23208 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules

time to complete installation and

minimize the harm that may affect small

entities due to the shorter deadline.

6. Federal Rules That May Duplicate,

Overlap, or Conflict With the Proposed

Rules

26. None.

B. Comment Due Dates and Filing

Procedures

27. We invite comment on the issues

and questions set forth in the FNPRM of

Proposed Rulemaking and Initial

Regulatory Flexibility Analysis

contained herein. Pursuant to applicable

procedures set forth in §§ 1.415 and

1.419 of the Commission’s rules,

interested parties may comment on or

before May 23, 2001, and reply

comment on or before May 30, 2001.

Comments may be filed using the

Commission’s Electronic Comment

Filing System (ECFS) or by filing paper

copies. See Electronic Filing of

Documents in Rulemaking Proceedings,

63 FR 24,121, May 1, 1998.

V. Ordering Clauses

28. Pursuant to the authority

contained in sections 1–4, 201–205, 254,

303(r), and 403 of the Communications

Act of 1934, as amended, and §§ 0.91,

0.291, 1.3, and 1.411 of the

Commission’s rules, this Further Notice

of Proposed Rulemaking and Order is

adopted.

29. The deadline for the

implementation of non-recurring

services in Funding Year 3 of the

schools and libraries universal support

mechanism for all applicants is

extended from June 30, 2001 to

September 30, 2001.

30. Applicants in Funding Year 3 may

extend existing contracts for nonrecurring services until September 30,

2001, without having to comply with

the Commission’s competitive bidding

requirements.

31. The Commission’s Consumer

Information Bureau, Reference

Information Center, shall send a copy of

this Further Notice of Proposed

Rulemaking and Order, including the

Initial Regulatory Flexibility Analysis,

to the Chief Counsel for Advocacy of the

Small Business Administration.

Federal Communications Commission

Magalie Roman Salas,

Secretary.

[FR Doc. 01–11514 Filed 5–7–01; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

49 CFR Part 26

[Docket OST–2000–7639]

RIN 2105–AC88

Participation by Disadvantaged

Business Enterprises in Department of

Transportation Financial Assistance

Programs; Memorandum of

Understanding With the Small

Business Administration; Uniform

Forms and Other Revisions

AGENCY: Office of the Secretary, DOT.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Department of

Transportation (DOT or the Department)

is proposing revisions to the

Department’s regulations for its

Disadvantaged Business Enterprise

(DBE) program (49 CFR part 26). In its

final DBE rule the Department reserved

publication of a uniform reporting form

and a uniform certification application

form for a later date. This document

proposes those forms. In addition, this

document proposes implementation

procedures for a Memorandum of

Understanding (MOU) between DOT

and the U.S. Small Business

Administration (SBA). The MOU

streamlines certification procedures for

participation in SBA’s 8(a) Business

Development (8(a) BD) and Small

Disadvantaged Business (SDB)

programs, and DOT’s DBE program for

small and disadvantaged businesses.

Finally, this document proposes

substantive changes to several

provisions, including: Personal net

worth, retainage, the size standard,

proof of ethnicity, confidentiality, proof

of economic disadvantage, and DBE

credit for trucking firms.

DATES: Comments should be received no

later than June 7, 2001. Late-filed

comments will be considered to the

extent practicable.

ADDRESSES: Interested persons should

send comments to Docket Clerk, Docket

No. OST–2000–7639, Department of

Transportation, 400 7th Street, SW.,

Room PL–401, Washington, DC 20590.

We request that, in order to minimize

burdens on the docket clerk’s staff,

commenters send three copies of their

comments to the docket. Commenters

wishing to have their submissions

acknowledged should include a

stamped, self-addressed postcard with

their comments. The docket clerk will

date stamp the postcard and return it to

the commenter. Comments will be

available for inspection at the above

address from 10:00 a.m. to 5:00 p.m.,

Monday through Friday, except Federal

holidays.

FOR FURTHER INFORMATION CONTACT:

Laura A. Aguilar, Attorney, Office of

Environmental, Civil Rights, and

General Law, Department of

Transportation, 400 7th Street, SW.,

Room 10102, Washington, DC 20590,

phone numbers (202) 366–0365 (voice),

(202) 366–9170 (fax), (202) 755–7687

(TDD), laura.aguilar@ost.dot.gov (email).

SUPPLEMENTARY INFORMATION:

Background

On February 2, 1999, the Department

published a final rule revising its

Disadvantaged Business Enterprise

(DBE) program. The new regulations (49

CFR part 26) replaced 49 CFR part 23,

except for the airport concessions

regulations. In shaping the final rule,

the Department responded to 600

comments on its December 1992 Notice

of Proposed Rulemaking (NPRM), and

300 comments on its May 1997

Supplemental Notice of Proposed

Rulemaking (SNPRM). The Department

also participated in the Clinton

Administration’s review of affirmative

action programs and listened carefully

to Congressional debate during the

reauthorization of the Department’s DBE

program in the Transportation Equity

for the 21st Century (TEA–21). The final

rule also incorporates requirements set

forth in the Supreme Court’s June 1995

decision in Adarand v. Pen ̃ a. The result

is a narrowly tailored program that

provides a ‘‘level playing field’’ for

small socially and economically

disadvantaged businesses.

There are three different parts

addressed in this document. The first

part addresses uniform forms. In the

final rule, the Department stated that it

would develop a single reporting form

and a standard DOT application form

for DBE eligibility. The Department did

not want to delay the issuance of the

final rule, so it reserved the date on

which the uniform form requirements

would go into effect. This document

addresses both of these forms. The

second part addresses the

implementation of a Memorandum of

Understanding (MOU) between the DOT

and the Small Business Administration

(SBA). The MOU streamlines

certification procedures for

participation in SBA’s 8(a) Business

Development (8(a) BD) and Small

Disadvantaged Business (SDB) programs

and DOT’s DBE program. The final part

proposes substantive changes to several

provisions, including: personal net

worth, retainage, proof of ethnicity,

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules 23209

confidentiality, proof of economic

disadvantage, and DBE credit for

trucking firms.

A. Forms

1. Reporting Form

In the preamble to the February 2,

1999, final DBE rule, the Department

adopted the suggestion of having one

standard reporting form. We believe it

will reduce administrative burdens for

recipients, particularly those who

receive funds from more than one DOT

operating administration (OA). We are

now addressing the format and

substance of the uniform reporting form.

We are also proposing that recipients

report DBE program data to the

concerned OA semi-annually. The

concerned OA is the DOT agency from

which the recipient received Federal

funds. See § 26.21(a). For example, a

recipient of Federal Highway funds

must submit a report to the Federal

Highway Administration (FHWA). If a

recipient receives funds from more than

one OA, it must submit a separate report

to each OA. Finally, we are proposing

a three-year retention requirement for

basic program data. We are requesting

comment on the content and format of

the standard form. To assist commenters

in formulating responses, we are

publishing a proposed form in the

NPRM that would become appendix B

to 49 CFR part 26.

The proposed reporting form requires

that information concerning both

awards or commitments and

attainments of DBE participation be

reported. The rule requires recipients to

have a mechanism to verify that the

work committed and awarded to DBEs

is actually performed by DBEs. See 49

CFR 26.37(b). The preamble to the final

rule explains that recipients should

keep a running tally of the extent to

which, on each contract, performance

matched promises. However, we

recognize that in many instances the

awards and commitments reported will

not correspond to the attainments

reported on the same form within a

single fiscal year. For example, if a

contract is awarded to a DBE in January

2001, the award would be reflected in

the report for that period. However, the

contract would likely not be completed

for many years. Therefore, the actual

achievement section in that report could

not reflect the achievements on that

contract. Instead, the report will reflect

attainments on contracts completed

during the reporting period. It is

essentially a ‘‘snap-shot’’ of a recipient’s

progress towards the participation of

DBEs in its DBE program and not a

determinative factor as to whether or

not DBE goals are being met and

programs are successful.

In the attainments section, recipients

would report the actual number and

dollar amounts of payments made to

DBEs during the reporting period. This

section is also in keeping with the

mandate of 49 CFR 26.55(a), which

specifies ‘‘(w)hen a DBE participates in

a contract, you count only the value of

the work actually performed by the DBE

toward DBE goals.’’

Currently, Federal Aviation

Administration (FAA) recipients submit

annual reports while Federal Highway

Administration (FHWA) and Federal

Transit Administration (FTA) recipients

submit quarterly reports. The December

1992 NPRM proposed that recipients

report DBE program data quarterly to

the appropriate OA. Again, the

appropriate OA is the DOT agency

(FAA, FHWA and/or FTA) from which

the recipient receives Federal funding.

The OA’s believe that quarterly

reporting is often too burdensome for

recipients. This is especially true for

smaller recipients with only one

contract over a long period of time.

Requiring quarterly reports in that

instance would result in unnecessary

repetition of information. Therefore, we

are proposing semi-annual reporting.

This will allow the Department to

adequately monitor the extent to which

recipients are meeting DBE goals while

not overly burdening smaller recipients

with redundant reporting requirements.

Reports would be due to a recipient’s

OA on June 1 and December 1 each

year. The June 1 report would include

information from October 1 through

March 31. The December 1 report would

include information from April 1

through September 30. Since the

majority of recipients set goals based on

a fiscal year, we believe that these dates

will assist them in setting their overall

goals which must be submitted to the

OA by August 1 of each year.

In keeping within the parameters

suggested by commentators during the

SNPRM, we are proposing that

recipients retain information relating to

basic program data for three years.

2. Uniform Application Form

In the preamble to the final rule, the

Department adopted a single, uniform,

nationwide form that all recipients must

use without modification for DBE

eligibility. We are now addressing the

substance of the uniform application

form and requirements. Although

recipients must use the uniform

application form without modification,

we recognize that some States have

additional statutory and/or regulatory

requirements. Therefore, recipients may

supplement the uniform application

form with a one to two page attachment

containing the additional certification

requirements. We are requesting

comment on the content of the standard

form. To assist commenters in

formulating responses, we are

publishing a proposed form in this

NPRM that would become appendix F

to 49 CFR part 26.

In developing the proposed form, we

started with FHWA’s Region 5

Certification Application. We asked a

few recipients who receive financial

assistance from FHWA, FAA, and FTA

to comment on the content and format

of the application. We are attempting to

balance the need for a complete form

and the desire to simplify the

application. We urge commenters to

think about what must be contained in

the application and what may be

reserved for an on-site review.

We are working closely with

representatives from the SBA in

developing a uniform application form

to be used by both agencies. The MOU

is designed to streamline the application

process for SBA’s 8(a) BD and SDB

programs and DOT’s DBE program. We

believe that having a joint uniform

application form will make it easier for

small businesses to apply for

certification for programs from both

agencies. It is our hope that with the

comments received on the proposed

form in appendix F will be able to issue

the joint DOT/SBA certification

application form in the final rule.

B. Memorandum of Understanding

1. Background

The SBA’s 8(a) BD and SDB programs

and DOT’s DBE program share many

common certification requirements.

Therefore, on November 23, 1999, the

former Secretary of Transportation,

Rodney Slater, signed a Memorandum

of Understanding (MOU) with Aida

Alvarez, the former Administrator of the

SBA, the purpose of which is to develop

common application procedures that

will streamline the certification process

for the respective programs. This

streamlined process is designed to

reduce administrative costs and to

provide more opportunities for small

businesses owned and controlled by

socially and economically

disadvantaged individuals. It also

establishes procedures for the efficient

transfer of information among SBA,

DOT, and DOT recipients, and for the

consideration of certification appeals.

We are issuing this NPRM to amend

49 CFR part 26 to establish new or

revised responsibilities for DOT

recipients created by the MOU. The

23210 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules

MOU and these proposed changes do

not alter the program requirements. For

example, women are not presumed

disadvantaged in SBA’s programs.

Therefore a woman-owned DBE will

still have to show disadvantage to

qualify for SBA’s 8(a) BD and SDB

programs. Similarly, an SBA-certified

firm must still undergo an on-site

review before receiving DBE

certification.

The current DBE regulations allow

recipients the flexibility to accept

certifications for 8(a) BD or SDBcertified firms in lieu of conducting its

own certification process or to require

the firm to go through part or all of its

own application process. See 49 CFR

26.67 (c). Under the MOU, recipients

would be required to accept and

recognize 8(a) BD and SDB certifications

in lieu of requiring the applicant firm to

fill out the recipient’s own application.

However, the applicant firm must still

meet all the part 26 requirements. For

example, a firm must meet the DOT

statutory gross receipts cap, currently

$17,420,000, see 65 FR 52470 (August

29, 2000). Based on the information

gained from the on-site review,

including documentation that the firm

meets DOT eligibility criteria, a DOT

recipient may deny certification to a

firm that the SBA certified.

As stated in the previous section, we

are working with representatives from

the SBA in developing a joint

certification application form. We

anticipate that the joint application form

will contain a main section with

common requirements and have three

additional parts for 8(a) BD, SDB and

DBE certification. The applicant would

need to complete the main section of the

application only once. Then the

applicant would fill out the program

specific part for each program for which

the applicant is applying. We believe

that the joint application form will

simplify the application process for new

applicants.

For SBA-certified firms seeking DBE

certification, we are proposing the

following procedures. An SBA-certified

firm may submit its certification

package to the applicable DOT recipient

or it may request that the SBA forward

the certification package to the DOT

recipient. Pursuant to the MOU, the

SBA will forward the package to the

DOT recipient within thirty days after

receipt of the firm’s request. If

necessary, the recipient may request

additional information from the

applicant or from the SBA. If requested

from the SBA, the additional

information will be transferred within

45 days after receipt of the request. The

recipient will then make an

independent certification decision

based on the SBA application package,

any additional information provided

and an on-site review. If the SBA

conducted an on-site review, the DOT

recipient may rely on SBA’s report of

the on-site review in lieu of conducting

its own on-site review. 49 CFR 26.83(k)

requires a recipient to make decisions

on applications of certification within

90 days of receiving from the applicant

firm all information required under part

26. If a firm applies for DBE certification

pursuant to the MOU, the recipient is

required to make a decision within 90

days of receiving all the required

information, whether it is from the

applicant or the SBA.

Recipients are not required to process

an application for certification from an

SBA-certified firm having its principal

place of business outside the state

unless there is a report of a ‘‘home

state’’ on-site review on which the

recipient may rely. This helps the

problem of costly out-of-state visits.

If a recipient denies certification to a

firm certified by the SBA, it must notify

the SBA in writing. The notification

must include the reason for denial. A

recipient may simply send a copy of the

denial letter to the SBA. Similarly,

when a recipient decertifies a firm

certified by the SBA, it must notify the

SBA in writing. Again, the notification

must include the reason for denial. A

copy of the denial letter is sufficient

notification.

An SBA-certified firm that is denied

DBE certification or whose eligibility is

removed by a DOT recipient is entitled

to the same appeal rights as DBE firms.

Such a firm may make an administrative

appeal to the Department pursuant to

part 26. The Department will notify the

SBA, in writing, when DOT takes an

action on an appeal that results in or

confirms a loss of DBE eligibility to any

SBA-certified firm. The notice will

include the reasons for the Department’s

decision, including specific references

to the evidence in the record that

supports each reason for the decision.

If a DBE-certified firm is seeking SBA

certification, it may request, in writing,

that the applicable DOT recipient

forward a copy of its application to the

SBA. If a recipient receives such a

request, it must forward the application

package to the SBA within 30 days of

receiving the request. Under the MOU,

the recipient will be required to pay the

copying and transmittal fees. We are

requesting comment on the impact this

will have on recipients. If the SBA

requests additional information, the

recipient must forward the requested

information within 45 days of receiving

the request.

Recipients would also be required to

provide appropriate assistance to SBAcertified firms, including information

pertaining to the DBE application

process, filing locations, required

information and status of the

application.

C. Additional Changes

1. Personal Net Worth

Section 26.67 requires each

individual whose ownership and

control are relied upon for DBE

certification to submit a signed,

notarized statement of personal net

worth (PNW), with appropriate

supporting documentation. The

Department received a number of

questions about what documentation is

appropriate for recipients to require in

ascertaining the PNW of owners of DBE

firms. In the preamble to the final rule

correction (see 49 FR 34569 (June 11,

1999)), the Department recommended

using the SBA’s form as a model. SBA

requires completion of a two-page form,

supported by two years of personal and

business tax returns. The Department

wanted to remain flexible while

encouraging recipients to use forms that

are not unduly lengthy, burdensome or

intrusive. The Department did not

require recipients to use the SBA form

verbatim but encouraged them to use a

form of similar length and content,

including collecting and retaining two

years of an individuals’ personal and

business tax returns.

The final rule explicitly requires that

the personal financial information be

kept confidential. Nevertheless, the

Department has continued to receive

comments concerning the intrusiveness

of collecting personal tax returns. We

understand the justifiable privacy

concerns associated with collecting

personal income tax information.

However, we must also ensure that the

integrity of the program is maintained.

Recipients must have a tool to ensure

that non-disadvantaged persons do not

participate in the program.

Therefore, we are proposing an

alternative option with regard to

supporting documentation. Recipients

must still require an individual 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 $750,000. Applicants could

still submit a signed, notarized

statement of PNW, with appropriate

documentation. Alternatively, the

applicant could submit a signed,

notarized statement from a certified

public accountant (CPA) attesting that

the CPA has examined his or her

personal net worth pursuant to

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules 23211

§ 26.67(a)(2)(iii) and determined that his

or her personal net worth does not

exceed $750,000. This second option

would eliminate the need for the

applicant to provide personal income

tax information to the DOT recipient for

purposes of PNW.

Under either method, the

determination of an individual’s PNW

should follow certain requirements

specified in the final rule. For example,

the rule requires that an individual’s

ownership in the applicant firm be

excluded. With the exception of one

proposed change discussed below, the

requirements remain the same.

However, we are making the wording

and format of the current language

clearer and easier to read.

We are proposing a change with

respect to vested pension plans,

Individual Retirement Accounts, 401(k)

accounts, and other retirement savings

or investment programs in which the

assets cannot be distributed to the

individual at the present time without

significant adverse tax or interest

consequences. We are proposing that

PNW would include only the present

value of such assets, less the tax and

interest penalties that would accrue if

the asset were distributed at the present

time. An alternative method would be to

exclude such assets from the personal

net worth calculation. We are requesting

comment on this issue.

2. Retainage

As the Department noted in the

preamble to the February 1999 final

rule, delays in payment have long been

one of the most significant barriers to

the competitiveness, and in some cases

the viability, of small subcontractors.

One of the delays in payment about

which subcontractors have been most

concerned is payment of retainage.

Often, subcontractors have told us, they

finish all their work on a contract

months or years before the end of the

project on which the prime contractor is

working, but the prime contractor does

not pay them fully until after the

recipient has paid retainage to them at

the end of the entire project. To help

surmount this barrier, the final rule

requires prime contractors to pay

retainage to subcontractors promptly

after the subcontractors satisfactorily

complete their work.

Many states and other recipients have

responded very creatively to this

provision, taking such steps as making

incremental payments to contractors or

eliminating retainage altogether. Where

recipients have not taken such steps,

however, prime contractors have

complained that the requirement to pay

subcontractors fully before the recipient

pays retainage to the prime contractor is

a financial hardship on prime

contractors.

In order to address the prime

contractors’ concerns, without

diminishing the benefit of the existing

provision to subcontractors, the

Department is proposing to require

recipients to take one of three

approaches. First, a recipient could

eliminate retainage entirely, neither

retaining funds from prime contractors

nor permitting prime contractors to hold

retainage from subcontractors. Second, a

recipient could decide not to retain

funds from prime contractors, but give

prime contractors discretion to hold

retainage from subcontractors. In this

case, the recipient would require prime

contractors to pay subcontractors in full

after satisfactory completion of the

subcontractor’s work. Third, the

recipient could hold retainage from

prime contractors, but make incremental

inspections and approvals of the prime

contractor’s work at various stages of the

project (sometimes called ‘‘minifinals’’). The recipient would pay the

prime contractor the portion of the

retainage based on these approvals. The

prime contractor, in turn, would be

required to promptly pay all retainage

owed to the subcontractor for

satisfactory completion of the approved

work. None of these three approaches is

new. All are being employed

successfully by DOT recipients today.

We are defining ‘‘prompt’’ as no later

than thirty days. Based on our

experience in program review thirty

days was the most common length of

time suggested by recipients. We think

that this is a sensible amount of time.

We seek comment on these approaches

and on any other ideas commenters may

have concerning this matter.

3. Size Standard

One of the purposes of the DBE rule

is to make it possible for small firms to

grow. This includes the opportunity for

subcontractors to become able to

compete as prime contractors. To be

able to perform prime contracts,

companies often need to be larger and

have more resources than they had as

subcontractors. Frequently, firms who

are attempting to grow will perform

both prime contracts and subcontracts.

This may create a dilemma for DBE

firms in some cases. In order to work as

prime contractors, firms may need to

grow beyond the limits of the SBA size

standards applicable to their

subcontracting field. If they do, then

recipients may decertify them because

they are no longer small businesses. A

number of firms have expressed the

concern that this situation penalizes

success and impedes achievement of an

important objective of the DBE program.

We emphasized in the preamble to the

final rule and a recent Question and

Answer that recipients should not

totally decertify a firm because it

exceeds the size standard for one or

more of its activities. Under § 26.65(a),

if a firm meets the size standard for one

type of work (e.g., as a general

contractor), it should continue to be

certified and receive DBE credit for that

type of work, even if it has exceeded the

size standard for another type of work

(e.g., as a specialty subcontractor). In

that case, of course, the firm could not

remain eligible and receive DBE credit

for this type of activity.

The Department seeks comment on

whether we should make any

modifications of the rule to address

further the situations of firms that work

as both prime contractors and

subcontractors.

4. Proof of Ethnicity

We are proposing minor

modifications to § 26.61(c) and

§ 26.63(a) to address concerns raised by

both DBEs and recipients regarding

issues related to group membership.

There have been a few documented

instances of individuals attempting to

fraudulently participate in the DBE

program by falsely asserting to be a

member of one of the groups benefiting

from the rebuttable presumption of

social and economic disadvantage as

outlined in § 26.67(a). For this reason,

many recipients seek to obtain evidence

of group membership that goes beyond

an oral statement or ‘‘checking off a box

on a form.’’ At the same time, recipients

are concerned that if they request

additional evidence from some

individuals but not others, they could

be accused of discrimination in the

certification process. In response to both

of these concerns, we are proposing that

recipients obtain a signed and notarized

statement of group membership from all

persons who claim to own and control

a firm applying for DBE certification

and whose ownership and control are

relied upon for DBE certification.

A signed, notarized statement should

be considered sufficient proof of

ethnicity. The recipient should not ask

for additional evidence unless it has a

well founded reason to doubt the

veracity of the owner. We emphasize

that great care must be taken in looking

behind the individual’s assertion of

membership in one of the groups

designated in § 26.67(a). As a recipient,

if you have reason to believe that the

owner of a firm seeking certification has

misrepresented his/her group

membership, then further information

23212 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules

can and must be collected. However,

you must inform that person, in writing,

of your reasons for doubting his or her

statement and your need for additional

documentary evidence. Such instances

should be the exception, not the rule. It

is our expectation that requiring a

written record justifying the need for

additional information will help to

reduce the number of unnecessary

requests.

Even where additional documentation

is necessary, care should be taken to

ensure that particular ethnic group

members are not forced to meet a higher

level of proof than members of other

groups. For example, many recipients

accept a driver’s license or a birth

certificate as adequate proof of group

membership. These forms of

identification always indicate gender

and sometimes indicate the race of the

holder, however they often do not

designate whether or not an individual

is Hispanic or Native American. In some

instances, members of these groups have

been required to provide not one, but

several types of additional proof of

ethnicity simply because their driver’s

license did not indicate their race. Such

actions could constitute a violation of

the nondiscrimination provisions of 49

CFR parts 21 and 26 and of Title VI of

the Civil Rights Act of 1964.

A driver’s license or a birth certificate

may be adequate types of proof of

ethnicity. However, in cases where the

required proof does not indicate specific

races, such as Hispanic or Native

American, the applicant should only be

required to provide the same level of

proof as members of other groups. For

example, if a birth certificate is adequate

for one group, then only a single piece

of evidence may be required from

members of other groups. Such single

piece of evidence might include

naturalization papers, Indian tribal roll,

tribal voter registration certificate, a

letter from a community group,

educational institution, religious leader,

or government agency stating that the

individual is a member of the claimed

group, or a letter from the individual

setting forth specific reasons for

believing himself/herself to be a

member of the designated group.

5. Confidentiality

A common complaint of DBEs is that

there are insufficient protections for the

confidentiality of their business

information. When DBEs submit

significant amounts of information to

recipients for certification purposes,

firms are concerned that, through state

Freedom of Information Act (FOIA)

requests or discovery in state or Federal

court proceedings, their confidential

information will be released to the

public. We believe that this concern is

justified, and we believe that the

concern that confidential documents

may become public can act as a

deterrent to program participation by

some potential DBEs. For this reason,

we are amending the confidentiality

section of the regulation to parallel the

existing, tighter confidentiality

provision of § 26.67 concerning personal

net worth information. Under the

proposed provision, recipients would

not be authorized to release confidential

business information in any

circumstance without the submitter’s

written consent.

6. Economic Disadvantage

In appendix E to part 26, ‘‘Individual

Determinations of Social and Economic

Disadvantage’’, we are proposing to

remove paragraph (B)(2) under

‘‘Economic Disadvantage’’. This

paragraph requires that in the case of

applications by individuals to be

considered socially and economically

disadvantaged, the applicant submit

personal financial information for his or

her spouse. This is inconsistent with the

way the Department’s personal net

worth provisions under § 26.67 work in

the case of applicants who are members

of a group presumed to be economically

and socially disadvantaged. In order to

remove this inconsistency, we are

deleting the paragraph in question.

7. Credit for Trucking Firms

In the final rule, after reviewing

comments and the contrasting practices

of a number of recipients, the

Department decided to count credit for

the participation of DBE trucking

companies only with respect to trucks

that DBEs themselves owned and

operated. This was intended to prevent

a situation in which, for example, a DBE

trucking company owned only one truck

or a few trucks and leased the services

of a larger number of non-DBE truckers,

claiming credit for them as well. The

Department believed that this practice

was contrary to the general principle

that DBE credit should be counted only

for work that DBEs themselves perform.

Since we issued the rule, a number of

people have said to us that this

provision works an unnecessary

hardship on DBE trucking companies

and is difficult for recipients to

administer. Some have suggested, as a

middle ground, allowing credit for twice

the number of trucks actually owned by

the DBE (i.e., if a DBE owned one truck,

and leased another from a non-DBEs, it

could get credit for both). The

Department seeks comment on whether

this provision should be modified and,

if so, how.

Regulatory Analyses and Notices

Executive Order 12866 and DOT

Regulatory Policies and Provisions

This proposed rule is not a significant

regulation under either Executive Order

12866 and DOT Regulatory Policies and

Provisions. The proposal will not

impose any new costs on recipients or

contractors. It simply would make

administrative adjustments concerning

existing provisions and assist

contractors by implementing the SBA–

DOT MOU.

Regulatory Flexibility Act Analysis

The Department certifies that this

proposed rule, if made final, would not

have significant economic effects on a

substantial number of small entities.

While the proposal affects small

entities, it does not have a significant

economic impact on anyone.

Paperwork Reduction Act

This proposed rule also contains

information collection requirements. As

required by the Paperwork Reduction

Act of 1995 (the PRA, 44 U.S.C.

3507(d)), the Department will submit

these requirements to the Office of

Information And Regulatory Affairs of

the Office of Management and Budget

for review.

As noted elsewhere in this preamble,

the Department adopted the suggestion

of having one standard reporting form in

the February 2, 1999, final DBE rule.

The proposed Uniform Semi-Annual

Report of DBE Awards or Commitments

and Achievements form is contained in

Appendix B of this NPRM. At the

present time, the Department has an

information collection item approved

under the Paperwork Reduction Act.

This is for a quarterly DBE data report

from recipients to DOT (OMB No. 2105–

0510). This approval expires July 31,

2001. Under the NPRM, the frequency of

reporting would change from four times

a year to twice a year, which would

reduce the burden involved.

The February 2, 1999, final DBE rule

also adopted a single, uniform,

nationwide certification application

form. Part 26 requires firms applying for

DBE certification to provide information

to recipients to allow them to make

eligibility decisions. Currently, an

applicant firm may be required to fill

out different applications for FAA,

FHWA and FTA recipients. The

Department believes that requiring one

uniform application will reduce the

paperwork burden. The proposed

Uniform Certification Application form

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules 23213

is contained in appendix F of this

NPRM.

Individuals and organizations may

submit comments on the information

collection elements of this NPRM by

September 5, 2001 and should direct

them to the DOT docket specified at the

beginning of the NPRM. According to

OMB’s regulations implementing the

PRA (5 CFR 1320.8(b)(2)(vi)), an agency

may not conduct or sponsor, and a

person need not respond to, a collection

of information unless it displays a

currently valid OMB control number.

The OMB control number for this

information will be published in the

Federal Register after it is approved by

OMB.

Federalism

The Department has determined that

this proposed rule, if made final, would

not have Federalism impacts sufficient

to warrant preparation of a Federalism

assessment.

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 26th day of April, 2001, at

Washington, DC.

Norman Y. Mineta,

Secretary of Transportation.

For the reasons set forth in the

preamble, the Department proposes to

amend 49 CFR part 26 as follows:

PART 26—PARTICIPATION BY

DISADVANTAGED BUSINESS

ENTERPRISES IN DEPARTMENT OF

TRANSPORTATION FINANCIAL

ASSISTANCE PROGRAMS

1. The authority citation for 49 CFR

part 26 continues to read as follows:

Authority: 23 U.S.C. 324; 41 U.S.C. 2000d,

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

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

113.

2. Amend § 26.5 by adding a

definition of ‘‘DOT/SBA MOU

Memorandum of Understanding or

MOU’’ after ‘‘DOT-assisted contract’’

and by adding a definition of ‘‘SBA

certified firm’’ after ‘‘Small Business

Administration’’ to read as follows:

§ 26.5 What do the terms in this part

mean?

* * * * *

DOT/SBA Memorandum of

Understanding or MOU, refers to the

agreement signed on November 23,

1999, between the Department of

Transportation (DOT) and the Small

Business Administration (SBA)

streamlining certification procedures for

participation in SBA’s 8(a) Business

Development (8(a) BD) and Small

Disadvantaged Business (SDB)

programs, and DOT’s Disadvantaged

Business Enterprise (DBE) program for

small and disadvantaged businesses.

* * * * *

SBA certified firm refers to firms that

have a current, valid certification from

or recognized by the SBA under the 8(a)

BD or SDB programs.

* * * * *

3. Amend § 26.11 by adding

paragraph (a) to read as follows:

§ 26.11 What records to recipients keep

and report?

(a) You must use the reporting form

provided in Appendix B to this part

without change or revision.

* * * * *

4. Revise § 26.29 to read as follows:

§ 26.29 What prompt payment

mechanisms must recipients have?

(a) You must establish, as part of your

DBE program, a contract clause to

require prime contractors to pay

subcontractors for satisfactory

performance of their contracts no later

than thirty days from receipt of each

payment you make to the prime

contractor.

(b) You must ensure prompt and full

payment of retainage from the prime

contractor to the subcontractor within

thirty days after the subcontractor’s

work is satisfactorily completed. You

must use one of the following methods

to comply with this requirement:

(1) You may decline to hold retainage

from prime contractors and prohibit

prime contractors from holding

retainage from subcontractors.

(2) You may decline to hold retainage

from prime contractors and require a

contract clause obligating prime

contractors to make prompt and full

payment of any retainage kept by prime

contractor to the subcontractor within a

specific number of days after the

subcontractor’s work is satisfactorily

completed.

(3) You may hold retainage from

prime contractors and provide for

prompt and regular incremental

acceptances of portions of the prime

contract, pay retainage to prime

contractors based on these acceptances,

and require a contract clause obligating

the prime contractor to pay all retainage

owed to the subcontractor for

satisfactory completion of the accepted

work within a specific number of days

after your payment to the prime

contractor.

(c) For purposes of this section, a

subcontractor’s work is satisfactorily

completed when all the tasks called for

in the subcontract have been

accomplished and documented as

required by the recipient. When a

recipient has made an incremental

acceptance of a portion of a prime

contract, the work of a subcontractor

covered by that acceptance is deemed to

be satisfactorily completed.

(d) Your DBE program must provide

appropriate means to enforce the

requirements of this section. These

means may include appropriate

penalties for failure to comply, the

terms and conditions of which you set.

Your program may also provide that any

delay or postponement of payment

among the parties may take place only

for good cause, with your prior written

approval.

(e) You may also establish, as part of

your DBE program, any of the following

additional mechanisms to ensure

prompt payment:

(1) A contract clause that requires

prime contractors to include in their

subcontracts language providing that

prime contractors and subcontractors

will use appropriate alternative dispute

resolution mechanisms to resolve

payment disputes. You may specify the

nature of such mechanisms.

(2) A contract clause providing that

the prime contractor will not be

reimbursed for work performed by

subcontractors unless and until the

prime contractor ensures that the

subcontractors are promptly paid for the

work they have performed.

(3) Other mechanisms, consistent

with this part and applicable state and

local law, to ensure that DBEs and other

contractors are fully and promptly paid.

5. Revise § 26.61 (c) to read as follows:

§ 26.61 How are burdens of proof allocated

in the certification process?

* * * * *

(c) You must rebuttably presume that

members of the designated groups

identified in § 26.67(a) are socially and

economically disadvantaged. This

means they do not have the burden of

proving to you that they are socially and

economically disadvantaged. In order to

obtain the benefit of the rebuttable

presumption, individuals must submit a

signed, notarized statement that they are

a member of one of the groups in

§ 26.67(a). Applicants do have the

obligation to provide you information

concerning their economic disadvantage

(see § 26.67).

* * * * *

6. Revise § 26.63(a) to read as follows:

23214 Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules

§ 26.63 What rules govern group

membership determinations?

(a)(1) If, after reviewing the signed

notarized statement of membership in a

presumptively disadvantaged group (see

§ 26.61(c)), you have a well founded

reason to question the individual’s

claim of membership in that group, you

must require the individual to present

additional evidence that he or she is a

member of the group.

(2) You must provide the individual

a written explanation of your reasons for

questioning his or her group

membership and a written request for

additional evidence as outlined in

paragraph (b) of this section.

(3) In implementing this section, you

must take special care to ensure that you

do not impose a disproportionate

burden on members of any particular

designated group. Imposing a

disproportionate burden on members of

a particular group could violate § 26.7(b)

of this part and/or Title VI of the Civil

Rights Act of 1964 and 49 CFR part 21.

* * * * *

7. Amend § 26.67 as follows:

a. Revise paragraph (a)(2);

b. Remove and reserve paragraph (c),

the revision reads as follows:

§ 26.67 What rules determine social and

economic disadvantage?

(a) * * *

(1) * * *

(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) 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 $750,000.

(ii) You must require each individual

who makes this certification to support

it with the individual’s choice of either

of the following:

(A) A signed, notarized statement of

personal net worth, with appropriate

supporting documentation. This

statement and documentation must not

be unduly lengthy, burdensome, or

intrusive; or

(B) A signed, notarized statement

from a certified public accountant (CPA)

attesting that the CPA has examined the

individual’s personal net worth and

determined, consistent with the

provisions of this section and generally

accepted accounting standards, that the

individual’s personal net worth does not

exceed $750,000.

(iii) In determining an individual’s

net worth, you or the individual’s CPA

must observe the following

requirements:

(A) Exclude an individual’s

ownership interest in the applicant firm;

(B) Exclude the individual’s equity in

his or her primary residence (except any

portion of such equity that is

attributable to excessive withdrawals

from the applicant firm).

(C) For an Alaska Native, include

assets and income from sources other

than an Alaska Native Corporation but

exclude any of the following that the

individual receives from any Alaska

Native Corporation: Cash (including

cash dividends on stock received from

an ANC) to the extent that it does not,

in the aggregate, exceed $2,000 per

individual per annum; stock (including

stock issued or distributed by an ANC

as a dividend or distribution on stock);

a partnership interest; land or an

interest in land (including land or an

interest in land received from an ANC

as a dividend or distribution on stock);

and an interest in a settlement trust.

(D) Do not use a contingent liability

to reduce an individual’s net worth.

(E) With respect to assets held in

vested pension plans, Individual

Retirement Accounts, 401(k) accounts,

or other retirement savings or

investment programs in which the

assets cannot be distributed to the

individual at the present time without

significant adverse tax or interest

consequences, include only the present

value of such assets, less the tax and

interest penalties that would accrue if

the asset were distributed at the present

time.

(iv) Notwithstanding any provision of

Federal or state law, you must not

release an individual’s personal net

worth statement nor any documentation

supporting it to any third party without

the written consent of the submitter.

Provided, that you must transmit this

information to DOT in any certification

appeal proceeding under § 26.89 in

which the disadvantaged status of the

individual is in question.

* * * * *

8. Amend § 26.83 by revising

paragraph (c)(7)(i) to read as follows:

§ 26.83 What procedures do recipients

follow in making certification decisions?

* * * * *

(c) * * *

(7) Require potential DBEs to

complete and submit an appropriate

application form, unless the potential

DBE is an SBA certified firm applying

pursuant to the DOT/SBA MOU.

(i) You must use the application form

provided in Appendix F to this part

without change or revision. However,

you may provide in your DBE program,

with the approval of the concerned

operating administration, for

supplementing the form by requesting

additional information not inconsistent

with this part.

* * * * *

9. Add a new § 26.84 to read as

follows:

§ 26.84 How do recipients process

applications submitted pursuant to the

DOT/SBA MOU?

(a) When an SBA-certified firm

applies for certification pursuant to the

DOT/SBA MOU, you must accept the

certification applications, forms and

packages submitted by a firm to the SBA

for either the 8(a) BD or SDB programs,

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. Pursuant to the MOU,

the SBA will forward the package

within thirty days.

(b) If necessary, you may request

additional relevant information from the

SBA. The SBA will provide this

additional material within forty-five

days of your written request.

(c) Before certifying a firm based on

its 8(a) BD or SDB certification, you

must conduct an on-site review of the

firm (see § 26.83(c)(1)). If the SBA

conducted an on-site review, you may

rely on the SBA’s report of the on-site

review. In connection with this review,

you may also request additional relevant

information from the firm.

(d) Unless you determine, based on

the on-site review and information

obtained in connection with it, that the

firm does not meet the eligibility

requirements of subpart D of this part,

you must certify the firm.

(e) 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.

(f) You are not required to process an

application for certification from an

SBA-certified firm if the firm does not

provide products or services that you

use in your DOT-assisted programs or

airport concessions.

10. Redesignate § 26.85 as § 26.86. In

newly redesignated § 26.86, redesignate

paragraphs (b) and (c) as paragraphs (c)

and (d), respectively, and add a new

paragraph (b) to read as follows:

§ 26.86 What rules govern recipients’

denials of initial requests for certification?

* * * * *

(b) When you deny DBE certification

to a firm certified by the SBA, you must

notify the SBA in writing. The

Federal Register / Vol. 66, No. 89 / Tuesday, May 8, 2001 / Proposed Rules 23215

notification must include the reason for

denial.

* * * * *

11. Add a new § 26.85 to read as

follows:

§ 26.85 How do recipients respond to

requests from DBE-certified firms or the

SBA made pursuant to the DOT/SBA MOU?

(a) Upon receipt of a signed, written

request from a DBE-certified firm, you

must transfer to the SBA a copy of the

firm’s application package. You must

transfer this information within thirty

days of receipt of the request.

(b) If necessary, the SBA may make a

written request to the recipient for

additional materials (e.g., the report of

the on-site review). You must provide a

copy of this material to the SBA within

forty-five days of the additional request.

(c) You must provide appropriate

assistance to SBA-certified firms,

including providing information

pertaining to the DBE application

process, filing locations, required

documentation and status of

applications.

12. Amend § 26.87 by redesignating

paragraphs (h) through (j) as paragraphs

(i) through (k) and by adding a new

paragraph (h) to read as follows:

§ 26.87 What procedure does a recipient

use to remove a DBE’s eligibility?

* * * * *

(h) When you decertify a DBE firm

certified by the SBA, you must notify

the SBA in writing. The notification

must include the reason for denial.

* * * * *

13. Amend § 26.89 by revising

paragraphs (a)(1) and (f)(7) to read as

follows:

§ 26.89 What is the process for

certification appeals to the Department of

Transportation?

(a)(1) If you are a firm that is denied

certification or whose eligibility is

removed by a recipient, including SBAcertified firms applying pursuant to the

DOT/SBA MOU, you may make an

administrative appeal to the

Department.

* * * * *

(f) * * *

(7) The Department provides written

notice of its decision to you, the firm,

and the complainant in an ineligibility

complaint. A copy of the notice is also

sent to any other recipient whose

administrative record or decision has

been involved in the proceeding (see

paragraph (d) of this section). The

Department will also notify the SBA in

writing when DOT takes an action on an

appeal that results in or confirms a loss

of eligibility to any SBA-certified firm.

The notice includes the reasons for the

Department’s decision, including

specific references to the evidence in

the record that supports each reason for

the decision.

* * * * *

14. In § 26.109, revise paragraph (a)(2)

to read as follows:

§ 26.109 What are the rules governing

information, confidentiality, cooperation,

and intimidation or retaliation?

(a) * * *

(1) * * *

(2) Notwithstanding any provision of

Federal or state law, you must not

release information that may be

reasonably be construed as confidential

business information to any third party

without the written consent of the firm

that submitted the information. This

includes applications for DBE

certification and supporting

documentation. However, you must

transmit this information to DOT in any

certification appeal proceeding under

§ 26.89 in which the disadvantaged

status of the individual is in question.

* * * * *

15. Add Appendix B to part 26 to read

as follows:

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Appendix B to Part 26—Uniform Reporting Requirements Form

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16. In Appendix E, under Economic Disadvantage, remove and reserve section (B)(2).

17. Add a new Appendix F to read as follows:

Appendix F to Part 26—Uniform Certification Application Form

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[FR Doc. 01–11317 Filed 5–7–01; 8:45 am]

BILLING CODE 4910–62–C