing 

field among prime contractors and 

among DBEs. It would probably lead to 

higher reported DBE participation but it 

would, to some extent, undermine the 

principle that only the portion of a 

contract actually attributable to a DBE’s 

own work should be counted for DBE 

credit. 

Option 4: Amend the rule to prohibit 

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

credit. This option would eliminate the 

current intentional inconsistency by 

saying that if a DBE obtains items from 

any non-DBE source, whether the prime 

contractor or a third party, those items 

cannot be counted for DBE credit. This 

approach would result in counting DBE 

credit in all situations in a way such 

that only work actually performed by 

DBEs would result in credit. It would 

result in a level competitive playing 

field among prime contractors and 

among DBEs, but it would probably 

result in recipients having to set lower 

DBE goals on some kinds of contracts 

and to report lower DBE participation 

numbers. 

One concern mentioned in the 

stakeholder meeting discussion of this 

issue is that being able to report higher 

total contract dollars—even if based, in 

part, on items provided by prime 

contractors or other non-DBE sources— 

could be beneficial to DBEs. This was 

said to be the case because, in effect, it 

looked good on the resume of a DBE to 

say that it had completed a relatively 

large project. Doing so could make it 

easier for the DBE to grow and build 

capacity by being able to bid on larger 

contracts in the future, get larger bonds, 

etc. The Department seeks comment on 

how real and important this factor may 

be, and whether it is a consideration the 

Department should treat as significant 

in determining which option to pursue 

on this issue. 

In responding to this ANPRM, we 

invite interested persons to comment on 

these four options, how the Department 

could best structure whichever option it 

chooses, as well as any other options 

that commenters think may have merit. 

Contract Unbundling 

For as long as there have been 

programs designed to assist small or 

disadvantaged businesses in obtaining 

government contracts, ‘‘unbundling’’ 

has been mentioned as a desirable way 

of enhancing business opportunities for 

these businesses. The Small Business 

Reauthorization Act of 1997 defines 

contract bundling as ’’ consolidating 

two or more procurement requirements 

for goods or services previously 

provided or performed under separate, 

smaller contracts into a solicitation of 

offers for a single contract that is 

unlikely to be suitable for award to a 

small business concern.’’ By 

‘‘unbundling,’’ we mean breaking up 

large contracts into smaller pieces that 

small businesses will find it easier to 

compete for and perform, as well as 

structuring contracting requirements to 

ease competition for small firms. 

Unbundling contracts is cited in the 

DOT DBE regulation (section 

26.51(b)(1)) as one of the race-neutral 

measures that recipients can take to 

help meet overall DBE goals. 

In the DBE program, as in direct 

Federal procurement, unbundling 

historically has been easier to praise 

than to implement. The reasons why are 

not hard to understand. Contracting 

agencies often believe, with some 

justification, that it is more 

economically efficient to issue one large 

contract than to issue a series of smaller 

contracts. Doing so may also reduce the 

administrative burdens of the 

procurement process. In this ANPRM, 

the Department is seeking comment on 

what steps—beyond using its bully 

pulpit to advocate greater use of the 

technique—the Department might take 

to foster unbundling. 

For example, would it be useful to 

add to Part 26 a requirement that 

recipients’ DBE programs include 

specific policies and procedures to 

unbundle contracts of a certain size that 

are subject to DBE program 

requirements? In all design-build 

contracts, or other types of large 

contracts involving a master or central 

prime contractor, should there be 

requirements that the prime contractor 

ensure that some subcontracts are 

structured to facilitate small business 

participation? When a recipient is 

letting a race-neutral contract (that is, 

one without a DBE contract goal), 

should the terms of the solicitation call 

on the prime contractor to provide for 

enough small subcontracts to make it 

possible for small businesses, including 

DBEs, to participate more readily? When 

a recipient has a significant race-neutral 

component of its overall goal, should 

the recipient be required to ensure that 

some portion of the contracts that it 

issues are sized to facilitate small 

business participation? Should 

recipients include, as an element in 

their DBE programs, procedures to 

facilitate cooperation among small and 

disadvantaged businesses to enable 

them to better compete for larger 

contracts (e.g., formation of joint 

ventures among DBEs)? 

The Federal Acquisition Regulations 

(FARs) have procedures and criteria 

related to unbundling in direct Federal 

procurement. Do any of the FAR 

provisions suggest useful ways of 

approaching unbundling issues in the 

DBE program? 

The Department seeks comment on 

whether any of these ideas have merit, 

as well as any other suggestions that 

interested persons may have to make 

contracts more accessible to small and 

disadvantaged businesses. It would be 

useful for the Department to receive 

information on ‘‘best practices’’ that 

recipients have successfully 

implemented to make contracts more 

accessible to small businesses. 

Revised DBE Certification Application 

and Personal Net Worth Statement 

Under § 26.83(c)(7) of the Regulation, 

firms applying for DBE certification 

must use the uniform certification 

application form provided in Appendix 

F without change or revision. The 

application is intended to provide 

sufficient details concerning a firm so 

that recipients can determine whether 

the applicant firm is eligible for the 

program. Entries are provided to capture 

details concerning the firm’s 

origination; control by the 

disadvantaged owners; involvement by 

directors, employees, and other 

companies in the firm’s affairs; and 

financial/equipment arrangements. 

Recipients are permitted (with approval 

from the concerned Operating 


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Federal Register / Vol. 74, No. 66 / Wednesday, April 8, 2009 / Proposed Rules 15907 

Administration) to supplement the form 

by requesting additional information. 

The Department takes the uniformity 

requirement seriously. We have heard 

numerous complaints from DBEs that 

application materials may differ widely 

from state to state. We emphasize that 

all UCPs must use the same, identical 

DOT form, without change or addition 

except as specifically approved by an 

Operating Administration. 

We seek comment on what changes to 

the current application form (Appendix 

F) could be made to provide a more 

comprehensive understanding of the 

business structure and operation of the 

applicant firm. In particular, what items 

could be added, revised or eliminated so 

that recipients can obtain the 

information they need to adequately 

assess an applicant’s eligibility? We 

note that several pieces of new 

information placed on the application 

could be potentially useful for 

determining owners’ economic 

disadvantage and their ability to control 

their business. For example, an 

applicant’s date of birth would assist in 

determining a proper value for 

retirement assets under 

§ 26.67(a)(2)(iii)(D), which accounts for 

assets that cannot be distributed to an 

individual without significant adverse 

tax consequences. Under Internal 

Revenue Service guidelines, a person’s 

age is relevant when making such a 

calculation; yet the application and tax 

material submitted in connection with a 

DBE certification application does not 

contain the applicant’s date of birth. 

Questions 11 and 12 (found in Section 

4 ‘‘Control’’) request information on the 

firm’s management personnel who may 

perform a management or supervisory 

function for another business, or own or 

work for any other firms that have a 

relationship with the applicant firm. As 

written, these questions may not capture 

other types of employment or activities 

that persons may be commonly engaged 

in outside their role with the applicant 

firm. We believe that the outside 

activities of a firm’s owner(s) and key 

personnel are highly relevant in 

determining who at the firm controls 

each activity for which the firm is 

seeking certification. If an owner is 

absent from the firm and performs work 

(paid or unpaid) elsewhere, this could 

have an impact on the firm’s eligibility. 

While such information is commonly 

placed on re ́sume ́s submitted with the 

application or obtained during an onsite visit, this is not always the case. 

Also, not every key person submits his 

or her re ́sume ́ and it may be difficult to 

determine the number of hours devoted 

to firm activities. Should the application 

include more details concerning 

owners’ outside employment or other 

business dealings to include a 

description of the time spent at these 

operations and an explanation of how 

these activities do not conflict with their 

ability to manage the applicant firm? 

A related omission is found in Section 

3, Part B, Question 4, which asks for 

owner’s ‘‘familial relationship to other 

owners.’’ This entry does not include an 

owner’s familial relationship to other 

employees at the firm, any one of whom 

may have financed the operation or 

control key aspects of the firm’s work. 

This type of information would not be 

obtained without probing further during 

an on-site visit. What items could be 

added to the certification application 

that would clarify the roles of the firm’s 

owners and key individuals? What 

items are missing from the form that are 

routinely asked during the on-site visit? 

On such item is the firm’s NAICS Code. 

While an entry exists in Section 2 for a 

description of the firm’s primary 

activities, it seems necessary for 

certification purposes for the firm and a 

recipient to determine which NAICS 

Codes are applicable. We invite 

interested persons to comment on these 

issues and provide suggestions for 

changes to the certification application 

form. 

The foregoing paragraphs have asked 

for comment on clarifications or 

additions to the existing application 

form. The Department has also heard 

concerns that the form, as currently 

structured, is too long and complex, to 

the point of deterring firms from 

applying for DBE certification. The 

Department seeks comment on whether 

there are ways of significantly 

shortening or simplifying the form that 

would continue to give UCPs sufficient 

information to make informed decisions 

about firms’ eligibility. If commenters 

have a model of an alternative form in 

mind, it would be helpful if they would 

provide a draft copy with their 

comments. 

We also invite comments on an 

appropriate personal net worth form to 

be used by each applicant owner 

claiming to be socially and 

economically disadvantaged. The 

current certification application allows 

applicants to submit their own version 

of a personal net worth statement, and 

the Small Business Administration’s 

‘‘personal financial statement’’ (Form 

413) is most commonly used. SBA’s 

form is tailored to its program and the 

form’s headnote asks for completion of 

the statement by each proprietor, or 

limited partner with 20 percent or more 

interest and each general partner; or 

each stockholder holding 20 percent or 

more of voting stock; or any person or 

entity providing a guaranty on the loan. 

This varies significantly from the DBE 

program and has caused confusion, as 

Part 26 requires that only disadvantaged 

owners claiming ownership of 51 

percent of the firm (or a combination of 

disadvantaged owners holding a 

majority interest) submit a personal net 

worth statement. Confusion also stems 

from the nature of the entries to be 

completed by the applicant, which are 

missing information that recipients find 

useful in verifying the calculation of 

assets and liabilities. This is particularly 

the case in the listing of ‘‘real estate 

owned,’’ as the form does not allow easy 

entry of multiple owners, their relative 

share of any mortgages, any home 

equity/secondary loan amounts, and 

other items. 

Should Part 26 specify in greater 

detail what types of information should 

be included on an applicant’s personal 

net worth statement and what 

attachments should accompany the 

statement? What instructions can be 

placed on the application to alert 

owners (and recipients) that all assets 

are relevant to determining a person’s 

overall net worth? Instructions could 

specify that items often overlooked or 

mischaracterized as a joint asset (such 

as individual retirement accounts, 

which are never jointly held, or Medical 

Savings Accounts) should be included 

on the statement. In addition, how can 

owners adequately explain whether new 

assets were purchased with dividends 

or capital gains that are reported in a tax 

return, but not reflected on the personal 

net worth statement? What transactional 

details such as these should we require 

applicants to report? Are there financial 

documents not necessarily related to a 

person’s net worth that are missing but 

could be relevant to other aspects of the 

rule, such as W–2 ‘‘Wage and Tax’’ 

statements showing remuneration of 

owners and personnel? 

We are aware that an expanded form 

may have the unintended consequence 

of adding to the paperwork performed 

by firms and the length of the overall 

information gathering process, two 

issues that we hope commenters will 

also address. As with the application 

form, the Department seeks comment on 

whether there are ways of significantly 

shortening or simplifying the form that 

would continue to give UCPs sufficient 

information to make informed decisions 

about applicants’ PNW. If commenters 

have a model of an alternative form in 

mind, it would be helpful if they would 

provide a draft copy with their 

comments. 

The Department also believes strongly 

that PNW is not the only factor that 

recipients should consider in 


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determining whether an applicant is 

economically disadvantaged. As the 

Department has said in guidance, there 

may be situations in which the overall 

financial situation of an applicant can 

reasonably suggest that the applicant is 

not economically disadvantaged, even 

when his or her PNW falls under the 

$750,000 cap. For example, if an 

individual owns a $15 million house 

with a $14.5 million mortgage, or has 

numerous vacation properties, or an 

expensive yacht or horse breeding farm, 

or lives with family members whose 

evident wealth is quite high, a UCP 

might reasonably conclude that he or 

she is not economically disadvantaged 

even though he or she may meet the 

PNW requirements of the rule. The 

Department seeks comment on how best 

to apply and describe the economic 

disadvantage concept in its rules. 

Program Oversight 

Two stated objectives of the DBE 

program are to create a level playing 

field on which DBEs can compete fairly 

for DOT-assisted contracts and to ensure 

that only firms that fully meet the 

eligibility standards are permitted to 

participate as DBEs. Unfortunately, 

these objectives have at times been 

thwarted by DBE program fraud, fronts/ 

pass-throughs, and other nefarious 

schemes, which have been subjects of 

great concern to the Department. In 

2004, the Secretary of Transportation 

established a senior-level working group 

to develop and implement strategies for 

enhanced compliance, enforcement, and 

oversight of the DBE program. 

Combating DBE fraud has become a 

major emphasis area for the 

Department’s Office of the Inspector 

General. 

While effort at the Federal level is 

very important, fraud prevention begins 

at the state and local level. We seek 

comment on amending the regulation to 

require recipients to take a more handson approach to overseeing the program. 

The precise nature of what this entails 

is the subject of this portion of our 

request for information and we seek 

input on what revisions could increase 

the integrity of the program and what 

best practices exist that recipients could 

emulate. This includes specific language 

that could be added to address (1) 

conflicts of interest within a recipient’s 

certification unit or UCP, (2) general 

standards and guidance for reviewing 

their DBE program, (3) the 

independence and competence of 

certifiers in the process, and (4) 

objective and impartial judgment on all 

issues associated with the DBE program. 

If additional language would be too 

cumbersome, are there different 

measures that would achieve this same 

result? 

Facilitating Interstate Certification 

The DBE program is a national 

program, and many firms are interested 

in working in more than one state. 

However, certification proceeds on a 

state-by-state basis, with each state’s 

UCP operating independently. In the 

stakeholder meetings and other forums, 

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 section 26.81(e) and (f)), and in 

1999 we issued a Q&A encouraging this 

approach. To further encourage such 

efforts, the Department issued a Q&A in 

2008, providing the following guidance: 

WHAT STEPS SHOULD RECIPIENTS AND 

UCPs TAKE TO REDUCE CERTIFICATION 

BURDENS ON APPLICANTS WHO ARE 

CERTIFIED IN OTHER STATES OR 

CERTIFIED BY SBA? (Posted—6/18/08) 

* It is the policy of the Department of 

Transportation that unified certification 

programs (UCPs) should, to the maximum 

extent feasible, reduce burdens on firms 

which are certified as DBEs in their home 

state and which seek certification in other 

states. Unnecessary barriers to certification 

across the country are contrary to the 

purpose of a national program like the DBE/ 

ACDBE program. 

* In particular, recipients and UCPs 

should not unnecessarily require the 

preparation of duplicative certification 

application packages. 

* We remind recipients and UCPs that the 

Uniform Certification Application Form in 

Appendix F to part 26 MUST be used for all 

certifications. The rules do not permit 

anyone to alter this form or to use a different 

form for DBE certification purposes. 

* The Department strongly encourages the 

formation of regional certification consortia, 

in which UCPs in one state provide 

reciprocal certification to firms certified by 

other members of the consortium. 

Consortium members should meet and/or 

speak with each other frequently to discuss 

eligibility concerns and approaches to 

common issues, to conduct training, and for 

other purposes. Generally, these consortia 

should be established among states that are 

located in proximity to one another. 

* The Department will closely monitor the 

efforts of UCPs to reduce burdens on firms 

applying for certification outside their home 

states. The Department will determine at a 

later time whether additional regulatory 

action is appropriate to prevent unnecessary 

certification burdens. 

Certifications From Other States 

* For situations in which a firm certified 

in State A applies for certification in State B, 

we suggest the following model. Other 

approaches are also possible, but the 

Department believes strongly that all states 

should put into place procedures to avoid 

having firms certified in one state start the 

application process from scratch in another 

state. 

+ Request that the applicant provide a copy 

of the full and complete application package 

on the basis of which State A certified the 

firm. State B should require an affidavit from 

the firm stating, under penalty of perjury, 

that the documentation is identical to that 

provided to State A. It is important that all 

this material be legible, so that State B can 

review the package as if it were the original. 

+ To ensure that information is reasonably 

contemporary, State B could have a provision 

limiting this expedited process to application 

packages filed with State A within three 

years of the application to State B. 

+ State B should instruct the applicant to 

provide any updates needed to make the 

application material current (e.g., changes in 

personal net worth of the owner, more recent 

tax returns, changes affecting ownership and 

control). 

+ State B should request State A’s on-site 

review report and any accompanying 

memoranda or evaluations. State A should 

promptly provide this material. 

+ State B should certify the firm unless 

changes in circumstances or facts not 

available to State A justify a different result, 

or unless State B can articulate a strong 

reason for coming to a different result from 

State A on the same facts. 

The Department is aware that in one 

case, Virginia, Maryland, and the 

District of Columbia have created a 

‘‘reciprocity’’ agreement with respect to 

DBE certification, though it does not 

have the ‘‘rebuttable presumption of 

eligbility’’ feature suggested in the 

Department’s Q&A. That is a feature we 

regard as a key part of an effective 

interstate certification system. 

Otherwise, we are not aware of much 

activity to facilitate interstate 

certifications and thereby mitigate the 

problems of which DBEs have spoken. 

UCP representatives have been very 

candid in saying that a lack of trust 

among various state UCPs and a concern 

about the perceived uneven quality of 

certifications are obstacles to such 

action. 

Another obstacle to effective interstate 

certification, and to effective oversight 

of certified firms generally, is the 

apparent age of many on-site review 

reports. A firm may be certified in State 


rwilkins on PROD1PC63 with PROPOSALS-1
Federal Register / Vol. 74, No. 66 / Wednesday, April 8, 2009 / Proposed Rules 15909 

A in Year 1, with no update of the onsite review for many years thereafter. 

When the firm applies to State B eight 

years later, State B does not have a 

reasonably recent on-site review report 

to use in determining whether the firm 

is eligible. Even State A does not have 

recent information to rely upon in 

determining whether the firm remains 

eligible. The Department seeks comment 

on whether it would make sense to 

require an update of each on-site review 

report at certain intervals, such as every 

three or five years. The Department also 

seeks comment on the impact of such a 

requirement on UCP resources. 

The Department seeks comment on 

whether we should propose a regulatory 

requirement along the lines of the idea 

suggested in the Q&A to begin to 

surmount the obstacles to facilitating 

interstate certification. We also welcome 

ideas about other potential approaches 

to the issue. 

Over the years, interested persons 

have raised the idea of either 

nationwide certification reciprocity or 

Federalizing the certification process. 

Nationwide reciprocity raises 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, 

may 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 

seeks comment on how, if at all, these 

issues could be addressed, and whether 

there is merit in one or another 

nationwide approach to certification. 

Terminations for Convenience and 

Substitution 

Currently, section 26.53(f)(1) tells 

recipients to 

* * * require that a prime contractor not 

terminate for convenience a DBE 

subcontractor listed in response to paragraph 

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

substitute DBE firm) and then perform the 

work of the terminated subcontract with its 

own forces or those of an affiliate, without 

your prior written consent. 

Under section 26.53(f)(2), 

When a DBE subcontractor is terminated, 

or fails to complete its work on the contract 

for any reason, you [the recipient] must 

require the prime contractor to make good 

faith efforts to substitute for the original DBE. 

These good faith efforts shall be directed at 

finding another DBE to perform at least the 

same amount of work under the contract as 

the DBE that was terminated, to the extent 

needed to meet the contract goal you 

established for the procurement. 

In recent years, participants in the 

DBE program have informally told the 

Department of what they, and DOT staff, 

regard as a growing problem. For 

example, a prime contractor accepts 

DBE Firm A and lists it as the firm that 

will meet its DBE contract goal. Firm A 

expends time, effort, and money to 

prepare to perform the contract, after 

signing a letter of intent with the prime 

contractor. Then, after contract award or 

execution, the prime terminates Firm A 

for convenience and substitutes DBE 

Firm B, whose participation is sufficient 

to meet the goal. 

There could be various reasons for 

such an action. For example, the prime 

may have been able to negotiate a lower 

price with Firm B, or the prime has an 

established relationship with Firm B, 

and Firm B has just become available to 

perform the work. In any case, Firm A 

is left out in the cold. Because the prime 

contractor did not terminate Firm A for 

convenience and then perform the work 

itself, the recipient did not, under 

section 26.53(f)(1), have to sign off on 

the substitution. Because the substitute 

firm is itself a DBE, the prime contractor 

met its good faith efforts obligation 

under section 26.53(f)(2). 

We are also aware of another concern. 

Suppose DBE Firm C is performing a 

subcontract (e.g., in paving). The 

recipient issues a change order, 

resulting in a significant increment in 

the paving work to be done on the 

contract. The prime contractor, rather 

than assigning this additional work to 

Firm C, either does the work itself or 

assigns it to another DBE or non-DBE 

subcontractor. In this situation, Firm C, 

which is already on the job, and on 

which the prime contractor relied for its 

original DBE goal achievement, is 

denied the opportunity for additional 

work and profit. 

The Department is seeking comment 

on whether we should modify section 

26.53 to provide greater involvement by 

recipients in these situations. For 

example, we could propose that, when 

a prime contractor has relied on a 

commitment to a DBE firm to meet all 

or part of a contract goal, the prime 

contractor could not terminate the DBE 

firm for convenience without the 

recipient’s written approval, based upon 

a finding of good cause for the 

termination. This would be true 

whether the prime contractor proposed 

to replace the DBE’s participation with 

another DBE subcontractor, a non-DBE 

subcontractor, or with the prime 

contractor’s own forces. Likewise, we 

might propose amending section 26.53 

to require the recipient to approve a 

decision by a prime contractor to give a 

significant increment in the work (e.g., 

as the result of a change order) assigned 

to a DBE subcontractor on which the 

prime contractor had relied to meet all 

or part of its contract goal to any party 

other than that DBE subcontractor. The 

purpose of these ideas would be to make 

more meaningful the commitment to a 

particular DBE firm that the prime 

contractor made as part of the contract 

award process. We also seek comment 

on adding a similar requirement for preaward substitutions in the case of 

negotiated procurements. 

The concept on which we are seeking 

comment would concern situations 

where there is a contract goal in a 

solicitation for the contract. We do not 

now contemplate proposing such a 

provision with respect to race-neutral 

contracts, in which there was not a 

contract goal. However, we do seek 

comments on whether a concept of this 

kind should apply to race-neutral 

contracts. We also seek comment on 

whether we should propose any criteria 

for recipients to apply in deciding 

whether to approve a substitution, and 

on what such criteria might be. 

Regulatory Analyses and Notices 

This ANPRM is a nonsignificant rule 

under Executive order 12886, because 

any notice of proposed rulemaking 

resulting from it will not impose 

significant costs or burdens on regulated 

parties. Nor will an NPRM that may 

follow this ANPRM have significant 

economic effects on a substantial 

number of small entities. While the DBE 

program focuses on small entities, the 

ANPRM seeks comment on measures 

that would have the effect of reducing 

administrative burdens on small 

entities. At the time of the NPRM, the 

Department will determine whether it is 

necessary to conduct a Regulatory 

Flexibility Analysis. 

This ANPRM does not include 

information collection requirements 

subject to the Paperwork Reduction Act. 

The Department does not anticipate 

effects on state and local governments 

sufficient to invoke requirements under 

the Federalism Executive Order. 

Because it is based on civil rights 

statutes, this rulemaking is not subject 

to the Unfunded Mandates Act. 

The Department seeks comment on 

any issues related to the application of 

these or other cross-cutting regulatory 

process requirements to rulemaking on 

the aspects of the DBE program covered 

by this ANPRM. 


rwilkins on PROD1PC63 with PROPOSALS-1
15910 Federal Register / Vol. 74, No. 66 / Wednesday, April 8, 2009 / Proposed Rules 

Issued this 25th day of March 2009, at 

Washington, DC. 

Ray LaHood, 

Secretary of Transportation. 

[FR Doc. E9–7903 Filed 4–7–09; 8:45 am] 

BILLING CODE 4910–9X–P 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

49 CFR Part 26 

[Docket No. OST–2009–0081] 

RIN 2105–AD76 

Disadvantaged Business Enterprise; 

Overall Goal Schedule and 

Substitution 

AGENCY: Office of the Secretary (OST), 

DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: This notice of proposed 

rulemaking (NPRM) would propose to 

improve administration of the 

Disadvantaged Business Enterprise 

(DBE) program by calling upon 

recipients of DOT financial assistance to 

transmit overall goals to the Department 

for approval every three years, rather 

than annually. 

DATES: Comments on this proposed rule 

must be received by July 7, 2009. 

ADDRESSES: You may submit comments 

(identified by the agency name and DOT 

Docket ID Number OST–2009– ) by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

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– 

2009– ) 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 

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 

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 

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 current DBE rule (49 CFR part 26) 

requires recipients to submit overall 

goals for review by the applicable DOT 

operating administration on August 1 of 

each year. The process of setting annual 

overall goals can be time-consuming, 

particularly given the requirements for 

public participation by the recipient. 

The Department’s experience has been 

that many goals are submitted after the 

August 1 date, and the Department’s 

workload involved in reviewing annual 

goals from 52 state departments of 

transportation and hundreds of transit 

authorities and airports has often 

resulted in delays in the Department’s 

response to recipients’ submissions. 

In the Department’s 2005 airport 

concessions disadvantaged business 

enterprise (ACDBE) regulation (49 CFR 

part 23), the Department established a 

staggered three-year schedule for the 

submission by airports of ACDBE goals. 

The purpose of this provision was to 

better manage the workloads of both 

airports and the Federal Aviation 

Administration (FAA). This approach 

appears to have been successful in 

achieving that objective, and we are 

now proposing to establish a similar 

system for Part 26 DBE goals. We seek 

comment on whether such a system 

should, like its Part 23 counterpart, 

permit operating administrations to 

grant program waivers for different 

schedules that recipients suggest. 

Under the proposal, each Part 26 

recipient would submit an overall goal 

every three years, based on a schedule 

established by the operating 

administrations. Some recipients would 

submit a goal in August 2009, as per the 

existing requirement. Others would not 

submit an overall goal until August 

2010, and others not until August 2011. 

With respect to airports, FAA would 

arrange the schedule so that an airport 

would not have to submit both a Part 23 

and Part 26 goal in the same year. The 

Department seeks comment on the 

concept of submitting DBE goals every 

three years as well as the proposed 

schedules for submission. We also seek 

comment on whether the rule should 

provide for annual reviews of goals or 

adjustments for new opportunities, 

similar to what is provided in section 

23.45 of the airport concessions DBE 

rule. 

Regulatory Analyses and Notices 

The Department has determined that 

this action is not considered a 

significant regulatory action for 

purposes of Executive Order 12866 or 

the Department’s regulatory policies and 

procedures. The NPRM would ease 

administrative burdens on recipients by 

reducing the frequency of overall goal 

submissions and would improve 

protections for DBE subcontractors by 

requiring recipient approval of certain 

contracting actions. 

The NPRM would affect some small 

entities, easing administrative burdens 

related to goal submission on any 

recipients that are considered small 

entities and enhancing contracting 

process protections for DBEs, which are 

small entities. However, the economic 

effects of these changes on small entities 

are negligible. For that reason, the 

Department certifies that the NPRM, if 

made final, would not have a significant 

economic impact on a substantial 

number of small entities. 

The Department has analyzed this 

proposed action in accordance with the 

principles and criteria contained in 

Executive Order 13132, and has 

determined that the proposed 

amendments are consistent with the 

Executive Order and that no 

consultation is necessary. This NPRM 

does not propose information collection 

requirements covered by the Paperwork 

Reduction Act. 

List of Subjects in 49 CFR Part 26 

Administrative practice and 

procedures, Airports, Civil rights, 

Government contracts, Grant 

programs—transportation, Highways 

and roads, Mass transportation, 

Minority business, Reporting and 

recordkeeping requirements. 


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