43620 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

DEPARTMENT OF TRANSPORTATION 

Office of the Secretary 

49 CFR Parts 23 and 26 

[Docket No. DOT–OST–2022–0051] 

RIN 2105–AE98 

Disadvantaged Business Enterprise 

and Airport Concession 

Disadvantaged Business Enterprise 

Program Implementation Modifications 

AGENCY: Office of the Secretary (OST), 

U.S. Department of Transportation (DOT 

or the Department). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: This rulemaking would 

strengthen implementation of the 

Department of Transportation’s 

(Department or DOT) Disadvantaged 

Business Enterprise (DBE) and Airport 

Concession Disadvantaged Business 

Enterprise (ACDBE) Program 

regulations. The NPRM would update 

personal net worth and program size 

thresholds for inflation; modernizes 

rules for counting of material suppliers; 

incorporate procedural flexibilities 

enacted during the coronavirus 

(COVID–19) pandemic; add new 

program elements to foster greater usage 

of DBEs and ACDBEs with concurrent, 

proactive monitoring and oversight; 

update certification provisions with less 

prescriptive rules that give certifiers 

flexibility when determining eligibility; 

and make technical corrections that 

have led to substantive 

misinterpretations of the rules by 

recipients, program applicants, and 

participants. 

DATES: Comments should be filed by 

September 19, 2022. Late-filed 

comments will be considered to the 

extent practicable. 

ADDRESSES: You may submit comments 

(identified by the agency name and DOT 

Docket ID Number DOT–OST–2022– 

0051) by any of the following methods: 

• Federal eRulemaking Portal: Go to 

https://www.regulations.gov and follow 

the online instructions for submitting 

comments. 

• Mail: Docket Management Facility: 

U.S. Department of Transportation, 1200 

New Jersey Ave. SE, West Building 

Ground Floor, Room W12–140, 

Washington, DC 20590–0001. 

• Hand Delivery or Courier: U.S. 

Department of Transportation, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Ave. SE, Washington, 

DC 20590–0001 between 9 a.m. and 5 

p.m. EST, Monday through Friday, 

except Federal holidays. 

• Fax: 202–493–2251. 

Instructions: You must include the 

agency name and docket number DOT– 

OST–2022–0051 or the Regulatory 

Identification Number (RIN) 2105–AE98 

for the rulemaking at the beginning of 

your comment. All comments received 

will be posted without change to 

https://www.regulations.gov, including 

any personal information provided. 

Privacy Act: Anyone is able to search 

the electronic form of all comments 

received in any of our dockets by the 

name of the individual submitting the 

comment (or signing the comment, if 

submitted on behalf of an association, 

business, labor union, etc.). You may 

review DOT’s Privacy Act statement in 

the Federal Register published on April 

11, 2000 (65 FR 19477–78). 

Paperwork Reduction Act: Pursuant to 

44 U.S.C 3506(c)(2)(B), DOT solicits 

comments about the accuracy of the 

hours and cost burden estimates. 

Comments should be submitted to 

Walter Bohorfoush, Supervisory 

Information Technology Specialist, 

Office of the Chief Information Officer, 

U.S. Department of Transportation, at 

202–366–0560/walter.bohorfoush@

dot.gov or Joseph Nye, Office of the 

Secretary Desk Officer, Office of 

Management and Budget, at Joseph_B_

Nye@omb.eop.gov. The Office of 

Management and Budget (OMB) is 

required to make a decision concerning 

the collection of information 

requirements contained in this proposed 

rule between 30 and 60 days after 

publication of this document in the 

Federal Register. Therefore, a comment 

to OMB is best assured of having its full 

effect if OMB receives it within 30 days 

of publication. The final rule will 

respond to any OMB or public 

comments on the information collection 

requirements contained in this proposal. 

Docket: For internet access to the 

docket to read background documents 

and comments received, go to https://

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. EST, Monday through 

Friday, except Federal holidays. 

Electronic Access and Filing: A copy 

of the Notice of Proposed Rulemaking, 

all comments, final rule and all 

background material may be viewed 

online at https://www.regulations.gov 

using the docket number listed above. A 

copy of this notice will be placed in the 

docket. Electronic retrieval help and 

guidelines are available on the website. 

An electronic copy of this document 

may be downloaded from the Office of 

the Federal Register’s website at: https:// 

www.FederalRegister.gov and the 

Government Publishing Office’s website 

at: https://www.GovInfo.gov. 

FOR FURTHER INFORMATION CONTACT: 

Questions concerning part 26 

amendments should be directed to Marc 

D. Pentino, Associate Director, 

Disadvantaged Business Enterprise 

Programs Division, Departmental Office 

of Civil Rights, Office of the Secretary, 

U.S. Department of Transportation, at 

202–366–6968/marc.pentino@dot.gov. 

Questions concerning part 23 

amendments should be directed to 

Marcus England, Office of Civil Rights, 

National Airport Civil Rights Policy and 

Compliance (ACR–4C), Federal Aviation 

Administration, 600 Independence Ave. 

SW, Washington, DC 20591 at 202–267– 

0487/marcus.england@faa.gov or 

Nicholas Giles, Office of Civil Rights, 

National Airport Civil Rights Policy and 

Compliance (ACR–4C), Federal Aviation 

Administration, 600 Independence Ave. 

SW, Washington, DC 20591, at 202– 

267–0201/nicholas.giles@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

Introduction 

49 CFR Part 26 

Subpart A—General 

Bipartisan Infratructure Law (BIL) and 

Fixing America’s Surface Transportation 

(FAST) Act (§ 26.3) 

Definitions (§ 26.5) 

Disadvantaged Business Enterprise 

Personal Net Worth 

Principal Place of Business 

Transit Vehicle 

Transit Vehicle Dealership 

Transit Vehicle Manufacturer (TVM) 

Unsworn Declaration 

Reporting Requirements (§ 26.11 and 

Appendix B) 

Uniform Report of DBE Awards or 

Commitments and Payments (Uniform 

Report) 

Bidders lists 

Moving Ahead for Progress in the 21st 

Century (MAP–21) data reports 

Subpart B—Administrative Requirements for 

DBE Programs for Federally Assisted 

Contracting 

Threshold Program Requirement for FTA 

Recipients (§ 26.21) 

Unified Certification Program (UCP) DBE/ 

ACDBE Directories (§§ 26.31 and 

26.81(g)) 

Monitoring Requirements (§ 26.37) 

Subpart C—Goals, Good Faith Efforts, and 

Counting 

Prompt Payment and Retainage (§ 26.29) 

Transit Vehicle Manufacturers (TVMs) 

(§ 26.49) 

Section Heading 

Terminology and Abbreviations 

Post-Award Reporting Requirements 

Awards to Transit Vehicle Dealerships 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43621 

TVM Goal Setting, Submission, and 

Review 

TVM Uniform Reports 

Good Faith Efforts Procedures for Contracts 

with DBE Goals (§ 26.53) 

DBE Performance Plan (DPP) 

Terminations 

DBE Supplier Credit (§ 26.55(e)) 

Limiting DBE Supplier Goal Credit 

Evaluating a Supplier’s Designation as a 

Regular Dealer 

Drop-Shipping and Delivery From Other 

Sources 

Negotiating the Price of Supplies 

DBE manufacturers 

Suppliers of Specialty Items 

Subpart D—Certification Standards 

General Certification Rules (§ 26.63) 

Business Size (§§ 26.65, 23.33) 

Changing the Measurement for NAICS 

Code Size Calculations From 3 to 5 Years 

Statutory Gross Receipts Cap 

Future Amendments and Technical 

Amendments 

Gross Receipts of ACDBE Affiliates and 

Joint Venture Partners 

Personal Net Worth (PNW) Adjustment 

Rationale for $1.60 Million Adjustment 

Periodic Adjustments to the PNW Cap 

Presumption of Social and Economic 

Disadvantage (SED) (§§ 26.5, 26.63, and 

26.67 and Appendix E) 

Evidence and Rebuttal of Social 

Disadvantage 

Evidence and Rebuttal of Economic 

Disadvantage 

Individualized Determinations of Social 

and Economic Disadvantage 

Ownership (§ 26.69) 

Burden Reduction, simplification, and 

Consistency 

Reasonable Economic Sense 

Control (§ 26.71) 

Socially and Economically Disadvantaged 

Owner (SEDO) Decisions 

Governance 

Expertise 

SEDO Decisions 

Delegation 

Independent Business 

Franchises 

NAICS codes 

Subpart E—Certification Procedures 

Technical Corrections to UCP 

Requirements (§ 26.81) 

Virtual On-site Visits (§ 26.83(c)(1) and 

(h)(1)) 

Timely Processing of In-State Certification 

Applications (§ 26.83(k)) 

Curative Measures (§ 26.83(m)) 

Interstate Certification (§ 26.85) 

Issues With the Current Rule 

Post-Interstate Certification Procedures 

Denials of In-State Certification 

Applications (§ 26.86) 

Decertification Procedures (§ 26.87) 

Strict Compliance 

Failure to Submit Declaration of Eligibility 

(DOE) 

Decertification Grounds 

Virtual Informal Hearings 

Informal Hearing Participation 

Counting DBE Participation After 

Decertification (§ 26.87(j)) 

Summary Suspension (§ 26.88) 

Appeals to DOCR (§ 26.89) 

Updates to Appendices F and G 

49 CFR Part 23 

Subpart A—General 

Aligning Part 23 With Part 26 Objectives 

(§ 23.1) 

Definitions (§ 23.3) 

Affiliation 

Airport Concession Disadvantaged 

Business Enterprise (ACDBE) 

Concession 

Personal Net Worth 

Socially and Economically Disadvantaged 

Individual 

Sublease 

Subpart B—ACDBE Program 

Direct Ownership, Goal setting, and Good 

Faith Efforts Requirements (§ 23.25) 

Fostering ACDBE Small Business 

Participation (§ 23.26) 

Retaining and Reporting Information About 

ACDBE Program Implementation 

(§ 23.27) 

Subpart C—Certification and Eligibility of 

ACDBEs 

Size Standards (§ 23.33) 

Certifying Firms That Do Not Perform 

Work Relevant to an Airport’s 

Concessions (§ 23.39) 

Subpart D—Goals, Good Faith Efforts, and 

Counting 

Removing Consultation Requirement When 

No New Concession Opportunities Exist 

(§ 23.43) 

Non-car Rental Concession Goal Base 

(§ 23.47) 

Counting ACDBE Participation After 

Decertification (§ 23.55) 

Shortfall Analysis Submission Date 

(§ 23.57) 

Subpart E—Other Provisions 

Long-tErm Exclusive Agreements (§ 23.75) 

Five-Year Term for Long-Term Agreements 

Long-Term Agreements and Options 

Long-Term Agreements and Holdovers 

Definition of Exclusive Agreement 

Local Geographic Preferences (§ 23.79) 

Appendix A to Part 23: Uniform Report of 

ACDBE Participation 

Technical Corrections 

Obsolete Dates in § 23.31 

2019 Uniform Certification Application 

(UCA) Inconsistency 

Enhanced Consistency With Part 26 

Introduction 

Spanning nearly 40 years, the DBE 

and ACDBE Programs are small business 

initiatives intended to prevent 

discrimination, and remedy the effects 

of past discrimination, in federally 

assisted contracting markets. This 

proposed rulemaking advances the 

administration’s goals of advancing 

equity and expanding opportunities in 

government programs. We invite 

comment from Federal Aviation 

Administration (FAA), Federal Highway 

Administration (FHWA), and Federal 

Transit Administration (FTA) funding 

recipients and project sponsors, firms 

participating or seeking to participate in 

federally assisted contracts and/or in 

airport concessions, the prime 

contracting community at large, and the 

general public about our proposed 

changes to the DBE and ACDBE Program 

regulations at 49 CFR parts 26 and 23, 

respectively. 

The Department revised the ACDBE 

Program regulation in 49 CFR part 23 

(part 23) in 2005 to make it parallel, in 

many important respects, to the DBE 

regulation in 49 CFR part 26 (part 26). 

DOT later modified part 23 in June 

2012, amending the small business size 

standards and personal net worth limit 

for ACDBE Program participants. In 

October 2014, the Department published 

a final rule for part 26, revising the 

Uniform Certification Application 

(UCA) and the Uniform Report of DBE 

Awards or Commitments and Payments 

(Uniform Report), and adding the 

Personal Net Worth (PNW) Statement. 

The rule also strengthened the 

certification-related provisions, 

amended provisions addressing good 

faith efforts, overall goal setting, transit 

vehicle manufacturers, and counting for 

trucking companies. 

Since 2014, FAA, FHWA, FTA, and 

the Departmental Office of Civil Rights 

(DOCR) have held outreach and 

listening sessions and conducted 

trainings on a range of critical program 

topics including certification, counting, 

goal setting, good faith efforts, joint 

ventures, long-term exclusive (LTE) 

agreements at airports, PNW, gross 

receipts calculation adjustments, and 

participatory reporting. In Fiscal Year 

2019, for example, FAA conducted six 

listening sessions, each focusing on 

issues identified within the specific 

subparts of part 23 with input from 

airport sponsors, ACDBEs, certifying 

agencies, consultants, and industry 

groups. In that same fiscal year, FHWA 

held stakeholder listening sessions 

about supply transactions and counting 

mechanisms for DBEs considered 

brokers, manufacturers, and regular 

dealers. 

The Department also conducted 

internal research and analysis of issues 

raised by stakeholders before and during 

the COVID–19 pandemic, including 

those presented by the Transportation 

Research Board, the Airport Cooperative 

Research Program, prime contractor 

associations, and small businesses 

submitting certification appeals to 

DOCR. The Department found that 

many portions of the current rules seem 

outdated for today’s DBE and ACDBE 

marketplace. They might inhibit firm 

growth and success, and limit recipient 

and sponsors’ ability to effectively 

monitor program compliance by all 

participants in a pandemic and postpandemic environment. The 

Department seeks to update several core 


lotter on DSK11XQN23PROD with PROPOSALS2
43622 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

1See ‘‘USDOT Official Guidance—DBE and 

ACDBE Certification for Non-Transportation 

Industry Businesses’’ at https:// 

www.transportation.gov/civil-rights/disadvantagedbusiness-enterprise/dbe-and-acdbe-certificationnon-transportation. 

provisions of the regulation to maintain 

optimal program performance, improve 

operational cohesiveness, and provide 

contemporary solutions for program 

deficiencies. 

The DBE Program was reauthorized in 

the Bipartisan Infrastructure Law (BIL) 

(enacted as the Infrastructure 

Investment and Jobs Act (Nov. 15, 2021) 

(Pub. L. 117–58)). The ACDBE Program 

is authorized and mandated by 49 

U.S.C. 47107(e), 42 U.S.C. 2000d, 49 

U.S.C. 322, and Executive Order 12138. 

Part 26 

Subpart A—General 

1. Bipartisan Infrastructure Law (BIL) 

and Fixing America’s Surface 

Transportation Act (FAST Act) (§ 26.3) 

The Department is amending § 26.3 to 

add applicable Titles in the reference to 

the Department’s surface authorizations, 

the BIL enacted on November 15, 2021, 

and the Fixing America’s Surface 

Transportation Act (FAST Act), enacted 

on December 4, 2015. 

2. Definitions (§ 26.5) 

We propose minor technical and 

spelling corrections for the following 

terms: ‘‘Alaska Native, ‘‘Department or 

DOT,’’ ‘‘Indian tribe or Native American 

tribe,’’ ‘‘primary industry 

classification,’’ ‘‘recipient,’’ and 

‘‘Secretary.’’ We also propose expanding 

current definitions and adding new 

definitions, as described below. 

Disadvantaged Business Enterprise 

We would like to clarify the term 

‘‘Disadvantaged Business Enterprise’’ to 

align it with the definition in the 

Department’s official guidance regarding 

the types of firms that should apply for 

DBE and/or ACDBE certification.1 The 

guidance provides that certification in 

the DBE Program be limited to business 

concerns engaged in transportationrelated industries. We propose adding 

that language to the definition of 

Disadvantaged Business Enterprises. 

Personal Net Worth 

The Department seeks to modify the 

definition of ‘‘personal net worth’’ for 

simplicity and to include a reference to 

the applicable provision (i.e., proposed 

§ 26.68). 

Principal Place of Business 

We would like to clarify the definition 

of ‘‘principal place of business’’ to 

explain that it does not include 

construction trailers or other temporary 

construction sites. This clarification 

would mirror the Small Business 

Administration’s (SBA) definition of 

‘‘bona fide place of business’’ in 13 CFR 

124.3. 

Transit Vehicle 

The Department recognizes that the 

term ‘‘transit vehicle’’ is used 

throughout part 26 yet is not defined; 

some recipients and TVMs have 

expressed confusion over whether 

‘‘transit vehicle’’ refers to only those 

vehicles produced by a TVM. The 

Department believes that defining this 

term in the regulation is important 

because whether a vehicle qualifies as a 

‘‘transit vehicle’’ under part 26 has a 

significant impact on a recipient’s goal 

setting and reporting efforts. For 

example, pursuant to § 26.45(a)(2), 

‘‘transit vehicle purchases’’ are to be 

excluded from a recipient’s goal 

calculation. Some recipients have 

incorrectly interpreted ‘‘transit vehicle’’ 

to mean ‘‘vehicles used by the recipient 

for transit purposes,’’ and therefore have 

excluded from their goal vehicles such 

as minivans manufactured by major 

automakers to be used for micro-transit 

pilots. In practice, funds used to 

purchase such vehicles must be 

included in the recipient’s goal 

calculations because such 

manufacturers do not qualify as TVMs 

and therefore do not have their own 

DBE programs. The Department 

proposes to alleviate this confusion by 

adding the following definition of 

‘‘transit vehicle’’ to § 26.5: a vehicle 

manufactured by a TVM. Additionally, 

the Department proposes to make 

explicit that a vehicle manufactured by 

a non-TVM is not considered a transit 

vehicle for purposes of part 26, 

notwithstanding the vehicle’s ultimate 

use. Thus, when a recipient procures 

vehicles that are not manufactured by a 

TVM, the FTA funds used in that 

procurement must be included in either 

the recipient’s overall triennial goal or 

in a project goal established pursuant to 

§ 26.45(e)(3) and must not be treated as 

if the funds were awarded to a TVM. 

Relatedly, any FTA funds used to 

procure vehicles that are not 

manufactured by a TVM must be 

reported in the recipient’s Uniform 

Report pursuant to § 26.11(a). 

Transit Vehicle Dealership 

The Department proposes to add a 

definition of ‘‘transit vehicle 

dealership’’ to § 26.5. This change, in 

combination with the proposed edits to 

§ 26.49, will clarify the Department’s 

existing practice regarding transit 

vehicle dealerships. The Department 

proposes to define ‘‘transit vehicle 

dealership’’ as follows: a business that 

is primarily engaged in selling transit 

vehicles but that does not manufacture 

vehicles itself. This addition would 

facilitate more accurate tracking of FTA 

funds and DBE participation, thus better 

serving the program. 

Transit Vehicle Manufacturer (TVM) 

The Department first added a 

definition of TVM to § 26.5 on October 

2, 2014 (79 FR 59592). Through 

experience, we have seen that the 

current definition creates confusion for 

manufacturers of both public and 

private mass transportation vehicles. 

The Department’s practice is to require 

all manufacturers of vehicles intended 

for public mass transportation to 

become certified TVMs to bid on FTAfunded contracts for such vehicles, even 

if they also manufacture vehicles for 

both public and private transportation 

and industrial vehicles. However, under 

the current definition such a 

manufacturer may question whether its 

‘‘primary business purpose is to 

manufacture vehicles specifically built 

for public mass transportation,’’ 

especially if the combined sales to 

private operators and from commercial 

vehicles exceed the sales of vehicles 

sold to public transit operators. The 

Department has found that the current 

definition of TVM is ambiguous and 

does not clearly convey which entities 

qualify as TVMs. Thus, we are 

proposing several changes to the TVM 

definition. We wish to remove 

‘‘specifically’’ and ‘‘public’’ from the 

definition. This would clarify that such 

manufacturers are considered TVMs and 

are therefore subject to all applicable 

DBE regulation requirements. 

Further, the Department has found 

that the TVM definition creates 

ambiguity as to which entities are 

subject to part 26 when a vehicle 

receives post-production alterations or 

is retrofitted for public transportation 

purposes (e.g., so-called ‘‘cutaway’’ 

vehicles, vans customized for service to 

people with disabilities). In practice, the 

Department has noted that the current 

definition, which includes ‘‘producers 

of vehicles that receive post-production 

alterations or retrofitting to be used for 

public transportation purposes,’’ has 

caused some recipients and TVMs to 

mistakenly believe that any 

manufacturer of any motor vehicle 

could become a TVM based on the 

actions of a third-party modifier. 

However, as the Department stated in its 

response to comments on the 2014 final 

rule, we intended to include only those 

businesses that perform the alterations 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43623 

2See ‘‘COVID–19 Public Health Emergency: 

Update and Supplemental Guidance’’ at https:// 

www.transportation.gov/sites/dot.gov/files/2020-05/ 

DOCR%20Guidance%20April

%2030%2C%202020_0.pdf. 

or retrofitting to vehicles for public 

transportation purposes. Accordingly, 

the Department proposes to address this 

confusion by clarifying that the 

businesses that perform retrofitting or 

post-production alterations to vehicles 

so that such vehicles may be used for 

public transportation purposes are 

considered TVMs. 

Further, the current TVM definition 

states that ‘‘businesses that 

manufacture, mass-produce, or 

distribute vehicles solely for personal 

use and for sale ‘‘off the lot’’ are not 

considered transit vehicle 

manufacturers.’’ With this language, the 

Department intended to exclude from 

the TVM definition entities that mass 

produce vehicles that are not 

specifically intended to carry a large 

number of passengers, which generally 

lack significant opportunities for 

recipient-requested specifications at the 

manufacturing stage. The Department 

recognizes that some recipients do use 

such vehicles for transit purposes. For 

example, a transit agency may use a 

completely unmodified four-door sedan 

to provide paratransit services for riders 

who do not require specialized 

equipment. In practice, the Department 

has noted that it is unclear whether any 

vehicle manufacturer makes vehicles 

‘‘solely’’ for personal use. Still, the 

Department intends to exclude vehicle 

manufacturers that are primarily 

engaged in selling vehicles that are 

ultimately designed to be used by 

individuals, notwithstanding their 

actual use. Generally, public 

transportation does not currently 

represent a major line of business for 

these manufacturers, and their business 

structures and supply chains do not 

create the sort of subcontracting 

opportunities that would allow for 

meaningful DBE participation. The 

Department would like to exclude such 

manufacturers and requests comments 

on whether such manufacturers should 

be treated as TVMs when they intend to 

bid on FTA-assisted contracts, 

particularly in light of new transit 

models and emerging vehicle 

technologies. 

Additionally, the Department has 

found that the ‘‘off the lot’’ condition is 

unnecessary and results in further 

confusion. The Department initially 

included the ‘‘off the lot’’ language to 

highlight that once a vehicle reaches the 

lot there are no longer meaningful 

opportunities for DBEs to participate in 

the manufacturing process, therefore 

obviating the rationale for requiring a 

TVM to operate a DBE Program. 

However, the language has caused some 

eligible TVMs to question how they 

should treat vehicles that they 

manufacture and sell to recipients from 

their own lots. The current definition 

creates some confusion over whether a 

vehicle must be both for personal use 

and for sale off the lot to meet the 

exception, or instead only needs to meet 

one of those conditions. 

The Department proposes to address 

this ambiguity by replacing ‘‘solely’’ 

with ‘‘primarily,’’ removing the 

reference to ‘‘off the lot’’ purchases and, 

as discussed below and in the 

discussion of the proposed changes to 

§ 26.49, add a definition and specify the 

requirements for transit vehicle 

dealerships. The Department expects 

that these revisions would clarify to 

vehicle manufacturers primarily 

engaged in producing personal use 

vehicles that they are generally not 

subject to part 26 and would clarify to 

eligible TVMs that the point of sale is 

irrelevant if it is the TVM that bids on 

the contract from the recipient. 

Unsworn Declaration 

Parts 26 and 23 contain several 

sections that require applicants and 

DBEs to submit documentation by 

notarized statement, sworn affidavit or 

unsworn declaration. See e.g., 

§§ 23.31(c)(2), 23.39(b), 26.61(c), 

26.67(a), 26.83(c)(3), (i)(3), and (j), and 

26.85(c)(4). The Department recognized 

(and continues to recognize) that the 

COVID–19 public health emergency 

made it difficult and unsafe to have 

forms notarized in person. Thus, on 

April 30, 2020, we issued temporary 

guidance to address this challenge.2 It 

was extended until June 30, 2022, and 

permits alternative methods to meet the 

notary requirements in parts 26 and 23 

by: 

1. Allowing the use of online notary 

public services if the recipient’s state 

permits notarized digital signatures 

validated with an electronic notary seal. 

2. Allowing the use of a subscribing 

witness if the recipient’s state permits 

such use permitting the document to be 

signed in the presence of a witness; the 

witness, not the signer, then appears 

before a notary if doing so does not 

compromise social distancing. 

3. Allowing the filing of unsworn 

declarations executed under penalty of 

perjury rather than sworn affidavits, 

including affidavits of no change. 

4. Allowing unsworn declarations as 

an interim measure and requiring the 

applicant or certified firm to follow up 

with a sworn version at a to-be 

determined later date. 

The Department is aware that the 

remote online notarization process is 

working effectively, and states are 

increasingly permitting this process in 

furtherance of the DBE requirements. 

The Department understands that in 

response to the COVID–19 pandemic, 

some states accelerated the 

implementation of laws permitting 

remote notarization or temporarily 

waived certain provisions of law that 

would otherwise impede the availability 

of remote notarization. 

Further, the Department believes the 

use of unsworn declarations executed 

under penalty of perjury rather than 

sworn affidavits has been viewed as a 

positive development. There are 

compelling reasons to continue allowing 

declarations under circumstances in the 

regulation where affidavits or 

verifications are normally required. The 

Department underscores that the use of 

declarations in lieu of sworn affidavits 

does not diminish the legal sanctions 

available. Section 26.107(e) 

acknowledges that the Department may 

refer false statement claims under 18 

U.S.C. 1001 to the U.S. Department of 

Justice for prosecution. Additionally, 

misstatements in a declaration are 

punishable as perjury under 18 U.S.C. 

1621. Moreover, 28 U.S.C. 1746 

recognizes that a matter required or 

permitted to be supported, evidenced, 

or proved by the sworn affidavit, may be 

supported by an unsworn declaration 

under penalty of perjury, with like force 

and effect. 

The use of online notarization 

services and the use of declarations in 

lieu of sworn affidavits has reduced 

burdens for small businesses that do not 

have direct or immediate access to a 

notary public. The Department, 

however, believes more benefits with 

even less burden can be achieved by 

relying on declarations rather than 

sworn affidavits; these benefits include 

convenience, time, and cost savings. 

Based on the success of the temporary 

practices and the benefits to small 

businesses, the Department is proposing 

to eliminate the requirement for sworn 

affidavits and notarization and instead 

require the use of unsworn declarations 

under penalty of perjury. 

3. Reporting Requirements (§ 26.11 and 

Appendix B) 

The Department proposes three 

changes to reporting requirements: (1) 

revise the Uniform Report to include 

additional data fields, (2) direct 

recipients to obtain a standardized set of 

bidders list data and enter it into a 

centralized database specified by DOT, 

and (3) expand data collection 

requirements for Moving Ahead for 


lotter on DSK11XQN23PROD with PROPOSALS2
43624 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

3See ‘‘New DBE Uniform Report’’ at https:// 

www.transportation.gov/civil-rights/disadvantagedbusiness-enterprise/new-dbe-uniform-report. 

4See ‘‘Guidance on Completing Ongoing 

Payments’’ at https://www.transportation.gov/sites/ 

dot.gov/files/2020-01/docr-20180425- 

001part26qa.pdf. 

Progress in the 21st Century (MAP–21) 

data reports. 

The proposed revisions to reporting 

requirements are critical to DOT’s 

efforts to improve data-driven program 

evaluation and DBE Program decision 

making going forward. The Department 

believes the proposed revisions would 

remedy current reporting deficiencies. 

They would also be a meaningful step 

toward a more data-driven and uniform 

approach to making future program 

improvements. An expanded data 

collection would allow DOT to look at 

data across several years to get a 

thorough assessment of the impact of 

the DBE Program. 

Uniform Report 

The Department collects much of its 

DBE utilization data from the Uniform 

Report. Recipients annually submit it to 

the OA(s) that provide funding to them. 

We propose to revise the Uniform 

Report to include additional data that 

would assist the OAs and the 

Department with evaluating whether the 

DBE Program is making progress toward 

meeting its stated objectives in § 26.1. 

The Department proposes to revise the 

Uniform Report to include the following 

new data fields: 

• Names of the DBEs with contracts 

that are included in the Uniform Report. 

• Zip code of the firm’s principal 

place of business. 

• Owner(s)’ contact information. 

• Work category/trade firm performed 

in that contract. 

• North American Industry 

Classification System (NAICS) code 

associated with the type of work 

performed. 

• Dollar value of the contract. 

• Federally assisted contract number. 

• Ethnic group membership. 

• DBEs decertified during the 

reporting period for excess gross 

receipts beyond the relevant size 

standard or because the disadvantaged 

owner exceeded the personal net worth 

cap. 

• Number of DBEs listed at time of 

commitment that were replaced during 

the life of the contract. 

The Department believes that access 

to this data would help inform the 

Department about areas that may need 

to be addressed through future policy 

decisions and regulation revisions. For 

example, the names of DBEs and NAICS 

codes would allow the Department to 

identify the firms working on federally 

assisted contracts to determine whether 

the DBE Program is benefiting a large 

subsection of all DBEs and not only a 

select few. 

Information on firms that have 

‘‘outgrown’’ the DBE Program by 

exceeding the business size or PNW 

limits, would allow the Department to 

determine whether firms later reenter 

the program. This data would help the 

Department to evaluate progress 

towards the DBE Program objective: 

‘‘[t]o assist the development of firms 

that can compete successfully in the 

marketplace outside the DBE Program.’’ 

§ 26.1(g). 

The proposed data collection would 

make it possible for the Department to 

compare information from 3 datasets: 

the new MAP–21 report (e.g., the total 

number of DBEs, delineated by NAICS 

code and prequalification), bidders list 

(i.e., those DBEs that are actively 

bidding on federally assisted contracts), 

and Uniform Report (i.e., those DBEs 

that are awarded contracts and 

subcontracts). The new information 

would improve the Department’s ability 

to evaluate program trends and would 

help establish a national baseline for the 

status of the DBE Program. 

The Department also proposes to 

revise the method that recipients use to 

submit the Uniform Report. Section 

26.11(a) instructs recipients to transmit 

the Uniform Report form in appendix B 

for review by the applicable OA. 

Recipients currently submit the 

information electronically and no longer 

submit printed spreadsheets. For this 

reason, the Department proposes to 

amend the rule, instructing recipients to 

submit this information in a form 

acceptable to the concerned OA. We 

also propose to remove the Uniform 

Report form from appendix B. Official 

forms are not required to be reproduced 

in the Code of Federal Regulations 

(CFR), and the Uniform Report is readily 

available on the DOT website.3

Removing this form from the CFR is an 

administrative action and would not 

impact the ability of the public to 

comment on any amendments to the 

information collections contained in 

these forms. 

The proposal would make a minor 

change to instruction 5, which specifies 

the reporting period for FHWA and FTA 

recipients. The change would clarify 

that FTA recipients that do not meet the 

new $670,000 threshold in § 26.21, are 

required to report data to the OA that 

covers the entire year. 

The proposal would also make a 

technical correction to line 18 of the 

report to conform the form text with the 

Department’s official guidance on 

reporting payments on ongoing 

contracts and add an example to explain 

the number of contracts reported in item 

18(C) may differ from the number 

reported in item 18(A).4

Finally, the Department does not 

currently collect data on the number of 

DBEs committed in response to a 

contract goal (prior to contract award) 

that were terminated during the life of 

the contract by the prime contractor. 

Nor do we collect information on the 

reasons for those terminations. This data 

would assist the Department with 

identifying any trends in the number of 

terminations and the most common 

reasons for terminations. For example, 

many terminations may occur in certain 

parts of the country, or many 

terminations may occur due to 

overcommitments by DBEs. With this 

data available, the Department can 

provide focused technical assistance 

and training to reduce the number of 

DBEs terminated and provide 

supportive services to DBEs to assist in 

appropriate bidding practices. The 

Department seeks comment about how 

frequent and detailed the collection 

should be as well as what would be the 

best and most efficient method to 

capture data on terminations of 

committed DBEs. 

Bidders Lists 

Section 26.11(c) instructs recipients to 

create and maintain a bidders list with 

certain information about DBE and nonDBE contractors and subcontractors who 

seek work on federally assisted 

contracts. Section 26.11(c)(1) states that 

the purpose of the list is related to 

determining availability for use in goalsetting. In the 1999 final rule, the 

Department noted ‘‘bidders lists appear 

to be a promising method for accurately 

determining the availability of DBE and 

non-DBE firms’’ and that ‘‘creating and 

maintaining a bidders list would give 

recipients another valuable way to 

measure the relative availability of 

ready, willing and able DBEs when 

setting their overall goals.’’ (64 FR 5096, 

5104 (Feb. 2, 1999)) The Department 

also noted in the 1999 final rule that 

flexibility was important because of 

potential burdens related to collecting 

data about ‘‘subcontractors that were 

unsuccessful in their attempts to obtain 

contracts.’’ Id. At the time, the 

Department did not seek to impose 

procedural requirements for collecting 

the data, in the interest of reducing 

burdens. The Department suggested 

several possible collection methods, 

including disseminating surveys and 

aggregating data from multiple sources. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43625 

These suggestions were incorporated 

into § 26.11(c)(3). It is not currently 

known how many recipients engaged or 

continue to engage in surveys and 

questionnaires to obtain bidders list 

information or how many are using this 

information to set overall goals. In 

practice, when setting overall goals 

many—if not most—recipients use DBE 

directories and U.S. Census Bureau 

data, a method described in § 26.45(c)(1) 

or use data from a disparity study as 

described in § 26.45(c)(3). 

Many recipients of DBE Programs 

specify that bidders list information is 

collected from all bidders at the time of 

bid submission, and many recipients 

rely on electronic systems for capturing 

and storing this information. Currently, 

all bidders list information is obtained 

and maintained locally by each 

recipient and is not reported to the 

Department or the concerned OA. As a 

result, this data is disaggregated among 

thousands of recipients in a wide 

variety of formats and may contain a 

variety of different data points. In a 

standardized and centralized format, 

this data could be of great value to the 

Department in evaluating the extent to 

which the program is achieving the 

objectives of § 26.1(b) and (g). A 

centralized database, searchable by 

recipients, could also improve the 

viability of the bidders list method 

described in § 26.45(c)(2) as a means for 

recipients to identify DBE availability at 

Step 1 of the overall goal setting 

process. 

The Department therefore proposes 

revising § 26.11(c) to require recipients 

to obtain and enter bidders list data into 

a centralized database the Department 

would specify. The purpose of this 

proposed change is twofold: first, the 

revision would build a data source that 

would allow more accurate and more 

granular analysis of firms actively 

seeking to participate in DOT-funded 

contracts in relation to the DBE Program 

objectives of § 26.1; secondly, a 

searchable, centralized database with 

bidders list information that includes an 

expanded dataset would aid recipients 

in evaluating DBE availability for goal 

setting purposes. We invite comment on 

estimated costs for developing and 

maintaining such a database (this is not 

a request for proposals or offers, and the 

Department is not seeking or accepting 

unsolicited proposals). 

The Department also proposes to 

amend § 26.11(c)(2) to require recipients 

to obtain and report the following 

additional data sets: race and gender 

information for the firm’s majority 

owner; and NAICS code applicable to 

each scope of work the firm sought to 

perform in its bid. This proposed 

revision would help ensure that the 

bidders list information to be collected 

includes at least the same elements as 

those being required in the proposed 

change to the Uniform Report. In 

conjunction with the proposed changes 

to the MAP–21 Report in § 26.11(e) and 

the Uniform Report, the proposed 

bidders list reporting requirement 

would provide the Department with 

data showing how many and what types 

of DBE firms are certified, how many 

DBEs are actively bidding as prime or 

subcontractors, and which of them are 

actually awarded contracts or 

subcontracts. 

To ensure uniformity of data 

collection for proper analysis, the 

Department proposes a change to 

§ 26.11(c)(3) regarding the collection of 

bidders list information to require a 

standard practice of requesting the 

information with bids or initial 

proposals. 

The Department anticipates minimal 

impact to stakeholders from these 

changes as recipients already collect 

most (if not all) of this information 

when conducting good faith efforts to 

obtain DBE participation on contracts 

with DBE goals. Additionally, contrary 

to the situation in 1999, current internet 

and data capture technology makes 

sending out surveys and questionnaires 

and aggregating that data less 

burdensome. 

MAP–21 Data Reports 

In 2014, the Department implemented 

a longstanding provision in the 

Department’s surface transportation 

program authorizations, adding a new 

reporting requirement which we called 

the MAP–21 data report. Under 

§ 26.11(e), state departments of 

transportation, on behalf of their UCP 

members, submit UCP directory 

information yearly to the Departmental 

Office of Civil Rights reporting the 

percentage and location in the state of 

DBEs controlled by women; socially and 

economically disadvantaged individuals 

(other than women); and individuals 

who are women and are otherwise 

socially and economically 

disadvantaged individuals. The 

Department usually sends a request for 

this information each Fall with a 

January due date and we have 

interpreted the ‘‘location in the state’’ to 

mean certified in a recipient’s home 

state or certified out-of-state. 

The MAP–21 report information is 

distinct from what is included in the 

Uniform Report that recipients and 

sponsors annually submit to the 

relevant OAs. It provides a yearly 

snapshot of the number and percentage 

of DBEs in that state. However, the 

MAP–21 report is limited in scope and 

utility largely because the Department is 

unable to break out the number of firms 

certified, denied, or decertified by 

ethnicity. This limitation prevents any 

comparison to section C of the Uniform 

Report that could show volume of 

participation in relation to firm 

ownership data contained in state 

directories. 

We are mindful that similar concerns 

were raised in a 2001 Government 

Accountability Office (GAO) report 

(‘‘Disadvantaged Business Enterprise: 

Critical Information is Needed to 

Understand Program Impact,’’ GAO–01– 

586, pp. 18–19 (Jun. 1, 2001)), which 

criticized elements of the Department’s 

data collection as not truly reflective of 

the environment that exists for the small 

business community of DBEs and DBE 

applicants. The GAO observed, for 

example, that a lack of key information 

prevents anyone from gaining a clear 

understanding of the firms that 

participate in the DBE Program and how 

these firms compare with the rest of the 

transportation contracting community. 

In response to the GAO report and 

subsequent observations, the 

Department instituted many changes to 

the Uniform Report, mandated 

improvements to state directories, and 

instituted the current MAP–21 

collection. The existing MAP–21 data 

collected shows the number of DBE 

certifications steadily increasing 

(approximately 3.5 percent each year). 

More can be done now, however, to 

inform our understanding of the DBE 

Program’s impact and depth of coverage. 

The Department believes the 

proposed revision remedies the current 

report deficiencies and is a meaningful 

first step toward a data-driven and 

uniform approach to future program 

improvements and coordination among 

program actors. The proposed revision 

does not replace existing data collection 

requirements under the BIL but expands 

the collection of data to cover the 

number of firms denied certification, 

summarily suspended, or decertified by 

ethnicity and gender. This expanded 

data collection would allow the 

Department to look at data across 

several years to develop a thorough 

assessment of the impact of the DBE 

certification process. 

We invite comment on expanding this 

collection to cover: (1) the number and 

percentage of in-state and out-of-state 

DBE certifications for socially and 

economically disadvantaged owners by 

gender and ethnicity (Black American, 

Asian-Pacific American, Native 

American, Hispanic American, 

Subcontinent-Asian American, and nonminority); (2) the number of DBE 


lotter on DSK11XQN23PROD with PROPOSALS2
43626 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

certification applications received from 

in-state and out-of-state firms and the 

number found eligible and ineligible; (3) 

the number of in-state and out-of-state 

firms decertified and summarily 

suspended; (4) the number of in-state 

and out-of-state applications received 

for an individualized determination of 

social and economic disadvantage 

status; (5) the number of in-state and 

out-of-state firms certified whose 

owner(s) made an individualized 

showing of social and economic 

disadvantaged status; and (6) the 

number of DBEs pre-qualified in their 

work type by the recipient. 

The Department proposes to create a 

similar data reporting requirement for 

the ACDBE Program (excluding 

prequalification data). The proposed 

rule would add a new paragraph to 

§ 23.27 that would require state 

departments of transportation, on behalf 

of their UCP members, to include 

ACDBE data in the yearly report to 

DOCR. This data collection would 

provide the Department a yearly 

snapshot of the number and percentage 

of ACDBEs. The Department anticipates 

that expanding the collection to include 

information on ACDBEs would pose 

minimal burden on recipients because 

UCPs are already required to report this 

data for DBEs. It is highly useful in our 

view for data on ACDBEs to be reported 

in order for the Department to gain a 

deeper understanding of the firms that 

participate in that program and how 

these firms compare with the rest of the 

airport concession community. It is 

important for the Department to be able 

to do this in order to enhance the 

Department’s ability to conduct more 

detailed trend analyses of changes in 

ACDBE participation levels and assess 

the program’s overall success. 

Subpart B—Administrative 

Requirements for DBE Programs for 

Federally Assisted Contracting 

4. Threshold Program Requirement for 

FTA Recipients (§ 26.21) 

Currently, the rule requires only those 

FAA and FTA recipients that will award 

prime contracts with cumulative total 

value exceeding $250,000 in a fiscal 

year to have a DBE Program. The 

$250,000 value for the threshold was 

first introduced in a 1983 final rule, but 

it originally meant that FTA and FAA 

recipients who received over $250,000 

in a fiscal year were required to have a 

DBE Program—in 2000, the $250,000 

threshold was updated to apply to 

contract awards. 

There is little documentation as to the 

rationale for the threshold when it was 

originally introduced. However, 

program experience shows that 

recipients with lower dollar amounts of 

total prime contract awards have low 

levels of DBE participation. Those lower 

contract amounts necessarily imply low 

amounts of DBE participation simply 

because the pool of available contract 

awards is small. In addition, small 

prime contract awards have fewer 

opportunities for unbundling to allow 

for subcontracting opportunities. It is 

only with subcontracting opportunities 

that race-conscious awards can be used. 

Further, subcontracts of small prime 

contracts are of low total value and may 

not attract much interest from DBEs. 

The proposed rule makes one 

adjustment to the rule based on 

observed changes in the consumer price 

index (CPI) from 1983 to 2020. The 

change sets a new threshold level for 

FTA recipients that would trigger full 

adherence to those rule requirements 

FTA deems essential for all recipients. 

This change amends the rule so that 

FTA recipients receiving planning, 

capital and/or operating assistance less 

than $670,000 must maintain a program 

locally that includes the requirements of 

§ 26.11, reporting and record keeping; 

§ 26.13, contract assurances; § 26.23, a 

policy statement; § 26.39, fostering 

small business participation; and 

§ 26.49, concerning transit vehicle 

manufacturers. FTA recipients receiving 

planning, capital and/or operating 

assistance that will award prime 

contracts (excluding transit vehicle 

purchases) the cumulative total value of 

which exceeds $670,000 in FTA funds 

in a Federal fiscal year must have a DBE 

Program meeting all the requirements of 

the rule. The Department will adjust the 

threshold for inflation in its discretion 

as the need arises. 

The Department conducted an 

economic analysis of this change, 

identifying how many FTA recipients 

would no longer need a full program 

(approximately 80), and the cost savings 

to those recipients and the Department. 

FTA also conducted a public outreach 

session on October 14, 2021 and 

received general comments on changes 

to the DBE Program, including 

increasing the threshold and amending 

the reporting requirements for recipients 

of that OA. The Department found that 

raising the threshold is expected to 

provide administrative cost savings to 

FTA recipients with reduced reporting 

requirements and only minor levels of 

reductions in total program-level DBE 

participation. The FTA Office of Civil 

Rights will also experience reduced 

workload related to monitoring, 

oversight, and training of these smaller 

recipients. Further, the FTA Office of 

Civil Rights staff will be able to direct 

their resources to recipients in other 

areas of need. That redeployment of 

FTA staff resources may produce more 

DBE participation from other recipients 

that may offset any losses in DBE 

participation from recipients who are 

below the revised threshold. 

We anticipate that recipients would 

experience cost savings resulting from 

lower administrative burdens if the 

threshold were raised. The exact 

impacts of this change would vary from 

year to year, given that recipients have 

varying amounts of Federal contract 

dollars every year, but an average 

impact can be estimated. The categories 

of cost savings included in the analysis 

are: 

• Program development and goal 

setting: These are the administrative 

costs associated with the development 

of a recipient’s DBE Program and 

establishing the DBE Program goals 

every three years. This work involves 

some amount of effort by recipients. In 

some cases, recipients may contract this 

work out to a consultant. 

• Monitoring, reporting, and 

outreach: These are the administrative 

costs incurred by the recipient related to 

administering their DBE Program every 

year. The recipient must monitor their 

contracts to ensure the work committed 

to DBEs is actually performed by DBEs, 

and verify payments made to DBEs. The 

recipient performs this work by 

conducting contract reviews and work 

site visits. Entities must report on their 

DBE participation twice a year to FTA. 

They must also conduct regular 

outreach to DBEs in their community. 

• Conferences and trainings: 

Recipients may send their employees to 

conferences or trainings related to the 

DBE Program. The cost to the recipient 

is incurred through travel expenses and 

the opportunity cost of the employee’s 

time. Some trainings provided by 

private companies and organizations 

include registration fees, but DOT offers 

training free of charge. This analysis 

assumes no registration fees for the 

conferences and trainings. 

• DOT technical assistance: FTA 

provides technical assistance to transit 

agencies for their DBE Programs. This 

cost is measured by the typical number 

of hours spent by FTA staff providing 

such assistance per recipient. 

The Department conducted a 

Regulatory Impact Analysis (RIA) 

(available in the docket) of this proposal 

in connection with this rulemaking; and 

believes that the revisions proposed 

reduces the administrative burden of the 

DBE Program on recipients receiving 

less funding and would have a minimal 

impact on race-neutral awards. We are 

proposing to retain annual reporting 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43627 

5The UCP directory provisions in §§ 26.31 and 

26.81(g) are applicable to the ACDBE program per 

§ 23.23(a). 

requirements, nondiscrimination 

contract assurances, strategies for 

expanding contracts with small 

businesses, and transit vehicle 

manufacturing requirements. 

5. Unified Certification Program (UCP) 

DBE/ACDBE Directories (§§ 26.31 and 

26.81(g)) 

Under the current DBE and ACDBE 

rules, each UCP must maintain a 

directory of all DBE and ACDBE firms, 

in the state in which the UCP is located. 

The directories must include each firm’s 

address, phone number, and types of 

work the firm has been certified to 

perform.5 The directories must be 

publicly available both electronically 

and in print. UCPs are to make 

additions, deletions, and other changes 

as soon as they learn of them. 

The Department enacted this 

requirement in 1999, noting in its final 

rule that commenters discussed whether 

the directories should include 

information concerning the 

qualifications of the firm to do various 

sorts of work. For example, has the firm 

been pre-qualified by the recipient or 

another state agency? Can it do 

creditable work? What kinds of work 

does the firm prefer to do? Some 

commenters also requested that the 

directory should list the geographical 

areas in which the firm is willing to 

work. 

The primary purpose of the 

directories is to show the results of the 

certification process, with sufficient 

identifying information for prime 

contractors to contact the DBEs or 

ACDBEs for those areas of work or 

supply they could perform or provide 

on a potential project or concession 

opportunity. Information about firms’ 

qualifications, geographical preferences 

for work, performance track record, 

capital, etc., were not required to be part 

of the directories because, as stated in 

the 1999 preamble, this would ‘‘clutter 

up the directory and dilute its focus on 

certification.’’ The Department expected 

that a prime contractor or prime 

concessionaire would contact a DBE or 

ACDBE to discuss its qualifications 

before hiring it to perform work as a 

subcontractor, sub-concessionaire, or 

supplier on a federally assisted contract 

or concession opportunity. While the 

Department continues to believe that the 

directories serve this purpose, the 

current regulation was written before 

the widespread adoption of the internet 

and the availability of online resources. 

The proposed rule would direct UCPs 

to expand their directories of DBE and 

ACDBE firms, allowing them to display 

other essential information about DBEs 

and ACDBEs that attests to the firms’ 

ability, availability, and capacity to 

perform work. While the UCP would in 

no way be required to vouch for the 

quality of the DBE or ACDBE’s work, it 

could expand information regarding a 

DBE or ACDBE beyond merely its 

contact information and NAICS code(s). 

Under the proposal, all UCPs would 

amend their directories so that firms 

would have a standard set of options for 

information they can choose to make 

public, such as a capability statement, 

state licenses held, pre-qualifications, 

personnel and firm qualifications, 

bonding coverage, recently completed 

project(s), equipment capability, and a 

link to the firm’s website. Under the 

proposed rule, UCPs would be required 

to incorporate these information fields 

as additional criteria by which the 

public can search and filter the UCP 

directory. We invite comments about 

the specific categories of information 

that prime contractors or prime 

concessionaires and DBEs or ACDBEs 

would find useful to have publicly 

available. We anticipate that most DBEs 

and ACDBEs will avail themselves of 

this opportunity, recognizing this is a 

cost-effective and timesaving alternative 

to market their qualifications while 

providing a one-stop baseline tool for 

prime contractors and prime 

concessionaires as they seek out 

potential subcontractors and subconcessionaires. Further, the 

Department also proposes eliminating 

the paper requirement for the directory 

in § 26.81; we see no continued utility 

for this requirement as all directories are 

available online. 

We invite comments on whether 

prime contractors and prime 

concessionaires will see time-andresource savings with such a change to 

the directory. There is a clear benefit to 

prime contractors and prime 

concessionaires that seek out 

information regarding a firm’s 

capabilities, experience, and past 

performance. Given the growing size of 

DBE/ACDBE directories each year, this 

may expedite contractor or 

concessionaire selection and overall bid 

or solicitation response times. 

Additional time savings would be 

realized in ‘‘contract or concession 

specific goal’’ situations, wherein an 

award to a prime contractor or prime 

concessionaire cannot be made unless 

that prime contractor or prime 

concessionaire commits to contracting 

to a sufficient number of DBEs or 

ACDBEs to meet a contract or 

concession specific goal or demonstrates 

good faith efforts if it falls short of the 

goal through contracting commitments. 

Also, when a prime contractor complies 

with the regulatory requirements to 

terminate and replace a DBE or ACDBE 

to which it committed at the time of 

award, it is typically required to make 

good faith efforts to replace that DBE or 

ACDBE. A more informative directory 

could assist prime contractors or prime 

concessionaires with the replacement 

process as well and could be used as 

one element in the good faith efforts 

analysis, a point referenced by prime 

contracting organizations in response to 

the Department’s October 2017 request 

for public input on existing regulatory 

and agency actions. (82 FR 45750 (Oct. 

2, 2017)) 

We are aware that some UCPs have 

already expanded the search capabilities 

of their current directories of DBE and 

ACDBE firms. We anticipate UCPs being 

able to implement the requirement by 

January 1, 2024, or within 180 days of 

the final rule, but we invite comment on 

how long UCPs expect the proposed 

enhancements may take, if 

enhancements are feasible given 

existing resources, and whether the 

benefits we describe above outweigh 

any upfront costs. We invite comment 

on whether the directory enhancements 

should consist of drop-down menus that 

draw from available data sources, openended fields with a word limitation 

(e.g., 250 words more or less), or some 

combination thereof. We invite 

comment on which of these approaches 

would be most conducive to useful 

search functionality, feasibility, and 

resource efficiency. If the proposed 

change takes effect, the Department 

anticipates having a phase-in period for 

the additional requirements described 

and will not make compliance 

mandatory until the certification 

members of UCPs can build the 

enhancements and make them 

operational. 

6. Monitoring Requirements (§ 26.37) 

Since 1999, § 26.37 has set forth a 

recipient’s responsibility for monitoring 

the performance of other program 

participants. This regulation in Subpart 

B, however, focuses on a recipient’s 

responsibility to include in its DBE 

Program a monitoring and enforcement 

mechanism to verify that work 

committed to a DBE at contract award 

is actually performed by that DBE. In 

addition, the recipient must keep a 

running tally of actual DBE payments to 

ensure that DBE participation is 

credited toward overall and contract 


lotter on DSK11XQN23PROD with PROPOSALS2
43628 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

6See ‘‘Official Questions and Answers (Q&A’s) 

Disadvantaged Business Enterprise Program 

Regulation (49 CFR 26)—Commercially Useful 

Function’’ at https://www.transportation.gov/sites/ 

dot.gov/files/2020-01/docr-20180425- 

001part26qa.pdf. 

7See ‘‘Recipient Responsibilities for Oversight 

and Monitoring of DBE Participation’’ at https:// 

www.transportation.gov/sites/dot.gov/files/docs/ 

mission/civil-rights/disadvantaged-businessenterprise/318146/oversight-and-monitoring-dbeparticipation.pdf. 

8See ‘‘New Disadvantaged Business Enterprise 

Firms Face Additional Barriers to Obtaining Work 

at the Nation’s Largest Airports,’’ USDOT Office of 

Inspector General, Report ZA–2016–002 (Nov. 3, 

2015) at https://www.oig.dot.gov/sites/default/files/ 

New%20DBE%20Participation

%20Is%20Decreasing%20at%20the

%20Nation%E2%80%99%20Largest

%20Ariports%2C%20and%20Certification

%20Barriers%20Exist.pdf. 

9See ‘‘USDOT Official Questions and Answers 

(Q&A’s) Disadvantaged Business Enterprise 

Program Regulation (49 CFR 26)’’ at https:// 

www.transportation.gov/sites/dot.gov/files/docs/ 

Official%20Questions%20and%20Answers%204- 

15-16.pdf. 

goals only when payments are actually 

made to DBEs. 

The Department has learned that 

certain language in § 26.55(h) has 

caused confusion among recipients. The 

heading of this section is misleading; it 

suggests that the section is limited to 

monitoring the performance of other 

program participants, when it also sets 

forth significant oversight requirements 

for recipients, including the 

requirement to keep a ‘‘running tally’’ of 

payments toward the achievement of the 

recipient’s overall goal as well as each 

contract with a DBE goal. Recipients 

also questioned how the requirement to 

certify in writing each DBE was actually 

performing the work for which it was 

committed intersected with § 26.55, 

which requires recipients to count DBE 

participation toward its annual goal and 

a contract goal only if the DBE is 

performing a commercially useful 

function (CUF). 

The Department also learned that the 

requirement for the recipient to keep a 

‘‘running tally’’ was often overlooked or 

misconstrued. Finally, the Department 

learned that many recipients were 

confused by use of the word 

‘‘certification,’’ used in this section as it 

pertains to the requirement that there 

must be written, signed confirmation 

that each DBE was monitored. The word 

‘‘certification’’ in the DBE Program more 

often than not refers to the application 

process a firm undertakes to achieve 

DBE status or ‘‘certification.’’ 

We seek to clarify § 26.37 by changing 

the title from ‘‘What are a recipient’s 

responsibilities for monitoring the 

performance of other program 

participants?’’ to ‘‘What are a recipient’s 

responsibilities for monitoring?’’ We 

believe that this would better describe 

the substantive content of the regulatory 

requirements. 

The Department also wants to make 

clear that even DBEs used race-neutrally 

must be monitored to count toward a 

recipient’s overall goal. We have learned 

that some recipients do not monitor 

DBE participation unless there is a raceconscious contract goal. 

We also seek to combine the 

requirements under this section with 

the commercially useful function (CUF) 

requirements in § 26.55. In order for a 

recipient to verify that a DBE is 

performing the work it was committed 

to perform, the recipient would be 

required to also verify that the DBE is 

performing in the manner in which it 

can be counted toward the recipient’s 

overall goal and a contract goal. This 

would clarify that while a CUF review 

can be an additional step in monitoring, 

a CUF review is necessary for every DBE 

that performs for credit toward a 

recipient’s overall goal and a contract 

goal. A CUF review could be combined 

with the § 26.37 requirement for the 

written verification or performed in a 

subsequent monitoring. Our official 

guidance on this section also makes this 

clear.6

The Department seeks to emphasize 

the importance of the ‘‘running tally’’ 

requirement. Since 1999, the 

Department has made it clear that a 

running tally applies to a recipient’s 

overall goal and contract goals. 

Therefore, we want to underscore in this 

revision that each recipient would be 

required to keep a running tally, or 

ongoing accounting, of its attainment of 

its overall DBE goal (including raceneutral DBE participation) and make 

adjustments, if necessary, as set forth in 

§ 26.51(d). 

The running tally requirement would 

also require recipients to keep an 

accounting of each contractor’s progress 

in attaining a contract goal through 

progressive payments to the committed 

DBE. This would be necessary to allow 

recipients to intervene in real time 

when and/or if they observe a prime 

contractor fall short of its contract goal. 

Keeping an accounting of a prime 

contractor’s progress toward meeting a 

contract goal would allow recipients to 

observe when a prime contractor is not 

on target toward achieving the goal. 

This information would allow the 

recipient to question whether there has 

been unreported termination of a DBE 

pursuant to a change order or otherwise; 

or whether the DBE has withdrawn, and 

whether the contractor should be using 

good faith efforts to find additional DBE 

credit, etc. If a recipient were to wait 

until the end of the contract to match 

commitments to actual payments, it 

would be too late to rectify any 

shortfalls during contract performance. 

This is also why the Department is also 

removing the sentence that indicates the 

monitoring requirement in this section 

could be performed during contract 

close-out reviews. The elimination of 

this sentence also conforms to the 

Department’s official guidance on this 

issue.7

The Department proposes replacing 

the word ‘‘certification’’ with 

‘‘verification’’ to avoid confusion with 

other parts of the regulation. We also 

recommend eliminating the last 

sentence in this section regarding DBE 

reports because it is misplaced. 

Subpart C—Goals, Good Faith Efforts, 

and Counting 

7. Prompt Payment and Retainage 

(§ 26.29) 

In the 1999 preamble to the final rule, 

we stated that prompt payment 

mechanisms are an important raceneutral mechanism that can benefit 

DBEs and other small businesses. 

Without the protections embedded in 

the rule, we remain concerned that DBE 

subcontractors can be significantly— 

and, to the extent that they tend to be 

smaller than non-DBEs, 

disproportionately—affected by late 

payments from prime contractors. As we 

said in 1999, lack of prompt payment 

constitutes a very real barrier to the 

ability of DBEs to compete in the 

marketplace; since that time, the 

Department has required recipients to 

take reasonable steps to address this 

barrier. 

In the 2021 BIL (section 1101(e)(8)) 

Congress repeated mandates it made in 

prior surface authorizations that the 

Department should take additional steps 

to ensure that recipients comply with 

§ 26.29. Similarly, the Department’s 

Office of Inspector General 

recommended the Department improve 

oversight of this issue.8

In response, the OAs recommended 

that guidance on this section was 

necessary to underscore the 

Department’s intent. Thus, on April 15, 

2016, we published official guidance 9

consisting of 12 questions and answers 

regarding § 26.29. With respect to 

prompt payment and return of retainage 

monitoring, the Department specified 

the need for recipients to create a 

mechanism to affirmatively monitor a 

contractor’s compliance with 

subcontractor prompt payment and 

return of retainage requirements, and 

that a recipient’s reliance on complaints 

or notifications from subcontractors is 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43629 

insufficient. The guidance provides, in 

relevant part, as follows: 

Relying only on complaints or notifications 

from subcontractors about a contractor’s 

failure to comply with prompt payment and 

retainage requirements is not a sufficient 

mechanism to enforce the requirements of 

section 26.29 . . . 

While this section does not mandate that 

a recipient employ a specific type of 

mechanism for monitoring prompt payment, 

recipients are expected to take affirmative 

steps to monitor and enforce prompt 

payment and retainage requirements. 

The guidance continues, providing 

examples of affirmative monitoring 

methods. 

In 2020, FHWA performed a national 

review on recipient compliance with 

prompt payment and return of retainage 

compliance. Among other things, the 

review found most recipients are not 

affirmatively monitoring subcontractor 

payments on FHWA-assisted projects. 

Many recipients wait for subcontractor 

payment complaints or other 

notification of non-payment before 

taking any action. 

The Department believes including in 

this regulatory section a specific 

reference to the need for affirmative 

monitoring of subcontractor prompt 

payment and return of retainage by the 

recipient will reinforce the 

Department’s position on this matter. 

This revision also makes clear that the 

requirements within this rule are 

intended to flow down to all lower tier 

subcontractors through an addition of a 

paragraph (f) to § 26.29. 

8. Transit Vehicle Manufacturers 

(TVMs) (§ 26.49) 

Section Heading 

The current heading of § 26.49 is 

‘‘How are overall goals established for 

transit vehicle manufacturers?’’ The 

heading of § 26.49 has remained 

constant since its introduction in 1999, 

but it no longer accurately describes the 

section’s contents. The Department 

proposes to revise the heading to ‘‘What 

are the requirements for TVMs and for 

awarding DOT-assisted contracts to 

TVMs?’’ This heading would describe 

the contents of the section more 

accurately, which includes 

requirements for TVMs that go beyond 

goal setting and pre- and post-award 

requirements for recipients. 

Terminology and Abbreviations 

Section 26.49 in the current rule uses 

language and terms inconsistently and 

does not match the language and terms 

used by the Department in related 

documents and used by the industry. 

The Department proposes to 

abbreviate ‘‘transit vehicle 

manufacturer’’ to ‘‘TVM’’ throughout 

§ 26.49 so that the term’s usage is 

uniform throughout part 26. The 

Department proposes to revise § 26.49(b) 

to use ‘‘you’’ and its forms consistently 

when referring to a party subject to this 

regulatory provision. 

The Department also proposes to 

change references to ‘‘certified’’ TVMs 

to ‘‘eligible’’ TVMs in § 26.49(a)(1) and 

(2) to reduce any confusion as to 

whether a TVM must first receive a 

certification from FTA prior to 

becoming eligible to bid on FTAassisted transit vehicle procurements. 

While FTA does evaluate whether a 

vehicle manufacturer meets the 

qualifications for a TVM and whether it 

is eligible to bid, such entities do not 

receive any sort of formal certification, 

and their eligibility is always 

conditioned on whether they are 

maintaining a DBE Program in 

compliance with part 26 and in good 

faith. We expect that this change will 

reduce the likelihood of a recipient 

mistakenly determining that a TVM is 

ineligible to bid because the TVM is 

unable to produce a certification from 

FTA. 

Post-Award Reporting Requirements 

Section 26.49(a) details the pre- and 

post-award requirements for FTA 

recipients engaged in procuring transit 

vehicles with FTA assistance. 

Section 26.49(a)(4) requires FTA 

recipients ‘‘to submit within 30 days of 

making an award, the name of the 

successful bidder, and the total dollar 

value of the contract in the manner 

prescribed in the grant agreement.’’ 

Since 2016, the Department has 

maintained an internet-based reporting 

form for recipients to fulfill this 

requirement. The Department has found 

that as currently written, § 26.49(a)(4) 

results in inconsistent and inaccurate 

reporting. These issues are especially 

prevalent when recipients report 

contracts with options or schedules. 

Recipients occasionally do not know 

which events trigger the 30-day 

requirement and from which day they 

must begin counting. Some of the 

confusion comes from the use of the 

word ‘‘award.’’ Generally, FTA defines 

‘‘award’’ as the Federal assistance FTA 

has provided to the recipient to carry 

out the scope of work that FTA has 

approved. However, § 26.49(a)(4) uses 

‘‘award’’ to refer to the procurement 

mechanism used by a recipient to 

procure a transit vehicle from a TVM. 

Additionally, some recipients are 

unsure when to report when they 

exercise an option or receive a delivery 

from a schedule. One of the most 

common errors the Department observes 

related to this requirement is a recipient 

reporting the date the initial 

procurement occurred instead of the 

date the option was exercised. To 

alleviate this confusion, the Department 

proposes to replace ‘‘making an award’’ 

with ‘‘becoming contractually required 

to procure a transit vehicle’’ in 

§ 26.49(a)(4), and to revise that 

paragraph for clarity. This clarifies that 

a recipient needs to reference its 

contract with the TVM to determine the 

trigger for the reporting requirements. 

Recipients have also expressed 

confusion about which information is 

required to be reported. Recipients 

sometimes do not know what to include 

and exclude from the report. Section 

26.49(a)(4) states that recipients must 

report the ‘‘total dollar value of the 

contract in the manner prescribed in the 

grant agreement.’’ Since the Uniform 

Report specifies that recipients are only 

to report the Federal share, some 

recipients misinterpret the language in 

§ 26.49(a)(4) to mean both the Federal 

and non-Federal share. 

Additionally, when reporting 

exercised options or scheduled 

deliveries, some recipients report the 

value of the entire contract. In practice, 

they must only report the value of the 

vehicles received from the option or 

schedule. For example, if a recipient 

contracts with a TVM to purchase 10 

buses at a cost of $100,000 per bus, with 

the option to purchase up to 10 

additional buses at the same price per 

bus over the next two years, and the 

Federal share is 50 percent; the 

recipient is to report only $500,000 for 

the initial contract, and only $50,000 

per bus if and only if the recipient 

exercises the option to procure 

additional buses. 

To alleviate this misunderstanding, 

the Department proposes to specify in 

§ 26.49(a)(4) that the recipient is to 

report ‘‘the Federal share of the 

contractual commitment at that time.’’ 

This clarifies that only the Federal share 

is to be reported and only the funds 

actually required to be paid at that time. 

These proposals, if adopted, would 

result in the Department collecting the 

information most useful to it, including 

in situations in which recipients use 

options and schedules. The Department 

clarifies that when a recipient uses a 

schedule in a contract and becomes 

contractually obligated to pay for the 

vehicles that will be delivered in the 

future as of the initial contract signing, 

the recipient must report once and only 

once. This is because the entirety of the 

funds will be expended by the recipient 

and received by the TVM in a single 

reporting period. 


lotter on DSK11XQN23PROD with PROPOSALS2
43630 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

Awards to Transit Vehicle Dealerships 

As currently written, part 26 does not 

specifically address situations in which 

an FTA recipient procures transit 

vehicles through a dealership. Reports 

received by FTA show that the transit 

vehicle market includes both directfrom-manufacturer procurements and 

procurements from dealerships. 

Previously, the rationale for requiring 

TVMs to maintain a DBE Program was 

that TVMs control their subcontracting 

opportunities and thus are better 

positioned than recipients to promote a 

level playing field for DBEs in the 

transit vehicle manufacturing market. 

Transit vehicle dealerships, however, 

are not required to maintain a DBE 

Program. Consequently, a transit vehicle 

dealership is generally not eligible to 

bid on FTA-assisted transit vehicle 

contracts. Recipients may procure 

vehicles from these entities but must 

treat such procurements as any other 

procurement when calculating their 

DBE goal. Thus, recipients may only 

procure transit vehicles from transit 

vehicle dealerships by establishing 

project-specific goals pursuant to 

§ 26.49(f) and must report using the 

Uniform Report for that project. Further, 

many FTA recipients currently 

incorrectly report contracts with 

dealerships as if they were contracts 

with TVMs, complicating FTA’s 

oversight efforts and resulting in 

inaccurate data. 

The Department proposes adding new 

paragraph (a)(5) to § 26.49 to expressly 

state that a contract with a transit 

vehicle dealership does not qualify as a 

contract with a TVM, even if a TVM 

manufactured the vehicles procured by 

the recipient from the dealership. 

Further, as described in the discussion 

of § 26.5, the Department proposes 

defining ‘‘transit vehicle dealership’’ 

and ‘‘transit vehicle’’ to clarify which 

procurements qualify as transit vehicle 

procurements. The Department expects 

that clarifying this aspect of the DBE 

Program will result in more accurate 

DBE goals, more accurate reporting, and 

generally greater compliance. 

TVM Goal Setting, Submission, and 

Review 

As currently written, § 26.49(b) states 

that development, submission, and 

approval of goals is generally the same 

for TVMs as it is for recipients. 

Recipients and TVMs have expressed 

confusion regarding how frequently 

TVMs must submit their goal, what 

period their goal should cover, and 

whether FTA approval is required prior 

to the TVM becoming eligible to bid. 

The Department proposes adding 

language to expressly state that TVMs’ 

goals are set and submitted annually. 

Further, the Department proposes 

eliminating the language related to 

FTA’s approval to harmonize the 

requirements for TVMs with the 

requirements for recipients. 

The proposed removal of the 

‘‘approval’’ language is not intended to 

have any substantive effect on the 

conditions necessary for a TVM to be 

eligible to bid on FTA-assisted transit 

vehicle procurements, nor any effect on 

the process by which FTA reviews a 

TVM’s goal and goal methodology. Even 

though § 26.49(a)(1) expressly states that 

TVMs that have submitted goals that 

have yet to be approved are eligible to 

bid, recipients and TVMs often express 

confusion over whether prior approval 

is required. Further, § 26.45(f)(4), part of 

the section TVMs are to reference when 

setting their goals, expressly states that 

recipients ‘‘are not required to obtain 

prior Operating Administration 

concurrence with [their] overall 

goal[s].’’ Additionally, § 26.49(b)(2) 

expressly states that the requirements 

for goal approval apply to TVMs in the 

same manner that they apply to 

recipients. Thus, by removing 

‘‘approval’’ from § 26.49(b), the 

Department expects that recipients and 

TVMs will better understand that FTA 

need not approve a TVM’s goal prior to 

the TVM becoming eligible to bid 

without affecting the eligibility 

processes and conditions. 

TVM Uniform Report 

As currently written, § 26.49(c) 

requires ‘‘transit vehicle manufacturers 

awarded’’ to submit the Uniform Report 

in the same manner as recipients to 

remain eligible to bid on FTA-assisted 

transit vehicle procurements. Some 

TVMs have expressed confusion over 

the word ‘‘awarded’’ and that confusion 

has resulted in eligible TVMs failing to 

report properly. These TVMs 

misinterpret the current text to mean 

that only TVMs that have actually been 

awarded contracts by FTA need to 

submit the Uniform Report. However, 

TVMs that are eligible to bid on FTAassisted transit vehicle procurements in 

a given fiscal year must submit the 

Uniform Reports for that fiscal year, 

even if they were not awarded any 

contracts with FTA assistance. 

Reporting zero contracts is important for 

the Department’s oversight efforts 

because it allows the Department to 

cross-reference the data provided by 

TVMs with data provided by recipients. 

The Department proposes eliminating 

the word ‘‘awarded’’ to clarify that an 

eligible TVM must fulfill the relevant 

reporting requirements for the years in 

which it is eligible. This revision should 

not be construed to mean that an entity 

that otherwise qualifies as a TVM is 

required to submit any reports to FTA 

or the Department if it is not eligible to 

bid on FTA-assisted transit vehicle 

procurements. 

9. Good Faith Efforts Procedures for 

Contracts With DBE Goals (§ 26.53) 

Considerations for administering the 

DBE Program in the context of a designbuild contract were introduced by the 

Department in 1999, in § 26.53(e). In 

this section of the regulation, pertaining 

to contract goal attainment, the 

Department recognized that at the time 

a design-build contract is awarded, the 

project is minimally designed, and 

future subcontracting opportunities are 

unknown. In light of this, the 

Department acknowledged that specific 

DBEs that will subsequently be involved 

in the contract cannot reasonably be 

identified as required under paragraph 

(b)(2) of this section. 

DBE Performance Plan (DPP) 

To address this issue, in 2014, DOT 

revised § 26.53(b)(3) to provide that 

bidders in negotiated procurements, 

such as design-build procurements, may 

make a commitment to meet the DBE 

goal at the time of their response to 

initial proposals but provide the 

information required by paragraph (b)(2) 

of this section before the recipient 

makes its final contractor selection. 

However, challenges to identifying 

specific DBEs when the project is 

minimally designed, and subcontracting 

opportunities are unknown, remain at 

the time the recipient makes its final 

selection and even after contract award. 

Further, in the event the design builder 

is unable to meet the goal through 

committing to enough DBEs before the 

recipient makes its final selection, the 

design builder must submit documented 

good faith efforts. In practice, the 

Department has noted that by requiring 

the contractor to identify specific DBEs 

and document good faith efforts at this 

early stage of a design-build project, 

goal achievement is often attained 

through minimal DBE subcontracting 

commitments and large submissions of 

documented good faith efforts. Thus, as 

currently written, § 26.53(b)(3)(ii) may 

unnecessarily limit the participation of 

DBEs in a design-build project that 

likely includes an abundance of 

subcontracting opportunities. 

Since 1999, design-build contracts 

have become much more prevalent, and 

best practices for administering the DBE 

Program in the context of this contract 

delivery method have been identified. 

The Department proposes to revise 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43631 

§ 26.53(e), to align with current best 

practices which allow for continued 

DBE participation as the contract 

proceeds and definitive subcontracting 

opportunities arise. 

The Department proposes to revise 

§ 26.53(e), to direct recipients requesting 

proposals for a design-build project to 

require a design builder to submit a DBE 

Performance Plan (DPP) with its 

proposal. The DPP replaces the need to 

commit to specific DBEs or submit good 

faith efforts at the time of the proposal 

or prior to final selection. To be 

considered responsive, a contractor’s 

DPP must include a commitment to 

meet the goal by providing details of the 

types of work and projected dollar 

amounts the contractor will solicit DBEs 

to perform. The DPP must also include 

an estimated time frame in which actual 

DBE subcontracts would be executed. 

Once the contract is awarded, the 

recipient must provide ongoing 

monitoring and oversight of the 

contractor to evaluate its good faith 

efforts to comply with the DPP and 

schedule. The parties may agree to 

revise the DPP throughout the life of the 

project, e.g., replacing the type of work 

items the contractor will solicit DBEs to 

perform and/or adjusting the proposed 

schedule as long as the contractor 

continues to use good faith efforts to 

meet the goal. The Department believes 

this method will result in greater 

opportunities for DBEs to participate in 

design-build contracts. 

In addition, DOT proposes clarifying 

§ 26.53(b)(3)(ii) to address negotiated 

procurements outside of the context of 

design-build procurements. 

Terminations 

Since 1999, § 26.53(f)(1) has 

prohibited a prime contractor from 

terminating a DBE used in response to 

a contract goal without the recipient’s 

prior written consent. The Department 

implemented protections in these 

situations to prevent abuse, i.e., that 

absent a recipient’s consent, a prime 

contractor may not terminate a DBE 

committed on the contract for 

convenience and then perform the work 

with its own forces. Also, since 1999, 

§ 26.53(g) has required a prime 

contractor that has terminated a DBE to 

make good faith efforts to substitute 

another DBE to perform the same 

amount of work as the DBE that was 

terminated. In 2005, these termination 

and substitution provisions in § 26.53(f) 

and (g) were made applicable by 

§ 23.25(e)(1)(iv) to concession specific 

goals. The Department expanded 

§ 26.53(f)(4) and (5) in 2011 to require 

recipients to include a provision in its 

prime contract requiring the prime 

contractor or prime concessionaire to 

give written notice to the DBE or 

ACDBE subcontractor or subconcessionaire (within five days) of its 

intention to request termination and/or 

substitution, and the reasons for the 

request. The prime contractor or prime 

concessionaire must also give the DBE 

or ACDBE five days to respond to the 

prime contractor’s or prime 

concessionaire’s notice and advise the 

recipient of any reasons the request 

should not be approved. 

The 2014 revisions to § 26.53(g) 

expanded the good faith efforts 

requirements a prime contractor or 

prime concessionaire must follow to 

replace the terminated DBE or ACDBE. 

After making this change, the 

Department has learned that because the 

section above combines the terms 

‘‘terminate and/or substitute,’’ some 

recipients permit a prime contractor or 

prime concessionaire that wishes to 

terminate a DBE or ACDBE in response 

to a contract or concession specific goal 

to seek written concurrence only for a 

DBE or ACDBE substitution. This action 

often omits the procedures a prime 

contractor or prime concessionaire is 

required to follow prior to terminating 

a firm. The required actions a prime 

contractor or prime concessionaire must 

take prior to terminating a firm provide 

the DBE or ACDBE with an opportunity 

to respond in writing to the recipient, 

indicating the reasons why it objects to 

the proposed termination. Requiring a 

prime contractor or prime 

concessionaire only to seek written 

concurrence for a proposed substitution 

deprives the DBE or ACDBE from these 

due process protections. 

To avoid this unintended result, the 

Department proposes a minor revision 

to this section to eliminate the pairing 

of ‘‘termination’’ with ‘‘substitution’’ to 

clarify that proposed DBE and ACDBE 

terminations require the prime 

contractor or prime concessionaire to 

follow specific actions and provide a 

DBE or ACDBE an opportunity to 

respond before a recipient may provide 

written concurrence or denial. Under 

this proposed revision, the prime 

contractor or prime concessionaire 

would be permitted to propose a 

substitution only after a recipient’s 

written concurrence with the proposed 

termination is received. 

The revisions also make clear that a 

prime contractor’s or prime 

concessionaire’s desire to eliminate a 

portion of the work committed to a DBE 

or ACDBE as a condition of award 

would also constitute a ‘‘termination’’ in 

which the prime contractor or prime 

concessionaire and recipient must 

follow the above-referenced procedures. 

10. DBE Supplier Credit (§ 26.55(e)) 

The Department first adopted 

regulatory provisions related to ‘‘regular 

dealer’’ suppliers in the 1987 DBE final 

rule (52 FR 39225 (Oct. 21, 1987)) 

(revising then-existing § 23.47(e) to 

§ 23.47(e) and (f)). This regulation has 

gone through several revisions since 

then, most recently in 2014 (79 FR 

59566 (Oct. 2, 2014)), and now appears 

as § 26.55(e). This section assists 

recipients in evaluating the appropriate 

credit to be given toward a contract goal 

(and a recipient’s overall goal) when a 

DBE provides services as a 

manufacturer, supplier, or transaction 

facilitator; the latter is sometimes 

referred to as packager, broker, 

manufacturers’ representative, or other 

firm that arranges or expedites 

transactions. 

The Department requested 

stakeholder feedback on the regular 

dealer concept in the 2012 Notice of 

Proposed Rulemaking. See 77 FR 54592 

(Sept. 6, 2012), which led to the 2014 

final rule. The preamble to the 2014 

final rule states: ‘‘Specifically, we 

sought comment on: (1) how, if at all, 

changes in the way business is 

conducted should result in changes in 

the way DBE credit is counted in supply 

situations;? (2) what is the appropriate 

measure of the value added by a DBE 

that does not play a traditional regular 

dealer/middleman role in a transaction;? 

and (3) do the policy considerations for 

the current 60% regular dealer credit 

actually influence more use of DBEs as 

contractors that receive 100% credit?’’ 

See 79 FR 59566, 59588 (Oct. 2, 2014). 

In response to the 2012 NPRM, the 

Department received over 50 comments 

from prime contractors, DBEs, 

stakeholder associations, and recipients, 

many of which emphasized the need for 

additional clarification of, or changes to, 

the terminology used to describe regular 

dealers, middlemen, transaction 

expediters, and brokers. The 

Department responded that more 

analysis and discussion was needed to 

make informed policy decisions about 

how best to amend the regulations 

governing regular dealers and 

transaction facilitators; it committed to 

continuing the conversation through 

future stakeholder meetings. 

On September 26 and 27, 2018, the 

Department held stakeholder meetings 

on the topic of ‘‘regular dealers.’’ Prime 

contractors, recipients, stakeholder 

associations, and DBEs, attended and 

many shared valuable information from 

their various perspectives. While the 

Department often hears that the ‘‘regular 

dealer’’ concept is outdated, does not 

reflect current industry practice, and 


lotter on DSK11XQN23PROD with PROPOSALS2
43632 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

10See 45 FR 21172, 21181 (Mar. 31, 1980) 

available at https://www.transportation.gov/sites/ 

dot.gov/files/2020-06/1980%20Final%20

Rule%2045%20Fed.%20Reg.%2020771%2

C%2021172%28Mar.%2031%2C%201980%29.pdf. 

11See 52 FR 39225 (Oct. 21, 1987) available at 

https://www.transportation.gov/civil-rights/ 

disadvantaged-business-enterprise/1987-final-rule). 

should be eliminated, most meeting 

contributors did not propose doing 

away with the regular dealer concept. 

Most acknowledged that even though 

the market has changed to allow prime 

contractors the ability to obtain goods 

through e-commerce without the need 

for a ‘‘middle-man,’’ many DBE 

suppliers reported that they rely upon 

the DBE Program and contract goals to 

maintain a viable business. Similarly, 

prime contractors conveyed their 

reliance on DBE suppliers to assist in 

meeting contract goals. 

Based on the input from the 

stakeholder sessions and DOT’s 

continued analysis of the role of the 

regular dealer provisions in the success 

of the DBE Program, DOT proposes 

several modifications to the regular 

dealer provisions designed to better 

align with modern business practices. 

Modifications to this section also 

include clarifying the definition of 

‘‘manufacturer’’ and ‘‘suppliers of 

specialty items.’’ 

Limiting DBE Supplier Goal Credit 

Since the beginning of the DBE 

Program in 1980, DOT has never placed 

a cap on the total amount of credit a 

prime contractor could obtain from 

supply contracts toward meeting a 

contract goal. DOT has long had a 

concern, however, that if prime 

contractors could frequently meet 

contract goals primarily through supply 

contracts with DBEs, opportunities for 

DBEs that perform other types of work 

would be too limited. DOT addressed 

this concern by allowing prime 

contractors to only count a certain 

percentage of the value of individual 

supply contracts toward contract goals. 

The Department’s initial comprehensive 

Minority Business Enterprise regulation, 

issued in 1980, limited goal credit for a 

contract with a non-manufacturer 

supplier to 20 percent of the 

expenditures with the supplier, 

provided the supplier performed a 

commercially useful function (CUF).10

In 1987, based on feedback from 

stakeholders, DOT adjusted the limit on 

goal credit to 60 percent of expenditures 

with a non-manufacturer supplier, 

determining that the adjusted figure 

would better balance the considerations 

that too low of a credit figure would 

unduly limit participation by MBE 

suppliers and that too high of a figure 

would unduly limit participation by 

other MBE firms (e.g., construction 

contractors). The 60 percent figure was 

set in 1987.11

During the 2018 stakeholder meetings, 

some DBE participants conveyed that 

although crediting suppliers is limited 

to 60 percent of the value of the 

contract, some contractors, are still able 

to meet all or most of a contract goal 

through DBE suppliers, especially 

suppliers that provide high-cost or bulk 

items such as petroleum or steel, 

diminishing or even eliminating the 

need for the prime to employ additional 

DBE subcontractors on a project. 

In consideration of the comments 

received, the Department proposes to 

revise this Part by adding a provision at 

§ 26.55(e)(6) to limit the total allowable 

credit for a prime contractor’s 

expenditures with DBE suppliers 

(manufacturers, regular dealers, 

distributors, and transaction facilitators) 

to no more than 50 percent of the 

contract goal. This revision would allow 

exceptions to the crediting limit (50 

percent) for DBE material suppliers on 

a contract-by-contract basis (for 

example, certain contracts may be 

material-intensive), with the prior 

approval of the appropriate OA. 

The following hypothetical is an 

example of how DBE credit should be 

applied under the proposed rule: 

A prime contractor seeks to bid on a $1M 

contract with a DBE goal of 20%. The prime 

contractor’s total creditable portion of the 

commitment submitted to meet the contract 

goal-cannot exceed $100,000 in DBE material 

supplier participation: ($1M × 0.2 = $200,000 

(total amount to meet goal)) ($200,000 × 50% 

= $100,000 (material supplier limit)). For 

example, the prime will use a DBE 

manufacturer of bricks for $50,000 and a 

regular dealer of steel costing $100,000. The 

regular dealer of steel can only count 60% of 

the cost of steel ($100,000 × 0.6 = $60,000). 

The total amount for DBE supplies is 

($50,000 plus $60,000 = $110,000). The 

prime can only count $100,000. 

Evaluating a Supplier’s Designation as a 

Regular Dealer 

The Department proposes to continue 

to credit 60 percent of the cost of 

supplies toward the contract goal (and 

recipient’s overall goal) should a DBE 

meet the regular dealer requirements. 

This determination is made up of two 

components: (1) whether the DBE is an 

established business regularly engaged 

in the sale or lease of a product of the 

‘‘general character’’ of that required 

under the contract; and (2) whether the 

DBE meets certain performance 

requirements in supplying the item. 

The Department has learned that 

recipients often find it difficult to 

determine whether a DBE is ‘‘regularly 

engaged’’ in a supply activity, versus a 

firm that occasionally engages in such 

work or does so on an ad hoc or 

contract-by-contract basis. Similarly, 

recipients find it difficult to determine 

if the DBE regularly sells products of the 

‘‘general character’’ of those called for in 

a specific contract. Moreover, recipients 

often wait to make these determinations 

until after the contract is awarded, 

during a CUF review in the field. While 

field inspectors performing CUF 

monitoring can evaluate a DBE 

supplier’s performance, they are 

unlikely to have a method to determine 

if the DBE supplier meets the 

fundamental criteria to be considered a 

regular dealer. 

In a design-bid-build contract, 

contractors/bidders must submit, either 

at the time of bid or within 5 days 

thereafter, information regarding the 

specific DBE firms to which they have 

committed to meet a contract goal. To 

determine if a contractor/bidder is 

eligible for contract award, recipients 

must evaluate these commitments to 

determine if the contractor/bidder met 

the goal either by sufficient 

subcontracting to DBEs and/or by 

demonstrating sufficient good faith 

efforts. See § 26.53(b). Contractor/bidder 

commitments often include the use of 

DBE suppliers and indicate 60 percent 

credit of the cost of the supplies toward 

goal achievement. 

The Department has learned that 

many recipients accept the 60 percent 

commitment at face value without 

knowing whether the DBE ‘‘regularly 

engages’’ in the purchase and sale or 

lease of items, or those of the ‘‘general 

character,’’ that it is committed to 

supply for the contract at issue. 

This face-value determination could 

affect whether a contractor/bidder has 

actually met the contract goal and is 

eligible for contract award. To avoid 

overcounting upfront toward contract 

goal achievement prior to contract 

award, and potential overcounting of 

goal credit in the field, the Department 

proposes to add a requirement in 

§ 26.55(e)(2)(iv) for a recipient to 

establish a system to determine, prior to 

award, that the DBE supplier meets the 

fundamental characteristics of a 

‘‘regular dealer,’’ i.e., whether the 

committed DBE is ‘‘regularly engaged’’ 

in the purchase or sale of items, or those 

of the ‘‘general character,’’ called for in 

the contract. (In the race-neutral 

context, this information should first be 

considered prior to entering the DBE’s 

participation into the recipient’s 

reporting system, which usually occurs 

when subcontracts are approved.) To 

make such a determination, the 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43633 

12Official FAQs on DBE Program Regulations— 

Commercially Useful Function https:// 

www.transportation.gov/civil-rights/disadvantagedbusiness-enterprise/dbe-guidance/official-faqs-dbeprogram-regulations-49-cfr-26#Commercially. 

recipient must evaluate whether the 

DBE supplier keeps sufficient quantities 

of the items in question and regularly 

sells the items to a sector of the public 

that demands such items. 

To address the second component of 

the determination, the Department 

proposes under § 26.55(e)(2)(iv)(A) to 

add a requirement that a recipient 

establish a system, pre-award, to 

determine whether a DBE supplier 

submitted by the contractor/bidder as a 

‘‘regular dealer’’ has demonstrated 

capacity and intent to perform as a 

regular dealer to ensure preliminary 

counting determinations are based on 

the DBE’s capacity and intent to comply 

with the CUF requirements. Such 

procedures would be flexible but should 

include preliminary questions to 

identify whether the products sold or 

leased will be provided from the DBE’s 

inventory or whether the DBE will have 

physical possession before they are sold 

or leased to the prime. 

Under this same section, these 

procedures would also address the 

supply of bulk items by including 

questions on the disclosure of 

information to determine if the DBE will 

deliver the items using distribution 

equipment it owns and operates. This 

system is necessary to provide a sound 

basis for evaluating goal attainment 

prior to contract award and is necessary 

to support the likelihood that the DBE 

supplier will actually perform as a 

regular dealer in the field. Should the 

additional information a recipient 

receives result in a determination that 

the committed DBE supplier’s services 

would not be entitled to the goal credit 

listed, the recipient would then 

determine that the contractor/bidder fell 

short of the goal and would then 

evaluate the bidder’s good faith efforts 

to determine eligibility for contract 

award or subcontractor approval. 

Ultimately, goal crediting would be 

made on a contract-by-contract basis 

contingent upon the outcome of a 

recipient’s final CUF and counting 

determination of the DBE supplier’s 

performance during the contract. 

Drop-Shipping and Delivery From Other 

Sources 

Many DBE suppliers said that the 

absolute prohibition on drop-shipping 

materials from the manufacturer to the 

desired location severely impacts their 

ability to compete with non-DBE 

suppliers. On the other hand, it is of 

concern to the Department and DBE 

subcontractors that a firm would receive 

60 percent credit of the cost of supplies 

if the DBE’s role is limited to making 

phone calls or sending emails to 

manufacturers or suppliers and asking 

them to drop-ship the materials to the 

desired location. The latter role is akin 

to a broker or transaction facilitator, and 

credit should be limited to the amount 

paid by the prime as a commission or 

fee for these services. 

During the 2018 stakeholder meetings, 

the Department learned that the 

prohibition of drop-shipping materials 

is especially of concern to DBEs with 

distributorship agreements for the 

supply of bulk items. Those with 

distributorship agreements conveyed 

that these agreements with 

manufacturers are limited in nature, 

costly, and require them to assume 

significant risk of loss or damage. They 

stressed that the requirement that they 

use and operate their own distribution 

equipment to deliver the products is a 

barrier to their ability to compete fairly 

with other suppliers of bulk items. 

Recognizing that a DBE with a 

distributorship agreement typically has 

more control regarding the quality of 

materials and bears significant risk, the 

Department proposes to add language to 

§ 26.55(e)(3) to allow materials or 

supplies purchased from a DBE 

distributor that neither maintains 

sufficient inventory nor uses its own 

distribution equipment for the products 

in question to receive credit for 40 

percent of the cost of materials, 

including transportation costs. 

In this section, a DBE distributor is 

defined as an established business that 

engages in the regular sale or lease of 

the general character of items specified 

by the contract and described under a 

valid distributorship agreement. This 

section further explains that a DBE 

distributor performs a CUF, entitling it 

to 40 percent credit, when it operates in 

accordance with the terms of its 

distributorship agreement; and with 

respect to shipping, the DBE distributor 

must assume the risk for lost or 

damaged goods. The Department 

proposes that recipients must review the 

language in distributorship agreements, 

prior to contract award, to determine 

their validity relevant to each purchase 

order/subcontract and the risk assumed 

by the DBE. Where the DBE distributor 

drop-ships materials without assuming 

risk, or otherwise does not operate in 

accordance with its distributorship 

agreement, credit is limited to fees or 

commissions. 

Stakeholders also expressed concern 

regarding how to credit supplies from a 

DBE regular dealer that provides the 

major portion of items under the 

contract from its inventory, but must 

provide additional quantities ‘‘of the 

general character’’ of those kept and 

regularly sold, from other sources. The 

Department believes it places an undue 

burden on recipients to segregate minor 

quantities of an order delivered by 

sources other than the DBE, to eliminate 

them from regular dealer credit (60 

percent). The Department proposes to 

clarify in § 26.55(e)(2)(iv)(A) that 60 

percent credit of the cost of materials or 

supplies (including transportation costs) 

is appropriate when all, or the major 

portion, of the supplies under a 

purchase order or subcontract are 

provided from the DBE’s inventory, and 

when necessary, any additional minor 

quantities, of the ‘‘general character’’ as 

those kept and regularly sold, are 

delivered from other sources (e.g., the 

manufacturer). The Department 

proposes that the recipient’s system 

mentioned above should include a 

means to evaluate at the commitment 

stage, prior to contract award, the type 

and quantity of items the DBE intends 

to have delivered by other sources. 

Negotiating the Price of Supplies 

The Department made clear that to 

receive credit for supplying materials, a 

DBE must demonstrate ownership by 

negotiating the price of supplies, 

determining quantity and quality, 

ordering the materials, and paying for 

the materials itself. Some DBE suppliers 

conveyed that they are unable to 

compete with those prices negotiated by 

larger companies with established 

relationships with manufacturers, or 

who purchase supplies regionally in 

bulk; and that this scenario is a barrier 

for DBEs to fairly compete. They asked 

us to consider eliminating the need to 

negotiate price for certain bulk items, 

and still allow 60 percent goal credit. 

We considered this request but 

ultimately do not support it. The 

Department reaffirms the following 

statement set forth in official guidance 

posted on May 24, 2012: 

The Department understands that there 

may be some kinds of transactions in which 

no subcontractor performs all of the four 

required functions (e.g., a prime contractor 

decides who will supply a commodity and at 

what price, with the result that a 

subcontractor cannot negotiate the price for 

the item). In such situations, the way the 

transaction occurs does not lend itself to the 

performance of a CUF by a DBE 

subcontractor, and it is not appropriate to 

award DBE credit for the acquisition of the 

commodity by the DBE subcontractor. All the 

DBE has done with respect to acquiring the 

commodity is to carry out, in a ministerial 

manner, a decision made by the prime 

contractor.12


lotter on DSK11XQN23PROD with PROPOSALS2
43634 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

DBE Manufacturers 

The Department has learned from the 

OAs that the definition of a DBE 

manufacturer should be clarified to 

assist recipients in evaluating whether a 

DBE is a manufacturer, allowing 100 

percent credit of the cost of supplies 

and materials it manufactures toward a 

contract goal (and a recipient’s overall 

goal). In response, we propose revising 

§ 26.55(e)(1) to clarify the meaning of 

the term ‘‘manufacturer.’’ A DBE is a 

manufacturer if it owns or leases and 

operates a factory or establishment that 

produces the materials, supplies, 

articles, or equipment required under 

the contract. Manufacturing also 

includes blending or modifying raw 

materials or assembling components to 

create the product to meet contract 

specifications. A DBE does not meet the 

definition of a manufacturer, however, 

when it makes minor modifications to 

the materials, supplies, articles, or 

equipment. 

Suppliers of Specialty Items 

The Department proposes a new 

provision at § 26.55(e)(2)(iv)(C) to 

address a common scenario in which a 

DBE supplies items that are not 

typically stocked due to their unique 

characteristics (e.g., limited shelf life, or 

specialty items requested by contractors 

on an ad hoc basis). We consider a DBE 

supplier that operates in this manner as 

a regular dealer of bulk items that can 

receive 60 percent credit for the items 

only if it owns and operates its own 

distribution equipment. We propose 

that the recipient include in its preaward system procedures to determine 

whether the DBE supplier of such items 

will operate its own distribution 

equipment in order to be entitled to 60 

percent credit. 

Subpart D—Certification Standards 

11. General Certification Rules (§ 26.63) 

To begin, we propose changing 

‘‘recipient’’ to ‘‘certifier’’ throughout 

subparts D and E because firms often do 

not know that ‘‘recipient’’ refers to 

‘‘certifier.’’ 

Currently, § 26.73 is a catch-all 

section that mostly provides broad 

certification requirements. The overall 

objective of the proposed revisions is to 

create more succinct and clearer 

paragraphs for rules. For this reason, we 

propose changing the title of this section 

from ‘‘What are the other rules affecting 

certification?’’ to ‘‘General Certification 

Rules;’’ and redesignating § 26.73 to 

§ 26.63. These changes provide context 

to the certification rules that follow and 

more accurately reflect the section’s 

purpose. 

The proposal would restate and 

compile the rules discussed in current 

paragraphs (a) through (d) and (f) 

through (g) into new paragraph (a). The 

Department believes that the new 

paragraph (a) would increase 

readability, making the rules more 

accessible to the general public. 

The most notable change in proposed 

§ 26.63(b) pertains to firm’s owned and 

controlled by a parent or holding 

company. The current § 26.73(e) states 

that a DBE must be owned by 

individuals and not another firm. 

However, § 26.73(e)(1) provides an 

exception to the general rule and states 

that ‘‘if socially and economically 

disadvantaged individuals own and 

control a firm through a parent or 

holding company, established for tax, 

capitalization, or other purposes 

consistent with industry practice, and 

the parent or holding company in turn 

owns and controls an operating 

subsidiary, you may certify the 

subsidiary if it otherwise meets all 

[other certification] requirements.’’ 

§ 26.73(e)(1). 

Because the text of current § 26.73(e) 

does not clearly define ‘‘parent,’’ 

‘‘holding company,’’ or ‘‘tax, 

capitalization or other purposes,’’ the 

ambiguity created by these terms makes 

the entire provision difficult to apply. 

The Department interprets the exception 

to the general rule to allow a DBE to be 

owned by another firm so long as the 

parent or holding company is owned 

and controlled by disadvantaged 

individuals. The proposal takes this 

approach. As we acknowledged in the 

1999 preamble when we issued the rule, 

‘‘[t]he purpose of the DBE Program is to 

help create a level playing field for 

DBEs. It would be inconsistent with the 

program’s intent to deny DBEs a 

financial tool that is generally available 

to other businesses.’’ (64 FR 5096, 5120 

(Feb. 2, 1999)) 

Contrary to the goal stated in the 

preamble, the ‘‘general rule’’ in 

§ 26.73(e) unduly excludes the 

disadvantaged owner from indirectly 

owning a firm through another entity— 

a flexibility that is available to nonDBEs. This restriction arguably puts the 

DBE at a competitive disadvantage with 

its non-disadvantaged competitors. 

We are aware that the more complex 

a firm’s ownership structure is, the more 

difficult it is for the certifier to assess its 

eligibility. Our proposal would permit 

only one tier of ownership above the 

subsidiary DBE. No firm would be 

certified based on ownership of a 

business, control on the grandparent 

level (i.e., a DBE cannot be 51 percent 

owned by firm B, which is 51 percent 

owned by firm C, which is owned by the 

disadvantaged owner). 

Also, the firm would still be required 

to meet all other certification 

requirements, including the PNW limit 

and business size standard, which may 

create eligibility issues related to the 

outside business interests and affiliation 

counting rules. The firm’s refusal to 

provide pertinent information about its 

parent or holding company would be 

grounds for denial or decertification for 

failure to cooperate. 

The proposal also makes technical 

corrections to the portions of the section 

concerning Indian tribes and Alaska 

Native Corporations. 

Overall, proposed § 26.63 simplifies 

and removes ambiguous language that 

exists within the current rule. It 

preserves common business practices 

while securing program integrity. 

12. Business Size (§§ 26.65, 23.33) 

Size standards in the DBE and ACDBE 

regulation are important for a number of 

reasons. They implement the statutory 

requirement that participants be small 

businesses. They provide a means to 

ensure that participation in the DBE and 

ACDBE Programs is not necessarily of 

indefinite duration: if a firm grows to 

exceed the applicable size standard, it 

ceases to be eligible for the applicable 

Program. The size standards are 

calibrated to help meet the objectives of 

the Programs, including permitting 

ACDBEs to compete in the 

transportation and airport concessions 

markets. 

To be classified as a small business 

under the DBE Program, a business’s 

gross receipts (including those of its 

affiliates) must satisfy two size 

standards. Per § 26.71(n), DBEs must 

meet a size limit for each North 

American Industry Classification 

System (NAICS) code corresponding to 

the firm’s work. The size standard 

represents the highest amount of 

receipts a firm can have to be 

considered small. For example, an 

architecture firm, assigned NAICS Code 

541310, cannot exceed $11 million in 

average annual gross receipts (SBA’s 

size limit for NAICS Code 541310) and 

still be considered small. DBEs must 

also meet a secondary size standard 

prescribed in the Department’s surface 

reauthorization legislation, known as 

the statutory or secondary gross receipts 

cap. This provision is currently 

implemented through § 26.65(b) and (c), 

and to qualify as a DBE, a firm cannot 

exceed the size cap prescribed by this 

regulation. The NAICS code standard 

cap is expressed in either millions of 

dollars or number of employees whereas 

the statutory gross receipts cap is 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43635 

13See 85 FR 80646 (Dec. 14, 2020) available at 

https://www.transportation.gov/civil-rights/ 

disadvantaged-business-enterprise/december-14- 

2020-final-rule-gross-receipts. 

14See 84 FR 66561 (Dec. 5, 2019) available at 

https://www.federalregister.gov/documents/2019/ 

12/05/2019-26041/small-business-size-standardscalculation-of-annual-average-receipts. 

15See ‘‘DBE/ACDBE Size Standards’’ at https:// 

www.transportation.gov/DBEsizestandards. 

16See https://www.transportation.gov/ 

DBEsizestandards. 

measured in average annual gross 

receipts. 

The Federal Aviation Administration 

(FAA) Reauthorization Act of 2018 (Pub. 

L. 115–254) removed the secondary 

gross receipts cap under § 26.65(b) for 

purposes of eligibility for FAA-assisted 

work. Therefore, the revised rule 

published on December 14, 2020, 

reflects that the secondary gross receipts 

cap of § 26.65(b) and (c) does not apply 

for purposes of determining a firm’s 

eligibility for FAA-assisted work.13

Size limits are similarly placed on 

ACDBEs and firms applying for ACDBE 

certification, but under § 23.33, these 

are not currently aligned with the SBA 

limits based on individual NAICS 

codes. Section (a) of the current 

provision requires recipients to treat a 

firm as a small business eligible to be 

certified as an ACDBE if its gross 

receipts, averaged over the firm’s 

previous 3 fiscal years does not exceed 

$56.42 million. Unique types of 

businesses have size standards that 

differ—Banks and financial institutions; 

car rental companies; pay telephone 

companies; and automobile dealers. 

Changing the Measurement for the 

NAICS Code Size Calculations From 3 

to 5 Years 

Section 1101(e)(3) of the BIL states 

that for purposes of the DBE Program’s 

definition of a small business, the term 

is defined as used in section 3 of the 

Small Business Act (15 U.S.C. 632). The 

Small Business Runway Extension Act 

of 2018 (SBREA) (Pub. L. 115–324) 

amended Section 3 of the Small 

Business Act, which in turn changed the 

method used by the SBA to calculate 

business size under 13 CFR part 121. 

The SBA implemented this change on 

January 6, 2020, through a final rule.14

This rule changed the time period for 

calculating average annual gross 

receipts under 13 CFR part 121 from 3 

years to 5 years but provided firms with 

the option to use either the 3-year 

calculation or the 5-year calculation 

until the 5-year period became 

mandatory on January 6, 2022. 

The SBA final rule applies to FHWA, 

FTA, and FAA-assisted projects because 

the DBE regulation requires recipients to 

use the current SBA business size 

standard(s) found in the SBA regulation. 

On October 19, 2020, the Department 

issued guidance stating that until 

January 6, 2022, DBEs participating in 

FHWA, FTA, and FAA-assisted projects 

may choose between using a 3-year 

averaging period or a 5-year averaging 

period for the purposes of meeting the 

requirements of the DBE Program, as 

described in § 26.65(a), and after that 

date, the 5-year averaging period would 

become mandatory.15

The Department proposes to 

incorporate the 5-year calculation 

changes in § 26.65(a) to meet these 

statutory requirements. Under the 

proposed additional language, a firm 

would be eligible as a DBE in any 

Federal fiscal year if the firm (including 

its affiliates) has had average annual 

gross receipts, as defined by the SBA 

regulation at 13 CFR 121.104, over the 

firm’s previous five fiscal years. 

Statutory Gross Receipts Cap 

For the statutory DOT size cap found 

at § 26.65(b), DBEs are still subject to the 

3-year averaging period because this 3- 

year period is specifically prescribed by 

the BIL. Therefore, while a DBE firm 

may elect to submit its average annual 

gross receipts for either the last 3 years 

or last 5 years to show it meets the size 

standard for a NAICS code under 13 

CFR part 121, only the last 3 years may 

be considered for determining whether 

the firm also meets the DOT size 

standard prescribed by § 26.65(b). 

Future Adjustments and Technical 

Amendments 

In December 2020, the Department 

removed the requirement from part 26 

to publish a Federal Register document 

informing the public of inflationary 

adjustments. In this proposed 

rulemaking, the Department will make a 

similar change to part 23 and will strike 

this language from paragraph (c) of 

§ 23.33. Like § 26.65(c), the proposed 

§ 23.33(c) language states that the 

Departmental Office of Civil Rights will 

publish the annually adjusted number 

on its web page.16

We propose adding the word 

‘‘passenger’’ to car rental companies, 

replacing ‘‘automobile dealer’’ with 

‘‘new car dealer,’’ and remove reference 

to pay telephone operators. The size 

standards for these types of firms (with 

the proposed new titles) will remain the 

same, i.e., $1 billion in assets for banks 

and financial institutions; $75.23 

million average annual gross receipts 

from passenger car rental companies’ 5 

previous fiscal years; and 350 

employees for new car dealers. 

We also propose removing the 

regulatory requirement for the 

Department to adjust the ACDBE size 

standards every two years. The 

Department last adjusted the ACDBE 

size standards in June 2012. We seek 

comments on whether any inflationary 

adjustment to the ACDBE size standards 

is needed at this time. The standards far 

exceed the SBA small business size 

limits placed on these types of 

businesses, and any adjustment must be 

made in recognition of the overall intent 

to narrowly tailor all program 

requirements. We are contemplating 

whether there is a need to further raise 

the current size standards, particularly 

given that we propose changing the 

period of measurement under § 23.33 

from 3 to 5 years. It is the Department’s 

view that raising the standards too high 

could result in smaller firms seeking to 

enter the concession industry having to 

compete with larger firms for space that 

is already limited in opportunities 

because of limited airport opportunities. 

The Department seeks data on 

whether the additional categories with 

different size standards, like car rental 

companies, are still needed and if the 

size standards applicable to these 

categories require an adjustment. If 

proponents advise that an adjustment is 

needed, should the Department again 

use an inflation rate tied to purchases by 

state and local governments as it does in 

part 26 adjustments? We currently use 

data from the Department of 

Commerce’s Bureau of Economic 

Analysis (BEA). The BEA measures 

constant dollar estimates of state and 

local government purchases of goods 

and services by deflating current dollar 

estimates by suitable price indexes. 

These indexes include purchases of 

durable and non-durable goods, and 

other services. 

Gross Receipts of ACDBE Affiliates and 

Joint Venture Partners 

The Department is proposing to 

address how an ACDBE must account 

for annual gross receipts of affiliates and 

joint ventures for size purposes, as 

provided in 13 CFR 121.104(d) and 

§ 121.103(h)(3) of the SBA regulations, 

respectively. The Department will add a 

new paragraph (d) to § 23.33, making 

clear that an ACDBE that is a party to 

a joint venture must include in its gross 

receipts its proportionate share of 

receipts generated by the joint venture. 

13. Personal Net Worth (PNW) 

Adjustment 

Section 26.67(a)(1) provides a 

presumption of social and economic 

disadvantage for citizens (or lawfully 

admitted permanent residents) who are 


lotter on DSK11XQN23PROD with PROPOSALS2
43636 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

17The $750,000 PNW cap was adjusted using the 

CPI from the base year of 1989. As explained in 

previous rulemakings, 1989 was used as the base 

year because this was the year the Small Business 

Administration initially proposed the $750,000 

PNW cap. See January 2011 final rule, available at 

https://www.transportation.gov/civil-rights/ 

disadvantaged-business-enterprise/dbe-laws-policyand-guidance. 

18Fed. Aviation Admin., ‘‘49 CFR Part 23 Review 

Virtual Virtual Listening Session Subpart C’’ (Apr. 

4, 2019). 

19As explained in the 1983 final rule, ‘‘[when] 

considering the economic disadvantage of firms and 

owners, it is important for recipients to understand 

that they are making a comparative judgment about 

relative disadvantage. Obviously, someone who is 

destitute is not likely to be in any position to own 

a business. The test is not absolute deprivation, but 

rather disadvantage compared to business owners 

who are not socially disadvantaged individuals and 

firms owned by such individuals.’’ 48 FR 33432, 

33452 (July 21, 1983) available at https://

www.transportation.gov/sites/dot.gov/files/docs/

Final%20Rule%2C%20July%

2021%2C%201983.pdf. 

20The Survey of Consumer Finances (SCF) is a 

cross-sectional survey of primary economic units 

(PEU) in the United States conducted every three 

years from 1983 to 2019. The PEU consists of the 

economically dominant individual or couple and 

all individuals in the household that are financially 

dependent on the individual or couple. The SCF is 

sponsored by the Federal Reserve Board of 

Governors and the U.S. Department of the Treasury. 

The survey includes information on demographics, 

income, assets, and debts, among other topics. The 

SCF presents five replicates of each record as a 

method of approximating missing values in the 

data. Thus, the number of records in the public 

dataset is 28,885, five times more than the number 

of households that responded to the survey (5,777). 

See https://www.federalreserve.gov/econres/

scfindex.htm. 

21Codebook for 2019 Survey of Consumer 

Finances, Board of Governors of the Federal Reserve 

System, assessed at https://www.federalreserve.gov/ 

econres/files/codebk2019.txt. 

women, Black Americans, Hispanic 

Americans, Native Americans, AsianPacific Americans, Subcontinent Asian 

Americans, or other minorities found to 

be disadvantaged by the SBA. However, 

individuals who belong to a group(s) 

whose members are presumed socially 

and economically disadvantaged (SED) 

could be too wealthy to be considered 

economically disadvantaged for 

purposes of the DBE Program. As a 

mechanism for excluding those 

individuals from the DBE Program, in 

1999, the Department adopted a PNW 

cap of $750,000. A PNW cap means that, 

regardless of membership in a group 

whose members are presumed SED, any 

individual whose PNW exceeds the 

PNW cap is not considered 

economically disadvantaged. This helps 

ensure that the DBE Program is 

narrowly tailored and that only those 

individuals who are actually 

economically disadvantaged are eligible 

for the DBE Program. 

The Department’s 2011 final rule 

raised the PNW limit from $750,000 to 

$1.32 million to keep up with 

inflation.17 The Department now 

proposes raising the limit to $1,600,000 

($1.60 million) for the DBE and ACDBE 

Programs, based on a number of factors. 

In addition, the Department proposes 

establishing a method for adjusting the 

PNW cap in the future that would allow 

the DBE and ACDBE Programs to adjust 

the PNW cap in a timely and responsive 

manner while avoiding the delay and 

the administrative burden of a formal 

rulemaking. 

The DBE Program adjusts the 

traditional definition of total personal 

net worth by excluding the 

disadvantaged owner’s interest in the 

firm in question, equity in the owner’s 

primary residence, and 50 percent of 

any assets held as community property 

with a spouse or domestic partner. The 

existence of a PNW cap highlights a 

tension between the DBE Program’s 

multiple objectives. If the PNW cap is 

set too high, the program would include 

business owners who are not in fact 

economically disadvantaged. If the PNW 

cap is set too low, the program will 

exclude some truly disadvantaged 

business owners who could benefit from 

participating in the program and whose 

participation would advance the 

program’s progress towards achieving 

equity in Federal contracting. A 2007 

report commissioned by the 

Congressional Black Caucus 

Foundation, ‘‘Increasing the Capacity of 

the Nation’s Small Disadvantaged 

Businesses,’’ points out that businesses 

need resources to build capacity and be 

competitive, thus a PNW cap that is too 

low will limit the success of 

participating businesses. 

In 2019, the Federal Aviation 

Administration (FAA) conducted 

listening sessions related to this 

rulemaking. Commenters noted that the 

current $1.32 million PNW cap hinders 

the success of the ACDBE Program. 

They noted that restaurants in airports 

can have very high upfront financing 

needs related to build-out costs, 

covering initial operating costs, and the 

need to refresh their facilities midway 

through a typical 7 to 10-year lease. In 

addition, because of the nature of those 

types of expenses (and possibly the risk 

inherent with the airport concession 

industry), banks require a high amount 

of collateral for loans to finance those 

upfront expenses.18 Consequently, a 

PNW cap that is too low means that the 

business owners who have the means to 

provide the collateral for airport 

concessions with high upfront 

investment requirements are generally 

not eligible to participate in the ACDBE 

Program. Note, however, that the 

business owner’s total household net 

worth can be used as collateral for a 

loan, so that while the PNW as defined 

by the program must be below the rule’s 

cap, the amount available to use as 

collateral might be higher than the cap 

due to how PNW is calculated for the 

DBE and ACDBE Programs. 

Rationale for $1.60 Million Adjustment 

As part of this proposed rulemaking, 

the Department conducted an original 

analysis to establish an appropriate 

PNW cap. We recognize that the 

determination of economic disadvantage 

is a comparative exercise, not an 

absolute determination made in 

isolation.19 In this analysis, the 

determination of an economically 

disadvantaged business is based on 

comparing the business owner to other 

business owners, since the wealth of 

business owners generally is likely 

higher than the wealth of the general 

population. Further, this analysis 

focuses on the wealth of business 

owners who are not presumed to be 

socially and economically 

disadvantaged: White, non-Hispanic 

men. To make this comparison, this 

analysis uses data from the 2019 Survey 

of Consumer Finances (SCF) to analyze 

the distribution of PNW among business 

owners to determine where a new PNW 

cap should be set.20

In the SCF, the race and ethnic group 

for a household is based on the 

identification of the original respondent 

to the survey. The employment status 

and other demographic descriptors are 

based on the reference person for the 

family. The reference person used for 

the household in the SCF data is the 

male in an opposite-sex couple, the 

older person in a same-sex couple, or 

the individual if the household is led by 

a single person. The SCF data allows for 

identification of the following race and 

ethnic group categorizations: White, 

Non-Hispanic; Black, Non-Hispanic, 

Hispanic, and Other. ‘‘Other’’ includes 

individuals who identify as Asian, 

American Indian, Alaska Native, Native 

Hawaiian, Pacific Islander, other race, 

and all respondents reporting more than 

one racial identification.21 Table 1 

shows that the mean net worth of White, 

Non-Hispanic households is roughly 6 

to 7 times higher than for Black, NonHispanic and Hispanic households. 

Even at the highest wealth levels, the 

disparity exists: the wealth of the top 10 

percent of White households exceeds 

the wealth of the top 10 percent of 

Black, Non-Hispanic, and Hispanic 

households by a factor of 5. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43637 

22The SCF data does not allow a distinction 

between all of an applicant’s active businesses and 

the sole business the applicant might choose to 

certify as a DBE or ACDBE. Therefore, the PNW 

proxy measure used here removes the total value of 

all active businesses. As a result, this proxy 

measure for PNW could be under-estimating an 

applicant’s true PNW. 

TABLE 1—TOTAL NET WORTH OF THE HOUSEHOLD BY RACE AND ETHNIC GROUP IN 2019 

[2019 Dollars] 

Race & ethnicity Total number 

of households Mean Median 90th percentile 

ALL ................................................................................................................... 5,777 $746,821 $121,774 $1,219,499 

White, Non-Hispanic ........................................................................................ 3,980 980,549 188,985 1,610,000 

Black, Non-Hispanic ........................................................................................ 679 142,330 24,100 324,901 

Hispanic ........................................................................................................... 490 165,541 36,031 333,500 

Other ................................................................................................................ 627 656,603 74,500 1,164,100 

Source: 2019 SCF. 

The current PNW calculation for the 

DBE and ACDBE Programs allows the 

firm owner to omit the value of their 

primary residence and the value of the 

business for which the owner is 

applying for certification. In addition, 

the PNW definition includes only the 

assets of the firm owner, meaning that 

only half the value of any assets held 

jointly by the owner and their spouse 

(community property) are included in 

the calculation of PNW. Finally, 

applicants are instructed only to report 

the current value of any retirement 

accounts, after any early withdrawal 

penalties and applicable taxes are 

subtracted. During stakeholder 

engagement events and compliance 

reviews, the Department received many 

comments that the calculations required 

to compute the applicable taxes and 

penalties on retirement accounts is 

highly burdensome to applicants and 

certifiers. Those calculations require a 

great deal of information including what 

portion of the account is the initial 

contributions versus subsequent capital 

gains or interest earned, applicable state 

and Federal income tax rates, and 

applicable state and Federal capital 

gains tax rates. In response to those 

comments, the Department proposes to 

exclude the full balance of retirement 

accounts in calculating PNW. 

In addition, the Department proposes 

to increase the PNW cap to $1.60 

million in order to account for factors 

such as inflation, since the PNW cap 

was last updated 10 years ago. The 

Department’s proposal to make future 

adjustments to the PNW cap is 

discussed later in this section. 

The analysis underlying the proposal 

to increase the PNW cap constructs a 

proxy measure for PNW under the 

proposed definition of PNW for the DBE 

and ACDBE Programs. Using the 2019 

SCF data, the proxy measure, shown in 

Equation 1, calculates PNW using 

measures of total household net worth, 

home equity (value in primary residence 

minus any home secured debt), active 

business equity (equity the individual 

owns in a business they actively 

manage), and current balance of 

retirement accounts.22 The calculation 

is performed separately for single 

individuals versus couples in order to 

account for adjustments for community 

property made in the definition of PNW 

for the DBE and ACDBE Programs. Only 

50 percent of any jointly held assets 

between a couple (community property) 

should be accounted for in an 

individual’s PNW according to that 

definition. Equation 2 shows the 

calculation for the proxy measure for 

PNW under an alternative proposal (not 

being proposed in this NPRM), which 

would include the full amount of the 

retirement account balances in the 

calculation of PNW. In the SCF, net 

worth is reported using the current 

balance of any retirement accounts with 

no adjustments made for early 

withdrawal penalties or taxes. 


lotter on DSK11XQN23PROD with PROPOSALS2EP21JY22.000</GPH>

If single, PNW = Net Worth - Home Equity - Active Business Equity - Retirement Accounts 

If married or living with partner, PNW = (Net Worth - Home Equity - Active Business Equity 

- Retirement Accounts) / 2 

Equation 1. Personal Net Worth Calculation Under Proposal 

If single, PNW = Net Worth -Home Equity -Active Business Equity 

If married or living with partner, PNW = (Net Worth - Home Equity - Active Business 

Equity) I 2 

Equation 2. Personal Net Worth Calculation Under Proposal 
43638 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

23See Bricker, Goodman, Moore and Volz. 

‘‘Wealth and Income Concentration in the SCF: 

1989–2019’’ in ‘‘FEDS Notes’’ (Sept. 28, 2020) 

available at https://www.federalreserve.gov/ 

econres/notes/feds-notes/wealth-and-incomeconcentration-in-the-scf-20200928.htm; see also 

Credit Suisse, ‘‘World Wealth Report 2020,’’ at p. 

29 and available at https://worldwealthreport.com/ 

resources/world-wealth-report-2020/; see also 

Kochar and Cilluffo, ‘‘Income Inequality in the U.S. 

Is Rising Most Rapidly Among Asians,’’ Pew 

Research Center (July 12, 2018) available at https:// 

www.pewresearch.org/social-trends/2018/07/12/ 

income-inequality-in-the-u-s-is-rising-most-rapidlyamong-asians/. 

24The range on this estimate is the result of lack 

of information in the SCF on how to appropriately 

adjust the current balances of retirement accounts 

for early withdrawal penalties and taxes. The lower 

end of the estimated range (88.7 percent) assumes 

that the entire balance of retirement accounts is 

counted toward the PNW cap while the upper end 

(90.8 percent) assumes that no portion of retirement 

account balances are counted toward the PNW cap. 

The Department believes that the true value is 

likely closer to 88.7 percent than 90.8 percent 

because the deduction for early withdrawal 

penalties and taxes is likely to be less than 50 

percent, but a more precise estimate is not possible 

with the available information. 

25Federal Reserve, ‘‘Financial Accounts of the 

United States; Balance Sheet of Households and 

Nonprofit Organizations Table Z.1,’’ available at 

https://www.federalreserve.gov/releases/zl/dataviz/ 

zl/balance_sheet/chart/. 

In addition, the analysis includes only 

White, Non-Hispanic households with 

male reference persons identified as 

owning a business and who indicated 

they were self-employed or in a 

partnership as their occupational status. 

The focus is on self-employed business 

owners because the intent is to identify 

a comparison group for business owners 

who are likely to participate in the DBE 

and ACDBE Programs. 

Table 2 shows the percentile 

distribution related to the estimated 

PNW calculation from the 2019 SCF for 

the proposal. 

TABLE 2—PERCENTILE DISTRIBUTION

OF THE PERSONAL NET WORTH FOR

MALE, WHITE, NON-HISPANIC, SELFEMPLOYED, BUSINESS OWNERS, AS

CALCULATED UNDER THE PROPOSAL

[2019 Dollars] 

Percentile PNW as calculated under 

proposal 

10th ................ ¥$50 

20th ................ 11,610 

30th ................ 24,050 

40th ................ 48,300 

50th ................ 77,875 

60th ................ 157,500 

70th ................ 265,000 

80th ................ 558,950 

90th ................ 1,601,500 

TABLE 2—PERCENTILE DISTRIBUTION

OF THE PERSONAL NET WORTH FOR

MALE, WHITE, NON-HISPANIC, SELFEMPLOYED, BUSINESS OWNERS, AS

CALCULATED UNDER THE PROPOSAL—Continued 

[2019 Dollars] 

Percentile PNW as calculated under 

proposal 

95th ................ 3,757,750 

Source: 2019 SCF. 

Under the proposal that the 

Department is recommending in this 

NPRM, retirement accounts (along with 

home and business equity) would be 

removed from the calculation of PNW. 

The 90th percentile of PNW for male, 

White, Non-Hispanic self-employed 

business owners is roughly $1.60 

million, which is $1.04 million higher 

than the 80th percentile of $0.56 

million, which is in turn just $0.29 

million greater than the 70th percentile. 

Using the proposed definition of PNW 

with exclusion of all retirement 

accounts, the Department proposes to 

set the PNW cap at the 90th percentile 

of the group of male, White, NonHispanic, self-employed business 

owners ($1.60 million). Determining a 

threshold beyond which an individual 

is considered to have accumulated 

wealth too substantial to need the 

program’s assistance, we used the 90th 

percentile to identify a high level of 

wealth or income, which is a common 

convention.23 Choosing a substantially 

lower threshold, such as the 80th 

percentile, would result in a cap that is 

lower than the current cap and would 

act to remove eligible businesses that 

are currently participating in the DBE 

and ACDBE Programs. Choosing a 

substantially higher threshold would 

increase the possibility that the program 

would no longer be sufficiently 

narrowly tailored. While the 

Department proposes to use the 90th 

percentile, it acknowledges that using a 

different threshold amount could also 

meet the goals of the program and 

requests comment from the public on 

how an appropriate PNW cap should be 

set. 

Data from the 2019 SCF suggests that 

between 88.7 and 90.8 percent of selfemployed business owners who are 

presumed to be socially and 

economically disadvantaged (i.e., 

individuals who are women, Hispanic, 

or non-White) have a PNW lower than 

the current PNW cap as PNW is 

currently defined.24 Under the proposed 

cap of $1.60 million, 92.6 percent of that 

group would fall under the cap, an 

increase of 2.0 to 4.4 percent. 

TABLE 3—COMPARISON OF CURRENT AND PROPOSED METHODS

Label Description Cap amount 

Current Method ... Applicants must calculate current value of retirement accounts by determining any early withdrawal 

penalties and applicable taxes.

$1.32 million. 

Proposed Method Full current retirement account balance excluded from PNW calculation ................................................... $1.60 million. 

Periodic Adjustments to the PNW Cap 

The previous adjustment of the PNW 

cap in January 2011 used the CPI to 

reflect the increase in prices due to 

inflation. However, while household net 

worth is expected to grow in nominal 

terms over time, simply due to inflation, 

it is also subject to additional 

influences. For instance, the 2008 

financial crisis significantly reduced 

household net worth but a CPI 

adjustment would not account for that 

change caused by the financial crisis. In 

consecutive periods of sustained 

economic growth that raises the net 

worth of all business owners in real 

terms (after adjusting for inflation), an 

adjustment using only the CPI could 

maintain a PNW cap that remains too 

low over time. 

One alternative to using a CPI 

adjustment includes using data on the 

changes in aggregate household net 

worth data published quarterly by the 

Federal Reserve.25 Another alternative 

is to calculate the 90th percentile of 

PNW for self-employed business owners 

using future editions of the SCF, which 

is published every three years. An 

advantage of using the Federal Reserve 

data is that the information is readily 

and frequently available whereas 

analysis of the SCF requires specialized 

statistical programming skills and the 

updates would be limited to a 3-year 

cycle. 

Table 4 compares the nominal growth 

rates inferred by the CPI, the Federal 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43639 

Reserve measure of total household net 

worth, and the historic information of 

the 90th percentile of PNW (calculated 

with exclusion of retirement accounts) 

for male, White, non-Hispanic, selfemployed business owners from 

previous editions of the SCF. While the 

SCF data might be considered the most 

precise in terms of accurately 

representing the proposed cap based on 

the 90th percentile of self-employed 

business owners, the Federal Reserve 

data historically shows very similar 

dynamics and is more accessible 

because it is easily computed and is 

updated more frequently. The CPI does 

not adequately reflect the underlying 

dynamics of household net worth. Using 

the CPI to adjust the cap going forward 

would result in a cap that may block 

participation from a growing number of 

firms over time. Therefore, the 

Department proposes to make future 

adjustments to the PNW cap using 

growth in Federal Reserve measure of 

total household net worth from 

‘‘Financial Accounts of the United 

States: Balance Sheet of Households and 

Nonprofit Organizations Table Z.1’’ 

using 2019 as the base year. 

TABLE 4—GROWTH OF CPI, FEDERAL RESERVE TOTAL HOUSEHOLD NET WORTH, AND PERSONAL NET WORTH 90TH

PERCENTILE OF WHITE, NON-HISPANIC, MALE, SELF-EMPLOYED BUSINESS OWNERS FROM THE SCF 

[Indexed to 1992] 

Year CPI 

Federal Reserve 

total household 

net worth 

Personal 

net worth 

90th percentile 

from SCF 

1992 ........................................................................................................................... 100.0 100.0 100.0 

1995 ........................................................................................................................... 108.6 118.2 105.8 

1998 ........................................................................................................................... 116.2 154.1 183.0 

2001 ........................................................................................................................... 126.2 184.4 237.1 

2004 ........................................................................................................................... 134.6 228.2 327.3 

2007 ........................................................................................................................... 147.8 287.7 411.5 

2010 ........................................................................................................................... 155.4 263.9 325.3 

2013 ........................................................................................................................... 166.0 319.4 535.3 

2016 ........................................................................................................................... 171.1 383.5 498.0 

2019 ........................................................................................................................... 182.2 467.4 514.2 

Based on the above analysis, the 

proposed rule would simplify the PNW 

calculation by excluding retirement 

accounts and changing the PNW cap for 

the DBE and ACDBE Programs from 

$1.32 million to $1.60 million. The 

proposed rule would increase that cap 

every 5 years using growth in the 

Federal Reserve measure of total 

household net worth from ‘‘Financial 

Accounts of the United States: Balance 

Sheet of Households and Nonprofit 

Organizations Table Z.1,’’ using 2019 as 

the base year. If household net worth 

were ever to decline by that measure, 

the Department would not revise the 

PNW cap and thereby avoid a 

downward adjustment of the PNW. A 

downward adjustment of the PNW cap 

might cause certain firms to be 

decertified due to circumstances beyond 

their control and would be an 

undesirable outcome for the DBE and 

ACDBE Programs. 

Note that the above analysis is broadbased in that it analyzes the distribution 

of PNW for all self-employed business 

owners and does not focus on the types 

of businesses that would be expected to 

be involved in the DBE and ACDBE 

Programs. The SCF does not contain 

sufficient detail on the industry of the 

business owners to permit a more 

focused analysis. There may be 

additional industry-specific factors that 

warrant consideration, and we invite 

comment on what factors could be 

considered for further analysis. 

The Department requests comment on 

the proposed $1.60 million PNW cap 

and seeks comment on whether the cap 

for the ACDBE Program should be 

different than the cap for the DBE 

Program. If recommending that the PNW 

cap be different than $1.60 million, wet 

request data and information that can be 

used to support an alternative PNW cap. 

Rules for Reporting PNW 

The Department proposes revisions 

for clarity and enhanced specificity. Our 

goal overall is to remove the ambiguity 

and confusion that we have seen caused 

by the current rules for reporting PNW. 

To start, we would like to remove any 

consideration of state marital laws or 

community property rules when 

calculating the socially and 

economically disadvantaged owner’s 

(SEDO) equity in the primary residence. 

It is neither appropriate nor practicable 

for the Department to interpret state 

marital laws or community property 

rules. Every state has its own laws and 

rules. The DBE Program is a Federal 

program governed by a Federal 

regulation. 

We are also proposing a detailed 

explanation of ‘‘household contents’’ in 

§ 26.68(e) because of disputes we have 

seen between owner-applicants and 

certifiers. One hundred percent of the 

contents of the SEDO’s primary 

residence belong to the SEDO. The 

exception is if the SEDO’s spouse or 

domestic partner cohabits with the 

SEDO in the SEDO’s primary residence; 

in that case, fifty percent of the value of 

all household contents is attributable to 

the SEDO, regardless of who acquired 

them and regardless of whether they 

were acquired before or after 

cohabitation. 

Motor vehicles of any type belong to 

the individual who holds title to the 

vehicle. We would like comments on 

how to treat leased vehicles under the 

definition of ‘‘household contents.’’ 

Specifically, should a vehicle leased in 

the SEDO’s name be considered an asset 

or should it be considered a liability? 

The general purpose behind the 

proposed asset transfers rule is to 

prevent individuals from offloading 

wealth immediately before or 

concurrent with applying for DBE 

certification to stay within the PNW 

limit. To what extent might there be 

administrative difficulties in 

implementing the proposed rule that 

could outweigh the intended benefits? 

In addition, as stated above, we would 

like to exclude all retirement assets from 

PNW calculations. Our rationale is 

twofold. The current rule states that the 

value of all assets held in vested 

pension plans, Individual Retirement 

Accounts, 401(K) accounts, etc. must be 

included, minus the tax and interest 

penalties that would accrue if the asset 

were distributed at the present time. 

The Department has witnessed multiple 

conflicts among certifiers, firm owners, 

accountants, etc. about how to 


lotter on DSK11XQN23PROD with PROPOSALS2
43640 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

determine the amount of tax and 

interest penalties. To eliminate this 

problem, and perhaps more importantly, 

to avoid the unintended consequence of 

penalizing individuals from saving for 

retirement, we propose fully excluding 

all retirement assets. 

14. Social and Economic Disadvantage 

(§§ 26.5, 26.63, and 26.67) 

Section 26.5 currently defines 

‘‘socially and economically 

disadvantaged individual’’ as any 

individual who is a citizen (or lawfully 

admitted permanent resident) of the 

United States and who has been 

subjected to racial or ethnic prejudice or 

cultural bias within American society 

because of the individual’s identity as a 

member of a group and without regard 

individual qualities. The social 

disadvantage must stem from 

circumstances beyond the individual’s 

control. These individuals who are 

members of one or more of the following 

groups are rebuttably presumed to be 

socially and economically 

disadvantaged (SED): Black Americans, 

Hispanic Americans, Native Americans, 

Asian-Pacific Americans, Subcontinent 

Asian Americans, women, and any 

additional groups whose members are 

designated as SED by the Small 

Business Administration (SBA), at such 

time as the SBA definition becomes 

effective. 

Evidence and Rebuttal of Social 

Disadvantage 

Section 26.61(c) states that certifiers 

must rebuttably presume that members 

of the designated groups identified in 

§ 26.67(a) are socially and economically 

disadvantaged (SED). This means that 

individuals who are members of the 

designated groups do not have the 

burden of proving that they are (SED). 

In order to obtain the benefit of the 

rebuttable presumption, individuals 

must only submit a signed, notarized 

statement that they are a member of one 

of the groups in § 26.67(a). Applicants 

do, however, have the obligation to 

provide certifiers with information 

concerning their economic 

disadvantage. See § 26.67. 

Section 26.63(a)(1) provides that if, 

after reviewing the signed, notarized 

affidavit of membership in a § 26.5 

presumptively disadvantaged group, the 

certifier has a well-founded reason to 

question the individual’s claim of 

membership, the certifier must require 

the individual to present additional 

evidence of group membership. See 

§§ 26.61(c) and 26.63(b)(1). The current 

rule states that in making such a 

determination, the certifier must 

consider whether the person has held 

himself/herself/themselves out to be a 

member of the group over a ‘‘long 

period of time’’ prior to applying for 

certification and whether the person is 

regarded as a member of the group by 

the relevant community. The certifier 

may require the individual to produce 

additional evidence of group 

membership. If, after reviewing the 

evidence, the certifier determines that 

the individual is not a member of a 

§ 26.5 group, the individual may elect to 

apply for certification by demonstrating 

social and economic disadvantage on an 

individualized basis. 

Current § 26.67(a)(1) states that 

certifiers must rebuttably presume that 

citizens of the United States (or lawfully 

admitted permanent residents) who are 

women, Black Americans, Hispanic 

Americans, Native Americans, AsianPacific Americans, Subcontinent Asian 

Americans, or other individuals, as 

defined by the SBA, are SED. Each 

owner claiming the presumption must 

submit a signed, notarized affidavit as 

evidence of the claim. Section 

26.67(b)(2) provides that if a certifier 

has a reasonable basis to believe that an 

individual who is a member of one of 

the designated groups is not, in fact, 

socially and/or economically 

disadvantaged, the certifier may, at any 

time, start a proceeding to determine 

whether the individual’s presumption of 

social and economic disadvantage 

should be deemed rebutted. Section 

26.67(b)(3) explains that the certifier 

bears the burden of demonstrating, by a 

preponderance of the evidence, that the 

individual is not SED. The certifier may, 

however, require the individual to 

produce information relevant to the 

determination of the individual’s 

disadvantage. 

The Department acknowledges there 

has been confusion caused by the 

definition of SED in § 26.5, the 

provisions governing group membership 

determinations, in § 26.63 and the 

rebuttal of social and economic 

disadvantage provisions in § 26.67. 

To more clearly address group 

membership, the presumption of social 

and economic disadvantage that 

attaches to group membership, and the 

rebuttal of presumed social and 

economic disadvantage, we propose 

several changes. Current § 26.63(b)(1) 

explains that when questioning an 

individual’s group membership, the 

certifier ‘‘must consider whether the 

person has held himself out to be a 

member of the group over a long period 

of time prior to application for 

certification . . .’’ (italics added). 

Without that requirement, a White male 

(for example) could suddenly discover 

he has Black ancestry and apply for DBE 

certification based on that recent 

discovery—even though he has never 

held himself out as Black, and he would 

likely have no evidence that the Black 

community regards him as a member of 

the Black community. The Department 

has not previously defined what 

constitutes ‘‘a long period of time.’’ 

Because of confusion expressed by 

certifiers and applicants alike, the 

Department now proposes defining ‘‘a 

long period of time’’ as a period of at 

least five years. We also propose adding 

procedural requirements to be followed 

by the certifier and the owner of the 

applicant firm claiming group 

membership in the event that the 

certifier questions the owner’s claim of 

group membership. 

We also propose folding the 

requirements of § 26.63 into § 26.67 for 

clarification and simplicity. Under 

§ 26.67(a)(1), an individual claims the 

presumption of social disadvantage by 

filing a signed, notarized Affidavit of 

Certification. We propose changing the 

name of this document to Declaration of 

Eligibility (DOE). Like the Affidavit of 

Certification, the DOE is found in the 

Uniform Certification Application 

(UCA). 

In the current rule, the definition of 

social disadvantage is immediately 

followed by the definition of economic 

disadvantage; both definitions precede 

the provisions regarding rebuttal of each 

type of disadvantage. We propose that 

the social disadvantage rebuttal 

provisions immediately follow the 

definition of social disadvantage, and 

likewise for economic disadvantage (i.e., 

definition immediately followed by 

rebuttal provisions. It is our view that 

this reordering will increase efficiency 

for certifiers and applicants when trying 

to find the rules for each type of 

disadvantage. 

To claim a presumption of social 

disadvantage, an owner must only check 

the box(es) on the DOE for which 

group(s) the individual is a member, 

and sign and submit the DOE with the 

firm’s UCA. To claim the presumption 

of economic disadvantage, the owner 

must sign and submit the DOE as well 

as a PNW statement. 

We propose adding a reminder in 

§ 26.67 that the signed DOE is the only 

evidence of group membership an 

individual must provide with the UCA. 

We want to add this reminder because 

we have seen instances in which 

certifiers burden applicants to provide 

additional evidence of group 

membership as a matter of course 

without a well-founded reason to 

question the individual’s claim of 

membership. This NPRM would clarify 

that certifiers must not request 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43641 

26See ‘‘Official Questions and Answers (Q&A’s) 

Disadvantaged Business Enterprise Program 

Regulation (49 CFR Part 26)’’ available at https:// 

www.transportation.gov/sites/dot.gov/files/docs/ 

mission/civil-rights/disadvantaged-businessenterprise/55851/official-questions-and-answersdisadvantaged-business-enterprise-programregulation-49-cfr-26-4-25.pdf and ‘‘Official FAQs on 

DBE Program Regulations (49 CFR 23)—Section 

23.31; 27.67(b)(2)—Personal Net Worth’’ available 

at https://www.transportation.gov/osdbu/ 

disadvantaged-business-enterprise/official-faqsdbe-program-49-cfr-23. 

additional evidence as a matter of 

course. Additional evidence may only 

be requested if the certifier has a wellfounded reason to question the 

individual’s claim of group 

membership. When group membership 

is in question, § 26.61(b) states that the 

firm seeking certification bears the 

burden of demonstrating, by a 

preponderance of the evidence, that it 

meets the regulation’s group 

membership requirements. 

In the proposed rule, we are placing 

timelines/deadlines in § 26.67 to ensure 

that the process of questioning group 

membership is not unduly delayed by 

certifiers or applicants. For example, if 

a certifier properly asks an owner for 

additional evidence of group 

membership, the owner would be 

required to submit the evidence within 

15 days of the certifier’s written 

explanation. If the owner timely submits 

the evidence requested, the certifier 

would be required to notify the owner 

in writing, no later than 30 days after 

receiving the evidence, of the certifier’s 

determination of group membership. 

We emphasize that the presumption 

of social disadvantage remains 

rebuttable. If a certifier has a reasonable 

basis to believe that, despite 

membership in one of the groups whose 

members are presumed socially 

disadvantaged, the individual is not, in 

fact, socially disadvantaged, the certifier 

may commence a proceeding to 

determine whether the presumption of 

social disadvantage should be regarded 

as rebutted. When social disadvantage is 

questioned, § 26.67(b)(3) states that the 

certifier bears the burden of proof. We 

point out that current § 26.67(b)(2) states 

that a certifier may (not must), at any 

time start a proceeding under § 26.87 to 

determine whether an individual’s 

presumption of social disadvantage 

should be rebutted. We believe that if a 

certifier has a well-founded basis to 

question an individual’s social 

disadvantage, it must initiate a 

proceeding under § 26.87, and we have 

adjusted this language accordingly. We 

propose allowing the owner of a firm 

that is denied certification to submit a 

claim of individual disadvantage at any 

time, without regard to the waiting 

period in § 26.86(c). A certifier would 

not be able to require the individual to 

file a new application; the individual 

would be permitted to simply amend 

the original application. 

Evidence and Rebuttal of Economic 

Disadvantage 

Under the current rule, an owner 

claiming a presumption of economic 

disadvantage must, in addition to 

submitting a signed DOE, demonstrate 

that the owner’s PNW does not exceed 

the DBE Program’s current $1.32 million 

limit. The owner must also submit a 

signed statement of PNW, with 

appropriate supporting documentation, 

using the Department’s PNW Statement 

without change or revision. 

As explained in current guidance, the 

DBE Program ‘‘should not include 

people who can reasonably be regarded 

as having accumulated wealth too 

substantial to need the program’s 

assistance.’’ 26 For example, there are 

instances in which an individual’s PNW 

is below the program’s cap, yet the 

individual is not, in fact, economically 

disadvantaged. Thus, if a certifier has an 

articulable reason, on a case-by-case 

basis (and not as a matter of course) to 

believe that an individual whose PNW 

does not exceed the cap should not be 

regarded as economically 

disadvantaged, the certifier is permitted 

under § 26.67(b)(1)(ii)(A) to evaluate 

whether the individual has the ability to 

accumulate substantial wealth (AASW). 

Under the current rule, the individual’s 

presumption of economic disadvantage 

will be rebutted if the certifier finds that 

the individual does have the AASW. In 

making its determination under the 

current rule, a certifier may consider 

factors such as, but not limited to: (1) 

whether the average adjusted gross 

income of the owner over the most 

recent three year period exceeds 

$350,000; (2) whether the income was 

unusual and not likely to occur in the 

future; (3) whether the earnings were 

offset by losses; (4) whether the income 

was reinvested in the firm or used to 

pay taxes arising in the normal course 

of operations by the firm; (5) other 

evidence that income is not indicative 

of lack of economic disadvantage; and 

(6) whether the total fair market value 

of the owner’s assets exceed $6 million. 

During the last eight years, the 

Department has seen, on multiple 

occasions, that certifiers and applicant 

firms misinterpret the AASW rule. For 

example, they often treat the six factors 

as a checklist and unduly focus on the 

owner’s adjusted gross income while 

ignoring the other five factors, rather 

than doing a holistic evaluation. In 

addition, calculating whether an 

owner’s assets exceed $6 million has 

resulted in overly complex calculation 

disputes, while again largely ignoring 

any other factors that could have 

indicated an AASW. Thus, the 

Department proposes eliminating the six 

factors in favor of a more ‘‘big picture’’ 

approach. Specifically, the provision 

would instruct certifiers to evaluate 

whether a reasonable person would 

consider the owner economically 

disadvantaged. Indicators could include 

(but are not limited to) ready access to 

wealth, lavish lifestyle, income or assets 

of a type or magnitude inconsistent with 

economic disadvantage, or other 

circumstances that economically 

disadvantaged people typically do not 

enjoy. We emphasize that inquiry would 

have no effect on the PNW asset 

exclusions or limitations on inclusions. 

It would entirely disregard liabilities. 

We welcome comment on whether this 

proposed replacement swings the 

pendulum too far in the opposite 

direction of the current AASW 

provision. In other words, are the 

proposed elements too vague in nature 

and result in just as much confusion 

and dispute as the current provision? 

Would the proposal lead to inconsistent 

application of the regulation? If so, what 

factors should be considered in making 

an AASW evaluation? 

Individualized Determinations of SED 

Status 

Because the DBE Program is intended 

to be as inclusive as possible—without 

compromising the program’s integrity 

and while remaining narrowly 

tailored—firms whose owners are not 

presumed socially and economically 

disadvantaged can still apply for 

certification. The DBE Program 

regulation has allowed for this since the 

program began in 1983. Appendix E of 

the regulation provides guidance for 

evaluating disadvantage on an 

individualized basis under § 26.67(d) 

(§ 26.67(e) in the proposed rule). The 

Department regularly receives feedback 

from certifiers, applicants, and other 

stakeholders about the excessive 

burdens related to gathering and 

submitting evidence under appendix E, 

particularly the evidence of economic 

disadvantage. Though not the 

Department’s intention, much of the 

required evidence of economic 

disadvantage can be more challenging to 

obtain than necessary. The list of 

required evidence also focuses largely 

on the stature of other firms rather than 

on the applicant firm. Multiple 

stakeholders have told us that the 

standards set forth in appendix E are 

nearly impossible to meet. The standard 

is ‘‘preponderance of the evidence,’’ but 


lotter on DSK11XQN23PROD with PROPOSALS2
43642 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

in practice is ‘‘clear and convincing.’’ 

The latter is a much more stringent 

burden to bear. Thus, we propose 

replacing appendix E with flexible, less 

prescriptive rules that will better allow 

certifiers to make accurate case-by-case 

determinations using the correct 

‘‘preponderance of the evidence’’ 

standard. Further, we want to reduce 

the cost and hours burden for applicants 

to submit evidence of their individual 

disadvantage. 

15. Ownership (§ 26.69) 

The Department proposes 

considerable revisions to § 26.69, which 

has remained largely unchanged since 

1999. The changes are essential because 

disadvantaged ownership is the 

foundation of the DBE Program. 

Burden Reduction, Simplification, and 

Consistency 

The revisions would preserve the 

section’s programmatic objectives and 

effect but articulate the operative 

concepts differently. We believe that the 

revisions would serve several related 

goals: burden reduction, simplification, 

improved understanding and thus 

compliance, streamlined administration, 

consistent results, and enhanced 

program integrity. We also think that 

revised § 26.69 can drive efficiency 

gains across the board. The proposed 

changes would further these goals by 

stating rules and intent plainly and 

directly. They would more logically 

organize the material. Our proposed 

changes would replace language that 

has proved confusing, impractical, 

awkward, or outdated, with text that we 

believe corrects or mitigates these 

shortcomings. Clear rules and consistent 

results are what stakeholders tell us 

they value above all. Accordingly, we 

propose several bright-line rules that we 

believe will make certification easier to 

obtain, maintain, and monitor. The 

overarching objective of subpart D, after 

all, is to certify eligible firms. 

The Department’s proposed revisions 

would describe and prescribe. It is more 

flexible than the language it replaces. At 

the same time, the revised rules would 

provide detail when detail can resolve 

longstanding misinterpretations. The 

intent is to confront interpretive 

challenges directly and unambiguously. 

A measure of certainty should provide 

all stakeholders peace of mind. The 

proposed revision would also make the 

certification process quicker and less 

intrusive. To the extent possible, we 

prefer to leave business decisions to 

business owners and give certifiers 

similar latitude to determine how the 

rules apply to individual applicants and 

DBEs. They are in the best position to 

make these judgments. Broad anti-abuse 

rules, rather than long lists of suspect 

transactions, safeguard the integrity of 

the ownership requirements. We 

consider the revision to be notably more 

user-friendly than the present § 26.69. 

The Department has come to believe 

that current § 26.69(a) is too complex. It 

is more a chronology or summary of 

ownership-related events than a 

statement of the core requirement for 

eligibility. It is also out of sync with 

current business realities. The revised 

rule reworks and simplifies the essential 

concepts and moves them to places in 

§ 26.69 that correspond to their role in 

explaining the general rule. There, we 

develop and update those concepts and 

cross-refer to related provisions. 

The current § 26.69(b), streamlined 

and restated as the general rule, would 

become the new § 26.69(a). The 

restatement would overtly tie the rules 

that follow to the general rule that 

SEDOs must own at least 51 percent of 

the business. It would explain concisely 

and precisely the import of the 

provision and what the firm must prove 

to be eligible for certification. 

Reasonable Economic Sense 

The proposed new § 26.69(b) replaces 

the concepts of ‘‘real, substantial, and 

continuing’’ (RS&C) capital 

contributions and ownership, and the 

binary alternative of ‘‘pro forma’’ 

ownership, with the broader, more 

flexible requirement that transactions 

affecting ownership make reasonable 

economic sense (RES). The revision 

would accomplish several objectives, 

not least of which are objectivity and 

neutrality. The revision would recast 

the requirement in terms less awkward 

and more descriptive. The revision 

would also address the rigidity of the 

RS&C, avoiding outcomes (e.g., 

ineligibility determinations based on a 

one-dollar deficiency in contributed 

capital) that can seem capricious. 

We propose retiring RS&C in favor of 

a more workable standard, one that can 

adapt to unforeseen transactions and 

business structures. RES is less absolute. 

It acknowledges that substance trumps 

form and one size never really fits all. 

Our objective is to encourage certifiers 

not just to ‘‘consider’’ all pertinent facts 

but to weigh them in firm-specific 

context. The current language obscures 

the fact that certifiers have always had 

the freedom and discretion to make 

these judgments. We believe that the 

proposed revision would make certifiers 

more confident and business owners 

less wary. Paragraph (b) of the revised 

§ 26.69 describes the proposed 

standard’s components and signals that 

reasonable proportionality, economic 

effect, and common sense are the new 

touchstones. We intend, in the ‘‘benefits 

and burdens’’ clauses, to give certifiers 

a more useful yardstick for assessing 

initial and continuing eligibility. 

The proposed revisions to § 26.69(c) 

would define the new term 

‘‘investments’’ to include purchase of 

ownership interests, capital 

contributions, and certain gifts, and 

additional investments after acquiring 

the ownership. This would be 

consistent with the current RS&C 

standard but more straightforward and 

less strained. Stakeholders frequently do 

not understand what the current 

language means. A purchase, for 

example, is not a capital contribution, 

and investments ‘‘to acquire’’ ownership 

are not the only ones to which the rules 

apply. The single-sentence numbered 

provisions under new paragraph (c) 

attempt to remedy these deficiencies in 

the current rule, which too often 

confuse SEDOs who are not versed in 

certification nuances. 

The paragraphs under § 26.69(c) 

would also streamline the rule and 

make it more equitable. The proposed 

§ 26.69(c)(3) would treat all joint owners 

the same, regardless of marital status or 

state-specific community property law. 

We intend for the same rules to apply 

to all SEDOs and to all cases of joint 

ownership regardless of jurisdiction. 

Hence the simple statement that 

ownership tracks title. Paragraph (c)(4) 

clarifies which gifts count as 

investments, simplifies the analysis, and 

minimizes opportunities for 

gamesmanship. 

These proposed changes would 

permit us to eliminate the marital 

property rule in current § 26.69(i) and 

extend the renunciation and transfer 

remedy to all joint owners. We would 

remove as unnecessary the complex 

machinery of current § 26.69(h), which 

applies when a non-disadvantaged 

individual gifts or transfers interest or 

other assets without adequate 

consideration. The presumption and 

two-pronged rebuttal/higher standard of 

proof is overly complex. The 

streamlined, modernized proposed rule 

would work in better coordination with 

the rest of part 26 and would enable us 

to simplify or eliminate corresponding 

rules in other sections, e.g., in §§ 26.67 

and 26.71. Revised § 26.69(c), in short, 

should minimize haggling, save 

resources, and improve program 

administration. We expect it to produce 

speedier, more accurate results that do 

not vary by state. 

The proposed § 26.69(d) explains how 

the rules for purchases differ from those 

for capital contributions, and they 

provide simple but significant 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43643 

27See, e.g., 17–0058 ARS Electric, LLC (Oct. 10, 

2017) at 2 (omitting any eligibility analysis under 

paragraphs (d)(1) through (3)). https://

www.transportation.gov/sites/dot/files/data/dbe/ 

appeal-docs/17-0058%20ARS%20Electric%

20FINAL-REDACTED.pdf. 

28See, e.g., 13–0073 C2PM, Inc. (Nov. 7, 2013) 

(certifier disregarded SEDO’s holding of highest 

officer position and demonstrated control of board 

of directors; decision reversed) and 16–0017 

Tamarac Land Surveying, LLC (Apr. 28, 2016) 

(certifier cited introductory language of § 26.71(d) to 

support denial but did not dispute SEDO’s ability 

to control board of directors; decision reversed). 

backstops. These rules tie into concepts 

introduced in preceding paragraphs and 

replace rules that have proved nearly 

impossible to administer effectively. 

The revised rule explains the concepts 

more objectively and more directly than 

do current § 26.69(c) through (f). 

The proposed revisions to § 26.69(e) 

would provide new, bright-line rules for 

debt-financed capital contributions and 

purchases. They would replace 

disjointed and often misunderstood 

provisions. The proposed would 

substitute an RES analysis for RS&C and 

go a step further toward clarity and 

preventing abuse. They give effect to 

longstanding Departmental and 

Congressional intent and, we believe, 

substantially reduce certifier burden. 

We intend for them to significantly 

reduce administrative bottlenecks. They 

should preempt at least some frivolous 

or premature applications and give 

certifiers a clear reason for rejecting the 

ones that get through. 

Paragraph (f) revisions bring 

Department policy into the regulation. 

We want to make clear that legitimate 

efforts to correct impediments to 

certification are not evasive or 

subversive. The ultimate objective 

remains certifying eligible small, 

disadvantaged businesses with as little 

hindrance as possible. 

The three, short anti-abuse rules in 

proposed paragraph (g) would put firms 

on notice of particular, and logical, 

results of the RES requirement and 

would give certifiers explicit authority 

to streamline the analysis. 

We believe that all of the proposed 

revisions would save firms and certifiers 

time and significantly improve program 

administration. We expect to see results 

that are more accurate and more 

equitable. 

16. Control (§ 26.71) 

Control of DBEs has been part of the 

certification eligibility criteria since the 

program began in 1983. Certifiers are 

required to analyze the extent to which 

disadvantaged individuals control their 

business in both substance and form. 

However, the Department believes that 

strict requirements about nondisadvantaged participants hinder the 

certifier from conducting a meaningful 

analysis of whether the disadvantaged 

owner controls the firm. As such, we are 

proposing significant revisions to the 

control provisions found in § 26.71. The 

rationale of our revisions is to give 

certifiers flexibility when determining 

whether the SEDO controls the firm. 

Thus, we recommend replacing the 

current checklist-type requirements 

with less prescriptive rules. The 

proposed revisions would also give 

applicants more flexibility in 

demonstrating control. 

The proposed revisions would shift 

the focus from the actions and 

experience of non-disadvantaged 

participants in the firm to those of the 

SEDO. The proper and originally 

intended inquiry is whether the SEDO 

controls the firm through managerial 

oversight, revocable delegation of 

authority, and critical and independent 

decision-making. The proposal would 

also streamline § 26.71 by removing 

redundancy, and in some instances, 

excessively burdensome requirements. 

The Department proposes to add 

general rules to § 26.71(a). Proposed 

§ 26.71(a)(1) would state that 

disadvantaged owners who own at least 

51 percent of the firm must also control 

it. Proposed § 26.71(a)(2) would add a 

fine point that the certifier must 

consider all relevant facts together in 

context. 

Because control requires the certifier 

to make a fact-intensive determination, 

proposed rule § 26.71(a)(3) would state 

that a firm must have operations in the 

type of business that it seeks to perform 

as a DBE before it applies for 

certification. We believe there are two 

benefits to this proposal. First, the 

proposed rule would allow the certifier 

to evaluate the disadvantaged owner’s 

control of the firm based on 

demonstrable actions that the owner 

takes to run the business. Second, the 

proposed rule would help certifiers 

better allocate their resources by 

relieving them from the burden of 

evaluating applications from firms that 

are not conducting business and have 

no ability to bid on DBE contracts. The 

proposed rule would exclude firms that 

are applying for ACDBE certification, 

since many potential ACDBEs have no 

operations before obtaining a contract. 

SEDO as the Ultimate Decision Maker 

The Department proposes § 26.71(b) 

to clarify that a disadvantaged owner 

must be the ultimate decision maker. 

The rule reminds certifiers and firms 

that the control inquiry requires an 

analysis that goes beyond formalities 

shown in business structure, governing 

documents, and policies. What the firm 

must prove under this provision is that 

the SEDO ‘‘runs the show’’ by having 

the final say on all matters. This means 

that the firm’s chain of command must 

be led by the disadvantaged owner, 

whether in a small startup business or 

a large multifaceted corporation. Except 

under narrow circumstances described 

in § 26.71(c)(4), other participants at the 

firm must faithfully carry out every 

decision that the SEDO makes. 

Governance 

Proposed rule § 26.71(c) combines the 

requirements of the current § 26.71(c) 

and (d) rules and clarifies what a firm 

must prove to demonstrate control of 

the firm’s governance. 

The proposal simplifies current 

§ 26.71(c) into one general rule that 

precludes provisions that require nonSEDO concurrence or consent for the 

SEDO to act. The proposed rule would 

simplify the introductory language of 

current § 26.71(d), denoting that the 

disadvantaged owners must ‘‘possess 

the power to direct or cause the 

direction of the management and 

policies of the firm and to make day-today as well as long-term decisions on 

matters of management, policy and 

operations.’’ This phrase comes from an 

earlier rule that the Department 

intended to remove after it issued the 

more specific provisions of § 26.71(e), 

(f), and (g). The phrase has caused 

certifiers to misinterpret this broad, 

introductory language as the rule itself, 

independent of the precise paragraphs 

(d)(1) through (3).27 We have previously 

opined that the introductory language is 

merely prefatory and does not constitute 

an eligibility requirement independent 

of paragraphs (d)(1) through (3).28

The Department intends the proposed 

rule to reflect what is described in the 

current § 26.71(d)(1) through (3)—that 

the disadvantaged owner must control 

the firm by holding the highest officer 

position and having voting authority 

over other directors, partners, or 

members. We believe the proposal 

would resolve confusion and clarify that 

the rule is about the disadvantaged 

owner’s governance of the firm. 

We also propose to clarify the 

requirement that ‘‘disadvantaged 

owners must control the board of 

directors.’’ Our proposal outlines voting 

and quorum provisions that would 

prevent a disadvantaged owner from 

controlling the board of directors. The 

proposal also clarifies that 

disadvantaged individual(s) must have 

present control of the board of directors, 

meaning they cannot prove eligibility 

under § 26.71(c) based on a 

disadvantaged owner’s power as a 


lotter on DSK11XQN23PROD with PROPOSALS2
43644 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

majority shareholder to later change the 

composition of the board of directors. 

See § 26.73(b) (certifier must evaluate 

eligibility based on present 

circumstances). The Department affirms 

many certification denials each year 

because of disqualifying voting and 

quorum provisions in the firm’s bylaws. 

We believe that adding more explicit 

language to the rule would encourage 

firms to amend bylaw provisions that do 

not conform with the rule before 

applying for DBE certification. 

The only exception proposed under 

§ 26.71(c) is for extraordinary actions 

detailed within proposed § 26.71(c)(4). 

The Department believes that nonSEDOs should have the power to block 

extraordinary measures that would 

affect their ownership rights. We believe 

that protecting minority ownerships 

through governing provisions is 

generally permissible and consistent 

with standard business practices. 

Expertise 

The Department proposes revisions to 

§ 26.71(d), to incorporate a portion of 

the current § 26.71(g) with minor 

adjustments. The proposed rule would 

clarify that the SEDO must have an 

overall understanding of the firm’s 

business operations to the extent 

necessary to make managerial decisions. 

Administrative decisions made by the 

disadvantaged owner do not prove 

control unless the firm primarily 

performs administrative business 

services for its customers. 

The owner of a DBE does not need to 

be an expert in every aspect of the firm’s 

operations, as we explained in the 1997 

supplemental notice of proposed 

rulemaking (SNPRM): ‘‘with respect to 

expertise, the disadvantaged owners 

must, in our view, generally understand 

and be competent with respect to the 

substance of the firm’s business.’’ (62 FR 

29548, 29568 (May 30, 1997)) 

The understanding that the owner 

should have varies by the nature and 

complexity of the firm’s operations. For 

example, a disadvantaged owner of a 

large electrical firm may not be an 

electrician but would need to know 

enough about the firm’s electrical work 

and processes to make managerial 

decisions. In contrast, an owner of a 

three-employee firm that provides lawn 

services may only need general 

managerial expertise to control the firm. 

SEDO Decisions 

Proposed rule § 26.71(e) incorporates 

a portion of the current § 26.71(g) with 

minor amendments. Based on several 

appeal decisions, the Department 

believes that this rule is too subjective, 

since it requires that the owner must 

have ‘‘the ability to’’ make decisions. To 

correct this issue, the proposed rule 

would direct the inquiry to whether the 

SEDO makes major decisions that affect 

the firm’s prospects. The proposed rule 

would have three requirements. First, 

the firm would be required to show that 

the SEDO receives pertinent information 

from subordinates to demonstrate that 

other participants are not making 

important decisions without the owner’s 

knowledge. Second, the firm the firm 

would be required to show that the 

SEDO critically analyzes the pertinent 

information, based on the SEDO’s 

knowledge demonstrated in § 26.71(d). 

Failure to prove this means that the 

owner simply ‘‘rubber-stamps’’ what 

another participant has to say about an 

issue. The proposed rule, however, 

would not preclude the owner from 

asking questions and consulting other 

participants as the owner analyzes the 

information. Finally, the SEDO would 

need to make independent decisions 

after receiving and analyzing the 

pertinent information. 

Delegation 

The Department proposes to simplify 

and restructure the current delegation 

rule. As we stated in the 1997 SNPRM, 

‘‘[t]he more successful or complex a 

firm becomes; the more inevitable 

delegation becomes. It is fanciful to 

imagine that one or a few owners can or 

should do, or be prepared to do, 

everything that a firm does. As long as 

the owners can take back authority they 

have delegated, retain hiring and firing 

authority, and continue to ‘run the 

show’ for the company, they control it, 

notwithstanding delegation of some 

authority and functions.’’ (62 FR 29548, 

29568 (May 2, 1997)) 

The proposal makes clear that the 

disadvantaged owner must have the 

power to revoke the delegated authority, 

but also emphasizes that the firm must 

show that an obvious chain-ofcommand exists within the company, 

which is recognized by all employees 

and associates of the business. 

Finally, the proposed paragraphs 

describe what delegated actions by nondisadvantaged individuals are 

permissible under § 26.71. 

Independent Business 

The Department proposes to make 

minor amendments to current § 26.71(b) 

and redesignate the provision as 

§ 26.71(g). The proposed rule would 

clarify that a firm must prove that it is 

independently viable, notwithstanding a 

relationship with another firm from 

which it receives or shares essential 

resources. A pattern of regular dealings 

with a single or small number of firms 

does not necessarily make a firm 

ineligible for certification so long as it 

is not acting as a ‘‘front’’ or ‘‘passthrough’’ for another firm or individual. 

For example, the fact that a trucking 

firm in a rural part of a state provides 

services to the only prime contractor in 

town does not necessarily make the firm 

ineligible under the proposed rule, 

unless the certifier determines that the 

applicant firm is set up as a conduit for 

another firm or person who is not 

eligible to participate in the DBE 

Program. The proposal also clarifies that 

relationships and transactions between 

firms of which the SEDO has 51 percent 

ownership and control does not violate 

the rule, although the relationship may 

raise a business size/affiliation issue. 

Franchises 

The Department proposes 

redesignating the current provision 

§ 26.71(o), which is commonly referred 

to as the franchise rule, to § 26.71(h). 

NAICS Codes 

The Department proposes 

redesignating the current provision 

§ 26.71(n), which is commonly referred 

to as NAICS rule, to § 26.73 with minor 

technical corrections. 

Removed Provisions (§ 26.71 (i), (j), (k), 

(l), (m), (p), and (q)) 

The current language of § 26.71(i), (j), 

(k), (l), (m), (p), and (q) relates to the 

concept that non-disadvantaged 

individuals can participate in any DBE 

firm, as long as disadvantaged 

individuals control the firm. The 

Department’s proposed rules offer more 

than adequate means to decide whether 

an owner controls his or her firm, with 

or without the involvement of nondisadvantaged participants. The 

proposal would eliminate redundancy 

but also remove the tendency of 

certifiers to rely in accurately on these 

provision as catch-all grounds for 

ineligibility whenever a nondisadvantaged participant is involved or 

present in the firm’s operations. The 

Department has stressed for decades 

that this is inappropriate, and that the 

proper inquiry is whether the 

disadvantaged owner controls the firm 

notwithstanding the participation of 

other employees, family members, or 

non-disadvantaged owners. 

For example, the Department 

proposes to remove § 26.71(k), 

commonly known as the ‘‘family 

business’’ provision, to eliminate an 

eligibility criterion that is often misused 

by certifiers. Family-owned firms have 

long been a concern in the program. The 

December 1992 NPRM proposed that 

certifiers treat non-disadvantaged family 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43645 

29See e.g., 18–0003 Clear Creek of Salisbury, Inc. 

(May 29, 2018) (owner did not need own 

commercial driver’s license (CDL) to control 

hauling firm); see also 18–0007 K-Kap, Inc. (May 

15, 2018). 

30See 13–0064 J&L Steel, Inc. (Aug. 23, 2013) 

(absence of electrician license did not impair 

owner’s control of large electrical contracting 

business when she did not perform electrical work); 

13–0112 Nancy’s Tree Planting, Inc. (Jan. 10, 2014) 

(no home improvement contractor license needed to 

control commercial landscaping business). 

31See COVID–19 Guidance (June 29, 2021) 

(extending virtual on-site flexibilities announced in 

March 2020) available at https://

www.transportation.gov/mission/civil-rights/covid19-guidance. 

32 49 CFR part 26 Q&A, ‘‘Is it appropriate for 

UCP’s to require out-of-state applicants to appear in 

person for an interview?’’ available at https://

www.transportation.gov/sites/dot.gov/files/2020-01/

docr-20180425-001part26qa.pdf. 

members the same as other nondisadvantaged participants in DBEs. The 

participation of family members in a 

firm should not be viewed as meaning 

that a disadvantaged individual fails to 

control a firm, as stated in the December 

1992 NPRM. The May 1997 SNPRM 

provided explicitly that if the threads of 

control in a family-run business cannot 

be disentangled, such that the certifier 

can specifically find that a woman or 

other disadvantaged individual 

independently controls the business, the 

certifier may not certify the firm. The 

1999 final rule maintained this line of 

thinking—a business that is controlled 

by the family as a group, as distinct 

from controlled individually by 

disadvantaged individuals, is ineligible. 

The current language of § 26.71(k) 

stresses that non-disadvantaged 

individuals can participate in any DBE 

firm, as long as disadvantaged 

individuals control the firm. This is 

duplicative of revisions proposed in this 

NPRM. The Department believes that 

the proposed provisions offer more than 

adequate means to determine whether a 

SEDO controls his or her firm, with or 

without the involvement of nondisadvantaged or disadvantaged 

individuals and relatives. 

The Department recommends 

removing current § 26.71(h), commonly 

referred to as the ‘‘license rule,’’ to 

eliminate redundancy with proposed 

rules § 26.71(d) and (e) and to eliminate 

state law requirements from the rule as 

we propose in revisions to the personal 

net worth and ownership provisions. 

The current § 26.71(h) directs the 

certifier to deny certification if the 

SEDO does not hold a license or 

credentials that a state or local law 

requires to own and control the firm. 

The Department believes that the UCP is 

the proper authority on state or local 

license requirements since it is more 

familiar with the law within its state, 

and Departmental personnel are not 

experts in state and local law. For 

example, appeal cases often provide two 

opposing interpretations of a state or 

local law, with no citation to the law at 

issue, and fail to explain how the law 

does, or does not, apply to the SEDO. 

The Department remands in these 

circumstances for the certifier to decide 

and interpret which license state or 

local law requires the SEDO to hold 

under the rule. 

More often however, a state or local 

law(s) only require that someone 

employed at the firm hold a license to 

perform specific work. In the preamble 

to the 1999 final rule, the Department 

explained that when ‘‘State law allows 

someone to run a certain type of 

business (e.g., electrical contractors, 

engineers) without personally having a 

license in that occupation, then we do 

not think it is appropriate for the 

certifier to refuse to consider that 

someone without a license may be able 

to control the business.’’ (64 FR 5096, 

5119–20 (Feb. 2, 1999)) The current 

language of § 26.71(h) adopts the view 

that the Department expressed in the 

preamble and allows the certifier to 

consider the SEDO’s lack of a license as 

‘‘one factor’’ in determining control. 

The Department reversed many 

appeal decisions where the ‘‘one factor’’ 

rule is either misapplied or not 

considered in context with the firm’s 

overall operations. For example, the rule 

does not disqualify trucking firms if the 

SEDO does not have a commercial 

driver’s license.29 The Department 

believes proposed rules § 26.71(d) and 

(e) better describe the proper control 

inquiry than the current ‘‘one factor’’ 

rule, making § 26.71(h) therefore 

redundant. The pertinent questions, 

which exist regardless of licensing, are 

whether the SEDO has enough of an 

overall understanding of the business to 

run the firm and whether the SEDO 

makes independent decisions.30

Subpart E—Certification Procedures 

17. Technical Corrections to UCP 

Requirements (§ 26.81) 

The Department would like to make 

minor technical changes to sections (a) 

and (g), removing language that is 

outdated and no longer applicable. 

18. Virtual On-Site Visits (§ 26.83(c)(1) 

and (h)(1)) 

Ensuring that only eligible firms 

participate in the DBE Program is 

central to the integrity of the program 

and critical to recipient compliance 

activities. The Department believes that 

regularly updated on-site reviews are an 

extremely important tool in helping 

prevent fraudulent firms or firms that no 

longer meet eligibility requirements 

from participating in the DBE Program. 

See 76 FR 5083, 5090 (Jan. 28, 2011). 

We acknowledged in the 2011 final rule 

that on-site visits can be time and 

resource-intensive, but the Department 

encouraged recipients to conduct 

updated on-site visits of certified firms 

on a regular and reasonably frequent 

basis. The current rule instructs 

certifiers to perform an on-site visit at 

the firm’s principal place of business to 

interview firm officers and evaluate 

their work histories and/or re ́sume ́s. 

The rule also requires certifiers to visit 

job sites the firm is working on at the 

time of its eligibility review. 

The Department proposes amending 

§ 26.83(c)(1) to make permanent the 

virtual on-site visit flexibilities 

announced in guidance in response to 

the COVID–19 pandemic.31 This would 

free up certifier resources to enable 

them to better administer other aspects 

of the DBE and ACDBE Programs, e.g., 

on-site monitoring of contractor 

compliance. Following the 

announcement of the Department’s 

flexibilities, we have received feedback 

from certifiers stating that virtual on-site 

visits have reduced logistical burdens, 

time, and expense on certifiers and 

firms while ensuring the safety of all 

parties involved in the on-site process. 

Even before the COVID–19 pandemic 

flexibilities were put in place, the 

Department’s past guidance and policy 

gave certifiers the discretion to conduct 

virtual on-site interviews. For example, 

the Department explained in a 2005 

Q&A, issued before the current 

interstate rule, that ‘‘the UCP has 

discretion to require the applicant to 

appear in person for an interview. 

Before imposing such a requirement, the 

UCP should determine if other, less 

onerous, means can be used to obtain 

the needed information (e.g., sending 

documents, participating in a 

teleconference or videoconference).’’ 32

The Department believes that virtual 

on-site visits are less onerous and more 

efficient, for certifiers and firms alike, 

for certifiers to obtain information about 

a firm. It is our view that a virtual onsite visit is equally effective as an inperson visit. It gives the certifier the 

choice to setup and complete multiple 

interviews during the day since it 

eliminates travel time to the firm’s 

principal place of business or job site. 

For example, one medium-sized certifier 

reported that conducting virtual on-site 

visits saved about $20,000 in travel 

costs and decreased the time it took to 

process applications by 10 percent. 

With the time and resources that a 

certifier would by not traveling to a 


lotter on DSK11XQN23PROD with PROPOSALS2
43646 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

33See ‘‘Compliance with Requirements for 

Timely Processing of Certification Applications’’ 

available at https://www.transportation/gov/sites/ 

dot.gov/files/docs/mission/civil-rights/

disadvantaged-business-enterprise/308776/dbeguidance-timely-processing-dbe-certificationapplications.pdf. 

34See ‘‘Curative Measures During DBE/ACDBE 

Certification Application Process’’ available at 

https://www.transportation.gov/civil-rights/

disadvantaged-business-enterprise/curativemeasures-during-dbeacdbe-certification. 

firm’s principal place of business, the 

certifier could better prepare for the 

interview itself, ultimately review more 

applications, and improve the quality of 

their on-site review report. 

Also, when certifiers or UCPs become 

aware of a change in circumstances or 

concerns that a firm may be ineligible or 

engaging in misconduct (e.g., from 

notifications of changes by the firm 

itself, complaints, information in the 

media, etc.), the certifier or UCP should 

review the firm’s eligibility, including 

conducting an on-site review. Certifiers 

can meet this objective more efficiently 

with a virtual option. 

The Department believes the proposal 

would give the firm a better opportunity 

to demonstrate eligibility because the 

SEDO would have more time to fully 

explain their industry and how the 

business runs, its relationships with 

other businesses, and describe how they 

control their business within the 

meaning of the rule. The owner can also 

make more employees available to 

support the owner’s statements or 

answer questions certifier may have. 

Many certifiers report that another 

benefit of virtual on-site visits is that 

most communication software allows 

the reviewer to record the interview, 

which is another flexibility that the 

Department proposes in this 

rulemaking. Recordings allow certifiers 

to prepare more precise on-site visit 

reports. The certifier and firm can use 

the recording as evidence during a 

decertification hearing, and the 

independent decisionmaker may find it 

useful to review the recording before 

ruling on the proposed decertification. 

The Department rarely receives 

recordings on appeal, but we believe 

that they may be useful when there is 

a dispute as to what the parties 

discussed during an on-site visit. 

Virtual on-site visits also have safety 

and health benefits. Several certifiers 

used virtual on-site visits during 

COVID–19 surges to protect the health 

and safety of employees and firm 

employees. Certifiers also report that the 

choice of conducting a virtual on-site 

visit eases the concerns of employees 

about traveling to rural areas where 

there is no mobile phone service or 

traveling to the homes of business 

owners. 

The Department believes that virtual 

on-site visits are an easier means for 

certifiers to conduct on-site reviews 

after it certifies a DBE that is in another 

state. As a matter of good auditing 

practice, certifiers can easily perform 

virtual on-sites visits of an out-of-state 

DBE on a regular and frequent basis per 

the UCP program requirements, or if the 

certifiers have a reason to question the 

firm’s eligibility. See §§ 26.83(h)(2), 

26.87(b). 

Although there are many benefits of 

virtual on-sites, we recognize that some 

certifiers may prefer to conduct 

interviews of some firms in person. The 

proposed rule would retain certifier 

discretion to still conduct in-person onsite visits. 

Finally, the proposal would not 

otherwise obviate requirements for 

conducting on-sites during an initial 

application. The certifier would still 

interview principal officers at the firm, 

review re ́sume ́s with the SEDO, 

interview the firm’s other participants, 

and visit an active jobsite (virtually or 

in-person). 

19. Timely Processing of In-State 

Certification Applications (§ 26.83(k)) 

The Department proposes amending 

the current § 26.83(k) (redesignated to 

§ 26.83(l) in the proposed rule) to 

reduce impediments to the certification 

process. Specifically, we seek to limit a 

certifier’s ability to extend the 90-day 

timeframe in which a certifier must 

issue a final eligibility decision for instate certification applications and to 

codify existing guidance that gives 

certifiers discretion to allow firms to fix 

errors within an application. Under the 

current rule, the certifier must notify a 

firm in writing within 30 days from 

receipt of the application whether the 

application is complete and ready for 

evaluation. The Department clarified in 

guidance that a ‘‘complete’’ application 

means that the firm filed a Uniform 

Certification Application (UCA) and the 

documents required from the UCA’s 

checklist. See 49 CFR part 26 Q&A, 

Compliance with Requirements for 

Timely Processing of Certification 

Applications (Apr. 25, 2018, at 1–2 

(discussing when the 90-day review 

period starts and steps UCPS should 

take to ensure the timely processing of 

DBE applications)).33

After the certifier receives all the 

information required under the rule, the 

certifier must make a certification 

decision within 90 days. Current 

§ 26.83(k) states that a certifier may 

extend the 90-day period up to 60 days 

‘‘upon written notice to the firm, 

explaining fully and specifically the 

reasons for the extension.’’ Our proposal 

would reduce the extension period from 

60 days to 30 days. A certifier would 

need OA approval for any extension 

beyond 30 days. The 1997 NPRM 

explains our rationale for the current 

review periods, providing that the 

Department decided to propose 

extending the deadline to 90 days, with 

a possibility of a 60-day extension of 

this period if the recipient sends a 

specific written explanation to the 

applicant. The Department was 

persuaded that a 60-day deadline was 

unrealistic in light of the certification 

workloads facing many recipients. 

However, the Department determined 

that a deadline remained necessary to 

give firms the assurance of reasonably 

timely handling of their applications. 

With the approval of the concerned 

Operating Administration, the recipient 

could alter the deadline involved, but 

the appropriate DOT office would be 

very careful to grant only what relief is 

necessary to recipients. (62 FR 29548, 

29573 (May 30, 1997)) 

The Department believes that the 

technological advances that exist today 

eliminate the need for a 60-day 

extension. Many certifiers now use 

software that reduce the time it takes to 

process an application, and the 

proposed allowance of virtual on-site 

visits should also give the certifier 

enough time to decide applications 

within the standard 90-day period. 

We understand, however, that there 

are some situations where the certifier 

would need a brief extension. For 

example, a certifier may extend its 

review to give the firm time to cure a 

defect in its application. There may also 

be extraordinary or unusual instances 

where the certifier may need more time 

beyond the proposed 30-day extension 

period, at which point, the proposal 

requires that the certifier obtain OA 

approval for another extension. The 

Department seeks comment on whether 

another extension is necessary. 

Finally, we remind certifiers that a 

failure to make an application decision 

within the § 26.83(l) period is a 

constructive denial of the firm’s 

application, and that certifier may 

become subject to penalties for 

noncompliance under §§ 26.103 and 

26.105. 

20. Curative Measures 

We propose to codify our 2019 

memorandum regarding curative 

measures during the DBE and ACDBE 

certification application process to 

streamline and reduce redundancy in 

the certification process.34 As we 

explained, the certification process can 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43647 

35See ‘‘Interstate Certification 49 CFR § 26.85 

Guidance’’ available at https:// 

www.transportation.gov/civil-rights/disadvantagedbusiness-enterprise/interstate-certification-49-cfr2685. 

be a lengthy and intensive undertaking 

for certifiers and applicant firms. If a 

certifier finds a firm ineligible, the 

certifier must expend often limited 

resources to issue a regulation 

compliant denial letter. If the denied 

firm reapplies, the certifier must 

reprocess a very similar application to 

what was previously submitted, 

including conducting another on-site 

review. That is why our 2019 

memorandum reminds applicant firms 

and certifiers that firms may proactively 

revise their UCA and/or supporting 

documents to conform with the 

regulation’s certification requirements 

before a certifier makes a final eligibility 

decision. Similarly, a certifier may 

notify the applicant about any eligibility 

concerns before making a final decision. 

We see tremendous benefits to this 

practice. The Department continues to 

stress that allowing an applicant to take 

curative measures is not meant to allow 

unqualified firms into the program. It 

would simply give the firm a chance to 

resolve certification issues during the 

eligibility evaluation. A firm contacting 

a certifier to request permission to cure 

deficiencies is generally not an attempt 

to circumvent program requirements. 

Proposed rule § 26.83(m) would 

incorporate what is stated in the 2019 

memorandum. A certifier would be 

required to allow a firm to make any 

change(s) as long as the changes are 

made within the § 26.83(l) review 

period. In addition to essentially 

mirroring the 2019 memorandum, our 

proposed change is consistent with 

policies we discussed in previous 

preambles. In 1992, the Department 

proposed an amendment that would 

allow a firm to correct errors within 30 

days of receiving a denial letter to avoid 

reapplying for certification. In the 1997 

SPRM, the Department recognized 

certifiers’ concerns that allowing firms 

to fix errors and reapply soon after a 

denial wastes resources. The 1997 

NPRM, however, encouraged certifiers 

to allow applicants to correct minor 

paperwork errors, non-material 

mistakes, and omissions in applications 

before denying an application. (62 FR 

29548, 29573 (May 30, 1997)) The 1999 

preamble to the final rule reiterated that 

certifiers may allow firms to correct 

minor errors without invoking the usual 

12-month waiting period, and the 

Department urged certifiers to follow 

such a policy. (64 FR 5096, 5123 (Feb. 

2, 1999)) 

21. Interstate Certification (§ 26.85) 

The Department proposes changes to 

the current § 26.85, the interstate 

certification rule, which would 

streamline the interstate certification 

process while preserving the integrity of 

the DBE Program. First, the proposal 

would implement reciprocity between 

Unified Certification Programs (UCP)— 

achieving a goal that we described in 

the 2010 NPRM as the ‘‘holy grail of 

certification.’’ (75 FR 25815, 25818 (May 

10, 2010)) Second, after a UCP certifies 

a DBE that applies for interstate 

certification, the Department is 

proposing procedures that would 

facilitate information sharing amongst 

UCPs and would establish efficient 

processes to remove ineligible firms 

from the program. 

We believe the proposal would 

provide faster and more efficient means 

to achieve the ‘‘fundamental objectives’’ 

of interstate certification, which are: (1) 

facilitating the ability of DBEs to 

compete for DOT-assisted contracting; 

(2) reducing administrative burdens and 

costs on the small businesses that seek 

to pursue contracting opportunities in 

other states; and (3) fostering greater 

consistency and uniformity in the 

application of certification requirements 

while maintaining program integrity.35

Issues With the Current Rule 

The Department compiled appeal 

information for the purpose of this 

NPRM. We observed that from fiscal 

years 2011 to 2020, 77 percent of the 

appeals that involved an interstate 

certification denial are reversed or 

remanded, less than 22 percent of cases 

are affirmed, and 1 percent are 

dismissed. 

Among the cases that are reversed, a 

plurality (35 percent) are reversed 

because the UCP required the firm to 

provide more information than 

§ 26.85(c) requires, and 26 percent of 

cases are overturned because the 

certifier denied certification without 

referencing a good cause reason. The 

same percentage of cases are reversed 

because the UCP did not give the DBE 

an opportunity to respond to the UCP’s 

objection to the DBE’s home state 

certification as the rule requires. Our 

reversals show a common trend: UCPs 

generally give little deference to the 

DBE’s existing certification. However, 

the UCP often chooses to verify, 

question, and reevaluate all aspects of 

the DBEs certification, which the 

interstate rule prohibits. 

Relatively few interstate certification 

denial cases are affirmed on appeal, and 

even fewer are affirmed because the 

home state certification is erroneous. 

Approximately 54 percent of 

affirmations occur because the DBE did 

not provide its entire home state (State 

A) package as § 26.85(c) requires. In 

these cases, it is not uncommon that the 

DBE cannot locate material or 

mistakenly omits a document. Few 

appeals decisions are affirmed because 

State A’s certification was erroneous. 

Cases are primarily affirmed because of 

defects in the certification file that the 

DBE could have easily corrected (e.g., a 

disqualifying bylaw provisions). There 

has not been a case where the 

Department affirmed based on an 

allegation that State A’s certification 

was obtained by fraud. 

The Department has observed over the 

10 years since we promulgated § 26.85 

that the rule has not operated in a way 

that achieves the rule’s objectives. The 

high reversal rate of interstate 

certification denials shows that the rule 

must be revised to reduce unnecessary 

burden on firms, certifiers, and the 

Department. We believe national 

reciprocity would build trust, encourage 

teamwork, and improve the quality of 

certifications as contemplated when the 

Department introduced the UCP system 

in 1999. 

Proposed § 26.85(a) would revise the 

interstate rule to apply to all DBEs, 

replacing the restrictive text of the 

current rule which applies only to DBEs 

with a home state certification. The 

Department believes that excluding a 

subset of DBEs would contradict the 

rule’s objective to facilitate certification. 

Paragraph (b) would clearly state that 

a UCP (State B) must accept 

certifications from a firm that has 

already been certified as a DBE— 

directly implementing interstate 

reciprocity. The proposal would repeal 

‘‘option 2’’ under the current rule. The 

proposal for paragraph (c) would 

provide a simple and streamlined 

interstate application process for DBEs. 

The DBE would apply to State B by 

submitting a short cover letter, an 

electronic image, or a photocopy of a 

UCP directory showing the DBE’s 

certification, and a signed Declaration of 

Eligibility (DOE) (the same declaration 

described in proposed §§ 26.67 and 

26.83). 

The cover letter would inform State B 

that the DBE is applying for interstate 

certification and identify the states 

where the DBE is certified. Since DBEs 

often do not have a certification notice 

readily available, the proposal only 

requires the DBE to provide proof that 

its name appears on a UCP directory. 

This would remove the unnecessary 

burden for a DBE to have to contact a 

certifier for a copy of its certification 

notice. Finally, we emphasize that the 

Declaration of Eligibility represents 


lotter on DSK11XQN23PROD with PROPOSALS2
43648 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

36Email from Departmental Office of Civil Rights 

to Recipients. 

conclusive evidence that the DBE is 

eligible when it submits its interstate 

certification application. The DOE 

ameliorates the burden of providing an 

entire certification package, which State 

B may require under the current rule; 

this is the most common issue presented 

on appeal. Of course, State B may later 

obtain certification information from 

other UCPs to carry out its compliance 

activities under proposed paragraphs (g) 

and (h) after it certifies the DBE. 

After receiving the material from 

paragraph (c), State B would have 10 

business days under proposed 

paragraphs (d) and (e) to verify that the 

firm is already certified as a DBE and to 

approve the DBE’s interstate 

certification application. State B would 

only contact State A for confirmation in 

rare cases where the name of the DBE 

does not appear in State A’s UCP 

directory. 

Since interstate certification is an 

expedited procedure, proposed 

paragraph (f) warns the certifier that any 

undue delay by State B in certifying the 

DBE would be noncompliance with this 

part. 

Overall, proposed paragraphs (a) 

through (f) would streamline a process 

that could take more than 140 days 

under the existing rule and reduce the 

review period to 10 business days or 

less. The interstate application would 

consist of the three documents 

described above. 

Post-Interstate Certification Procedures 

After certifying the DBE, as with the 

current rule, State B would treat the 

DBE as any other DBE within its UCP. 

Proposed paragraph (g)(1) describes a 

discretionary process for any UCP to 

obtain all or a portion of a DBE’s 

unredacted certification files. The UCP 

that initially certified the firm would 

likely have the bulk of the DBE’s 

information, but other UCPs could have 

additional information that may be 

helpful to monitor the DBE. The 

Department seeks comment on whether 

there should be limits to the information 

a UCP may request from another state. 

Should the rule only allow the UCP to 

request certification information from 

the previous seven years? Or should a 

UCP be entitled to only a subset of 

information in the certification file (e.g., 

most recent on-site report and the latest 

Declaration of Eligibility)? 

Paragraph (g)(2) would require all 

UCPs to share certification file 

information within 10 business days of 

a request. We believe the proposal 

would create a minimal burden, as 

technological advances now allow a 

certifier to send electronic certification 

files. The Department stresses that the 

integrity of the program is the 

responsibility of all participants, 

regardless of where the DBE is located. 

UCPs are required to promptly share 

information with other states. The 

proposal simply reinforces the UCP’s 

duty to cooperate, as described in 

§§ 26.81(d) and 26.109(c). 

As in the current rule, a UCP would 

be required to carry out its own 

oversight of its out-of-state DBEs. The 

proposed paragraph (g)(3) clarifies that 

the UCP must conduct its own 

certification reviews and investigate 

complaints regarding out-of-state DBEs, 

as it would do with in-state DBEs. We 

believe that the proposal to allow virtual 

on-site visits makes this process less 

burdensome. 

Paragraph (g)(3) would also clarify 

that the DBE must submit an annual 

DOE, with documentation of gross 

receipts to confirm small business size, 

to the UCP of each state in which it is 

certified. The Department seeks 

comment on whether a centralized 

portal should be created to reduce the 

burden on DBEs that must file 

declarations in multiple states. The 

DBEs could upload current annual and 

material change declarations to the 

system at a specific time during the year 

where all UCPs could review the 

information. The Department seeks 

other ideas on how a centralized portal, 

which would not be housed at USDOT, 

would function and what additional 

capabilities the portal should have. 

To address concerns discussed in 

previous preambles that reciprocity 

would promote forum shopping by 

DBEs to apply to UCPs that may be 

perceived as less stringent in their 

certification reviews, proposed 

paragraphs (g)(4) and (6) would provide 

UCPs tools to remove ineligible firms 

from the DBE Program. The objective of 

paragraphs (g)(4) and (6) is to promote 

uniformity in certification and program 

integrity. 

Proposed paragraph (g)(4) would 

allow a UCP to take part in a 

decertification proceeding conducted by 

another state, if the UCP believes the 

DBE is ineligible based on the same 

facts and reasons as the other state. The 

joint removal procedures would only be 

a possible if UCPs communicate with 

each other. We hope that the proposed 

rule will encourage UCPs to interact 

more frequently. If the UCP joining the 

proceeding has additional evidence to 

support ineligibility, both states could 

agree to update the notice of reasonable 

cause to propose decertification. While 

the UCP joining the proceeding would 

be permitted to provide additional 

information to support the initiating 

UCP’s case, the UCP would not be 

permitted to change the grounds for the 

proposed removal or unduly delay the 

informal hearing. The joint 

decertification proceedings would be a 

discretionary process and only UCPs 

that choose to participate would be 

bound to the decision of the 

independent decisionmaker. The 

Department seeks comments about 

additional, or alternative procedures 

and due process protections the 

provision should include. 

Proposed paragraph (g)(5) would 

provide that UCPs should regularly 

check and update the ineligibility 

database, which is the same requirement 

that exists under the current rule. 

Finally, to strengthen program 

integrity, proposed paragraph (g)(6) 

states that if the Department determines 

on appeal that substantial evidence 

supports a UCP’s decertification of a 

firm, that firm would automatically be 

decertified in all states. The proposal 

would not provide appeal rights to 

challenge an automatic decertification 

because the firm already had the 

opportunity to challenge its 

decertification after the UCP’s initial 

determination. This proposal promotes 

program integrity and uniformity in 

certifications through a single action. 

The proposed paragraph (g)(6) would 

not apply in instances where the 

Department affirms a decision because 

of failure to cooperate, since such cases 

are limited to a firm’s interaction with 

one UCP. 

22. Denials of In-State Certification 

Applications (§ 26.86) 

Under existing paragraph (c) of 

§ 26.86, when a firm is denied 

certification, the certifier must establish 

a waiting period of no more than twelve 

months before the firm may reapply. We 

propose removing the requirement for 

the certifier to gain OA approval before 

adopting a shorter waiting period, as we 

do not see the necessity for it. In May 

2020, DOCR began requiring certifiers to 

include specific, verbatim appeal 

instructions in their denial letters.36 We 

propose adding those instructions to 

§ 26.86(a). Most notable in the 

instructions is a shorter timeframe for 

filing an appeal as well as notifying the 

firm that they have a right to request the 

documents that the certifier relied on to 

make its decision. 

Under the current rule, the clock for 

the waiting period for reapplication 

begins to run on the date the applicant 

receives the denial letter; we propose 

that the period begin on the date the 

certifier sends the denial letter, which 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43649 

37See ‘‘Memorandum—DBE and ACDBE 

Certification Procedures During COVID–19 

Pandemic’’ available at https:// 

www.transportation.gov/sites/dot.gov/files/2020-04/ 

DOCR-20200324-001.pdf. 

in the majority of cases is done by 

email. 

23. Decertification Procedures (§ 26.87) 

Strict Compliance 

Since the beginning of the DBE 

Program in 1983, rules have been in 

place that recipients/certifiers must 

follow when removing a DBE’s 

certification. These rules are essential 

for ensuring that only eligible firms 

participate in the program. We reiterate 

that these rules exist to give certifiers 

the tools to take prompt action in a fair 

manner if a firm’s circumstances, 

ownership, or control changes over 

time, resulting in once-eligible firms 

becoming ineligible. Certifiers’ strict 

compliance with the program’s 

decertification rules is critical to 

keeping intact appropriate due process 

protections afforded to DBEs and 

ensuring administrative efficiencies if or 

when the firm chooses to appeal a 

decertification decision to the 

Department. As such, decertification 

procedures are not to be perfunctorily 

executed. Given the inconsistent and 

erroneous manner in which we see 

certifiers sometimes implementing the 

procedures, we are proposing to 

streamline and strengthen the current 

language in § 26.87. Our goal is to make 

the procedures easier to understand so 

that they may be more easily followed. 

Although the substance of § 26.87 

remains largely the same, we propose 

adding some requirements and 

clarifications. 

In too many instances, we have seen 

certifiers issue pro forma notices of 

intent to decertify and pro forma final 

notices of decertification, with scant 

justifications articulated. Section 26.87 

requires both notices to fully explain the 

reason(s) for moving to decertify a firm 

with references to specific evidence in 

the record. Sparse notices and blanket, 

incomplete, or cryptic references 

deprive the DBE of the ability to 

meaningfully respond and provide 

information that demonstrates its 

continued eligibility. Further, the 

certifier bears the burden of proof in 

decertification proceedings (i.e., the 

certifier must show that, more likely 

than not, the DBE is no longer eligible 

for certification); notices not fulfilling 

the requirements of § 26.87 do not 

satisfy that burden. To address these 

issues, we propose more succinct and 

pointed language in paragraphs (b) and 

(g), which are respectively paragraphs 

(d) and (h) in the proposed rule. We also 

propose stating the burden of proof 

information at the very beginning of 

§ 26.87. 

Failure To Submit Declaration of 

Eligibility (DOE) 

The Department notes an upward 

trend in the number of appeals from 

DBEs that certifiers decertified based on 

the DBE’s failure to cooperate with a 

request(s) to submit a § 26.83(j) annual 

no-change affidavit (and now proposed 

as declaration of eligibility (DOE)). The 

responsibility of timely filing a DOE 

squarely falls on the DBE. There is no 

requirement that a certifier remind a 

DBE of the annual DOE submission 

deadline, though we are aware many do 

send reminders electronically through 

automated systems. In the preamble to 

the 2014 final rule we explained that a 

DBE’s failure to provide a DOE after a 

request or reminder from a certifier is 

failure to cooperate under § 26.109(c), 

for which a certifier may initiate 

decertification proceedings. We also 

stated in 2014 that a certifier should not 

commence decertification proceedings 

simply because the DBE failed to meet 

the filing deadline; nor should 

decertification proceedings continue 

once the DBE submits the requested 

information. That statement 

unintentionally suggested that a DBE 

can fail to submit a DOE without 

consequence. 

The proposed revision to § 26.87 

would clarify that that is not the case. 

In the requirement for offering the firm 

an opportunity for an informal hearing, 

we are proposing an exception: the firm 

would not be entitled to a hearing if the 

ground for decertification is the firm’s 

failure to timely submit a § 26.83(j) 

DOE. If the firm does not provide the 

DOE within 15 days of the notice of 

intent to decertify, the certifier may 

issue a final notice of decertification 

based on § 26.83(j) and/or § 26.109(c) 

without offering an opportunity for a 

hearing. The Department recognizes the 

time and resources a certifier must 

undertake to convene a decertification 

hearing, no matter the simplicity or 

complexity of the issues. The proposed 

exception to the informal hearing 

requirement would help certifiers 

conserve resources that in many 

instances are already limited. 

Decertification Grounds 

Section 26.87(e) lists the grounds 

upon which certifiers may initiate 

decertification proceedings. One of the 

grounds (§ 26.87(e)(5)) is if there is a 

change in DOT’s certification standards 

or requirements after the firm was 

certified. The Department proposes an 

amendment to § 26.87(e)(5) stating that 

in the instance of a change in 

certification standards or requirements, 

the certifier must offer the firm, in 

writing, an opportunity to cure 

eligibility defects within 30 days. If the 

firm does not do so, the certifier may 

proceed with sending the firm a notice 

of intent to decertify. The Department’s 

rationale is that certified firms should 

not be penalized for changes to 

certification standards of which they 

most likely are unaware and with which 

they might be able to comply—and thus 

remain eligible—if given the 

opportunity to do so. 

Virtual Informal Hearings 

Section 26.87(d) requires a certifier to 

offer a firm that it intends to decertify 

an informal hearing at which the firm 

may respond in person to the reasons 

for the intent to decertify. At the onset 

of the COVID–19 pandemic in March 

2020, the Department issued guidance 

allowing certifiers to conduct a 

§ 26.87(d) hearing using virtual methods 

such as (but not limited to) video 

conferencing.37 We propose making 

permanent the option to conduct 

hearings virtually. In addition to 

reducing the risk of transmitting or 

contracting COVID–19 or other illness, 

virtual hearings would be more efficient 

for all parties because of the reduction 

in travel time and cost, as well as 

helping certifiers conserve financial and 

other resources that in-person hearings 

require. Moreover, the Department has 

not heard of any negative repercussions 

from conducting virtual informal 

hearings. The requirement for a certifier 

to maintain a complete, verbatim 

transcript remains intact. 

However, having heard of instances in 

which a certifier or a DBE requests 

multiple date changes for the hearing 

(some we suspect may be attempts to 

delay an adverse finding), we seek to 

impose a deadline by which the hearing 

must occur. If the DBE elects not to have 

a hearing, we would propose to impose 

the same deadline by which the DBE 

would be required to submit written 

information or arguments regarding its 

eligibility. The deadline in both 

instances would be within 45 days of 

the date of the certifier’s notice of intent 

to decertify (NOI). Otherwise, the ad 

infinitum potential for date changes 

would become excessively cumbersome 

for all parties, waste resources, and 

ultimately create unnecessary delay. 

Both the hearing and submission of 

written information would remain 

optional for the DBE, and we remind 

certifiers that a firm’s decision not to 

attend a hearing or submit written 


lotter on DSK11XQN23PROD with PROPOSALS2
43650 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

information does not equate to a failure 

to cooperate. 

Informal Hearing Participation 

We also propose that during an 

informal hearing, only the socially and 

economically disadvantaged owner 

(SEDO) be permitted to answer 

questions related to the SEDO’s control 

of the firm. Often, the purpose of the 

informal hearing is for the certifier to 

ascertain whether the SEDO in fact 

controls the firm. Responses from 

someone other than the SEDO do not 

allow a certifier to make an accurate or 

meaningful determination about the 

SEDO’s role in the firm, such as whether 

the SEDO makes independent decisions 

about the firm’s daily and long-term 

operations. Based on the Department’s 

regular review of multiple hearing 

transcripts when firms appeal 

decertification decisions, the 

Department has seen instances of a nonSEDO or other party providing 

rehearsed and/or falsified responses on 

behalf of the SEDO regarding the 

SEDO’s control of the firm. Thus, this 

proposed requirement would further 

protect the DBE Program’s integrity and 

help prevent fraud. A representative of 

the SEDO, including an attorney, would 

still be permitted to attend and 

participate in the hearing, including 

answering questions about ownership, 

business size, the firm’s structure, etc. A 

representative of the SEDO, including 

an attorney, would be permitted to ask 

the SEDO follow-up questions about any 

topic—including control—during the 

hearing. Other employees of the firm 

would still be permitted to answer 

questions about their own roles/ 

experiences as well as other general 

aspects of the firm. We emphasize that 

the requirement for the SEDO to directly 

answer questions only applies to 

questions about control. We welcome 

comments from certifiers and firms on 

this proposal. 

For similar reasons for proposing 

informal hearing and written 

submission deadlines, we propose a 30- 

day deadline in § 26.87(h) for a certifier 

to render a final decision following an 

informal hearing or receiving written 

information from the DBE. 

24. Counting DBE Participation After 

Decertification (§ 26.87(j)) 

In response to requests for 

clarification and various concerns 

evidenced by recipients and other 

stakeholders, the Department is 

proposing the following revisions to 

§ 26.87(j). 

The first revision breaks out the 

current first paragraph into two 

paragraphs to clarify the effect of 

removing a DBE’s eligibility prior to a 

prime contractor executing a 

subcontract with the DBE or prior to the 

recipient entering into a prime contract 

with the DBE. The Department believes 

that addressing each scenario in a 

separate subheading would not change 

the requirements of the rule; it would 

simply make it easier to understand by 

separately addressing each scenario in 

the current rule. 

The next proposed revisions concern 

the effects of decertifying a DBE after it 

has entered into a subcontract with the 

prime contractor. The current rule states 

that the DBE’s performance could 

continue to count toward the contract 

goal if it received notice of its 

decertification after the subcontract was 

executed. However, stakeholders have 

informed the Department that they have 

witnessed prime contractors taking 

advantage of this provision, particularly 

in the context of a design-build contract. 

On design-build contracts, prime 

contractors/developers may submit an 

open-ended DBE commitment plan, and 

only commit work to specific DBEs once 

they have been awarded a subcontract. 

In such instances, prime contractors 

have an incentive to add work to an 

existing contract with the now 

decertified firm. Prime contractors do 

this to avoid having to end the 

subcontract with the formerly certified 

firm and find another DBE to perform 

the additional work. This practice 

deprives other DBEs from being 

solicited to perform work on new 

subcontracts. Of course, in other 

situations, it may make sense to allow 

minor amendments, or a brief 

continuation, of a decertified firm’s 

work on a contract to alleviate the 

burden of ending the subcontract and 

soliciting a new DBE subcontractor. To 

balance the two concerns, the 

Department proposes that prime 

contractors would only be permitted to 

add work or extend a completed 

subcontract with a previously certified 

firm if it obtains prior, written consent 

from the applicable recipient. 

Further, DBEs have expressed 

concerns regarding the situation in 

which a DBE, after a subcontract has 

been executed between the DBE and the 

prime, becomes disqualified from the 

program because it was purchased or 

merged with a non-DBE firm, perhaps 

even by the prime contractor on the 

project. The current rule allows DBEs to 

continue to count toward contract goal 

credit, regardless of the reason they 

become disqualified from the program. 

The purpose of the current rule is to 

avoid burdening a prime contractor to 

find a replacement for a DBE that 

becomes ineligible after the subcontract 

was signed; the prime contractor already 

made a subcontracting commitment 

with a DBE that was certified at the time 

the commitment was made and should 

not have to repeat the process. The 

Department proposes an exception to 

this current rule because the 

Department has determined that the 

deprivation of opportunities for DBEs 

that results from a prime contractor’s 

ability to continue to count work now 

performed by a non-DBE outweighs the 

burden for a prime contractor to make 

good faith efforts to solicit a new DBE, 

if necessary to meet the contract goal. 

Thus, the Department proposes to 

disallow continued credit toward a 

contract goal if the DBE’s ineligibility 

after the subcontract is signed is the 

result of a purchase by, or merger with, 

a non-DBE firm. In that situation, the 

prime contractor would be required to 

use good faith efforts to replace the DBE 

if additional credit is needed to meet the 

contract goal. 

25. Summary Suspension (§ 26.88) 

Section 26.88 permits or requires the 

certifier to suspend a DBE’s certification 

immediately under specified 

circumstances. In promulgating this rule 

in 2014, the Department intended for it 

to apply in extraordinary situations that 

jeopardize program integrity or when 

time is otherwise of the essence. We 

said in the 2012 NPRM that we sought 

a ‘‘middle ground’’ between not having 

a suspension rule at all, as was then the 

case, and, as ‘‘many’’ stakeholders 

urged, one that is universal and 

automatic. See 77 FR 54960 (Sept. 6, 

2012). The middle ground was a rule 

requiring suspension upon the 

incarceration or death of a SEDO 

necessary to the firm’s eligibility and 

permitting suspension in the event of 

‘‘[o]ther material changes.’’ Preamble to 

final rule (79 FR 59577 (Oct. 2, 2014)). 

We noted the need for ‘‘swift action’’ 

when a ‘‘dramatic change in the 

operation of the DBE occurs that 

directly affects the status of the 

company as a DBE,’’ and our intent that 

suspensions be short and quickly 

resolved. Id. at 59578. We explained 

that our overall objective in adopting 

the current rule was ‘‘to preserve the 

integrity of the program without 

compromising the procedural 

protections afforded DBEs to safeguard 

against action by certifiers based on illfounded or mistaken information.’’ Id. 

The Department would like to add 

language in § 26.88 to permit a certifier 

to only rely on a single reason if the 

summary suspension is elective; if the 

suspension is for a mandatory reason, 

the certifier may rely on more than one 

reason. As already expressed, it is our 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43651 

view that summary suspension is an 

extraordinary measure that greatly 

impacts a firm’s operations. It is a severe 

remedy that certifiers should not invoke 

lightly and to which a firm should have 

adequate opportunity to respond. We 

believe the latter is critical to preserving 

a firm’s due process rights. Furthermore, 

being permitted to only provide a single 

reason would rightfully narrow the 

focus of the summary suspension while 

retaining a certifier’s discretion to 

decide the basis of the suspension. 

We remain committed to the 

objective. Experience has shown, 

however, that the rule has not 

functioned as intended. Too often, the 

rule has needlessly jeopardized the 

DBE’s viability, made the certifier’s job 

harder, or provided unfair and 

unreasonable outcomes. It has produced 

divergent results among jurisdictions 

without much time-to-resolution 

improvement over standard § 26.87 

proceedings. None of these outcomes 

enhances program integrity, reduces 

regulatory burden, or streamlines 

administration. 

The proposal states clearer rules and 

would reduce burdens bilaterally. The 

language would clarify and simplify 

procedures, provide bright-line rules, 

and rebalance rights and responsibilities 

more equitably. It would specify what 

needs to happen and when. Individual 

provisions would spell out what 

certifiers must do to get a result within 

45 days and what protections from 

arbitrary action DBEs could expect. The 

revised rule would require both parties 

to the suspension to act faster, which 

the Department believes is consistent 

with the gravity of the action, with 

procedural protections specified in 

much greater detail. We believe that 

both speed and precision bolster the 

integrity of the program. 

We have tried to reduce ambiguity 

and remove internal inconsistencies. We 

do not believe, for example, that an 

‘‘expedited’’ procedure should in fact 

delay the ‘‘commence[ment]’’ of an 

action to decertify. See current 

paragraphs (e) and (g). Similarly, current 

paragraphs (b) and (e) seem to take 

opposite sides on the question of 

whether § 26.87(d) procedures apply in 

resolving summary suspensions. The 

proposal would correct these problems 

and seize an opportunity. While the 

current rule requires nothing in the 

certifier’s notice other than the fact that 

the DBE is suspended—the reason, the 

evidence, the DBE’s response options, 

consequences, etc.—the proposed rule 

would require notice of the ‘‘procedural 

protections’’ to which we referred in 

2012. We realize now that the current 

rule can be revised to afford greater 

fairness to DBEs. For example, under 

the current rule a DBE cannot 

meaningfully ‘‘show cause’’ in defense 

of the unknown, let alone do it quickly. 

We invite comments on our proposed 

revisions, which we believe will address 

the above-described deficiencies. 

Proposed § 26.88(a) would 

consolidate the language in current 

paragraphs (e) and (f) about the 

temporary nature and consequences of 

summary suspension, with an important 

clarification and an essential 

simplification. The clarification would 

resolve the ambiguity in paragraphs (a) 

and (e) about whether a summary 

suspension triggers a § 26.87 proceeding 

and immediately activates all § 26.87 

procedures. The Department does not 

believe it does. Otherwise, there would 

be no distinction between §§ 26.87 and 

26.88 except the immediate penalty on 

the DBE. The current rule compounds 

the problem with hybridization: it 

converts swift suspensions into slower 

§ 26.87 decertifications, which further 

obscures the rule’s purpose and erodes 

its utility. Finally, the substantive reach 

of the current provisions is nearly 

identical. The proposed revision would 

eliminate much of the overlap and time 

lag by deeming a rule-compliant 

suspension decision to be a final 

decision appealable to the Department. 

It recognizes the reality that regular 

decertification proceedings almost 

always take more than 30 days, and it 

removes the additional, unintended 

burden to the DBEs of open-ended 

suspensions. The most obvious results 

would be time savings, burden 

reduction, and more business-critical 

certainty about what a suspension 

entails and how soon it would be 

resolved. Reinforcing and conforming 

changes elsewhere in § 26.88 would 

close structural gaps, shorten embedded 

deadline, and strengthen procedural 

integrity. 

The simplification is small but critical 

to fairness and transparency. The 

proposed rule would require notice of 

the suspension by email. The change 

would eliminate the certified mail 

requirement, which needlessly burdens 

both parties. The DBE would receive 

immediate notice of the suspension, 

including information critical to its 

response. Emailing notice to the DBE at 

an email address provided by the DBE 

in its initial DBE application or its 

annual DOE would remove uncertainty 

about when the suspension is, or is 

deemed to be, effective. The certifier 

would save time and resources, both 

parties would know when the 30-day 

clock begins to run, and the DBE would 

have a meaningful opportunity to 

contest the suspension. We believe the 

change is essential to producing speedy 

and principled results. Short, clear rules 

in subsequent paragraphs would specify 

the contents of the notice, its effect, and 

the rights and responsibilities of 

certifier and firm. 

Revised § 26.88(b) would alter the 

description of events requiring or 

permitting summary suspension. The 

most notable revision is also the most 

obvious. We propose to add as a 

mandatory suspension condition clear 

and credible evidence of the DBE’s 

involvement in fraud or other serious 

criminal activity. This proposed change 

should be self-explanatory. The 

proposed provision would omit the two 

‘‘material change’’ grounds for elective 

suspension as too subjective and better 

resolved by information request or 

§ 26.87(b) notice. We consider the ‘‘clear 

and credible’’ standard a simplified, 

plain language encapsulation of the 

more extensive but less helpful 

explanation in the current rule. 

The proposed rule would change the 

treatment of death and incarceration as 

suspension events. Our reasoning is that 

in a significant number of cases the 

event itself does not meaningfully affect 

program integrity. When a SEDO dies, a 

successor in interest may be able to 

demonstrate SED. We also believe that 

certifiers should be mindful of the effect 

of instantly removing certification at a 

time when the company is likely to be 

particularly vulnerable. Similarly, when 

a SEDO is incarcerated, the SEDO may 

be incarcerated for a minor offense of 

which s/he has not been convicted or on 

a charge that might not threaten 

program integrity. The decedent’s estate, 

though not an individual, might 

reasonably be considered to represent 

the interests of SED persons. While we 

generally leave to the certifier’s 

discretion which deaths or 

incarcerations demand immediate 

action, the new language in paragraph 

(b)(2)(i) would raise the bar. In short, 

deaths and incarcerations could trigger 

elective suspensions only if they clear 

that bar. 

Finally, proposed § 26.88(b) would 

resolve the apparent tension between 

summary suspension’s extraordinary 

nature and the current rule’s explicit 

provision for suspension in the case of 

a DBE’s SEDO’s failure to comply with 

§ 26.83(j) requirements. In this case, the 

rationales are procedural/administrative 

and substantive. Certifiers rightly point 

out that the magnitude of 

noncompliance unreasonably strains 

resources and hamstrings enforcement. 

The number of DBEs that do not comply 

strains the system in ways that 

sometimes preclude fair, efficient 

administration overall. We do not 


lotter on DSK11XQN23PROD with PROPOSALS2
43652 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

believe that giving every noncompliant 

firm a full § 26.87 proceeding in each 

year of noncompliance is tenable, given 

the likelihood that many offenders once 

suspended will simply provide the DOE 

and gross receipts documentation. The 

current rule diverts resources from more 

productive uses. 

The substantive rationale for retaining 

the No Change Affidavit (NCA)/ 

Declaration of Eligibility (DOE) trigger 

for discretionary suspension is more 

compelling: program integrity depends 

on the NCA/DOE filing. The NCA/DOE 

substitutes for the much more 

burdensome option of periodically 

requiring DBEs to re-demonstrate that 

they meet all eligibility requirements. 

Section 26.83(h) prohibits such 

recertification requirements as 

unreasonably burdensome, and 

§ 26.83(j) makes them unnecessary. The 

annual filing is the price of continued 

certification and one we consider more 

than reasonable. Hence our view that 

suspension is an appropriate remedy for 

a DBE’s failure to comply with the 

relatively light burden of submitting a 

NCA/DOE to demonstrate its continued 

eligibility for the DBE Program. Notably, 

the proposal expands the universe of 

cases that can be resolved without 

invoking § 26.87, which greatly 

streamlines program administration. 

We base these changes on stakeholder 

input and our own experience with the 

rule. In keeping with our oversight role, 

our primary concern is to maintain the 

integrity of the entire program. Local 

certifiers are better equipped than we 

are to consider issues such as changes 

in ownership of particular DBEs and 

whether such changes affect the DBE’s 

eligibility for the program. 

Proposed § 26.88(c)(1) specifies what 

the paragraph (a) notice must contain. 

The new language clarifies how §§ 26.87 

and 26.88 differ and specifies the scope 

of each in the suspension context. It 

closes the gap (i.e., the notice’s due 

process role referenced above) between 

notice and result. The rest of the 

paragraph fleshes out the necessary 

particulars and limits potential abuse in 

equal measure on both sides. The new 

rules, with their component time limits, 

explicit burden allocations, waivers, 

and defaults, are the mechanical core of 

§ 26.88. They will provide a realistic 

mechanism for achieving full, fair, and 

final resolutions within 30 days. We 

anticipate substantial efficiency gains 

from eliminating redundant processes 

and the much benefit to DBEs of 

certainty that any suspension will be 

fully and finally resolved by a date 

certain. 

Proposed revisions in § 26.88(d) 

preserve the current rule’s articulation 

of the firm’s appeal rights and add a 

provision for injunctive relief when the 

certifier does not comply with the new 

time limitations. The DBE may request 

injunctive relief when the certifier, 

contrary to a new curb on its expanded 

discretion, electively suspends the same 

firm twice within a rolling one-year 

period. The DBE may also request 

injunctive relief when the certifier fails 

to lift a suspension by the 30th day. 

These curbs reinforce our intent that a 

brief discretionary suspension is a 

remedy to be employed judiciously. 

26. Certification Appeals to DOCR 

(§ 26.89) 

The overarching goals of the 

Department’s proposed changes to this 

section are to increase administrative 

efficiency and enhance the clarity of 

existing rules by reordering the 

paragraphs and introducing a few 

requirements. 

We recommend shortening the 

timeframe for filing an appeal from 90 

to 45 days. The Department set the 90- 

day deadline prior to applicants 

commonly having access to email and 

the internet. The proposed timeframe 

matches the rule set by the SBA Office 

of Hearings and Appeals for firms 

determined ineligible for participation 

in SBA’s 8(a) contracting program. See 

13 CFR 134.404. We welcome comment 

from business owners on the feasibility 

of appealing within 45 days. We 

emphasize that we are not proposing 

any change to a firm’s ability to show 

that there was good cause for a late 

filing and to explain why it would be in 

the interest of justice for the Department 

to accept the late filing. 

While the Department will continue 

to accept appeals sent via mail or hand 

delivery, we encourage appellants to 

submit them via email to help decrease 

administrative costs and increase 

efficiency for all involved parties. 

Next, the requirement in § 26.89(d) 

that certifiers send the Department 

administrative records that are well 

organized, indexed, and paginated has 

long been in existence. Nonetheless, the 

vast majority of administrative records 

we receive are poorly organized and not 

indexed. Having to weed through these 

types of records—most of which are 

many hundreds of pages—wastes time 

and can prevent the Department from 

issuing timely decisions. Moving 

forward, the Department will reject nonindexed or otherwise disorganized 

records that do not meet this standard 

and will request certifiers to 

immediately correct and resubmit them. 

A certifier’s failure to comply with our 

request within seven days will be 

regarded as a failure to cooperate under 

§ 26.109(c). 

The Department would like to reinsert 

the language from § 26.89(c)(1) and (2), 

which were inadvertently omitted from 

the published rule during the 2014 

revision. The first provision to be 

reinserted would require appellants to 

identify in their appeal the other 

certifiers that have certified the firm, 

which certifier(s) have rejected an 

application for certification from the 

firm or removed the firm’s eligibility 

within one year prior to the date of the 

appeal, and which certifier(s), if any, 

before which an application for 

certification or a removal of eligibility is 

pending. The second reinsertion would 

notify program recipients that in the 

event of an appeal, the Department 

would request the information 

described above, which the firm in 

question would be required to promptly 

provide. 

In the interest of administrative 

efficiency, the Department proposes 

adding a paragraph that would allow 

DOCR, at its discretion, to summarily 

dismiss an appeal. DOCR would dismiss 

an appeal that does not set forth a full 

and specific statement under § 26.89(c). 

It is plausible that there are additional 

circumstances under which DOCR 

would decide to summarily dismiss. In 

every instance of a summary dismissal, 

DOCR’s written notification would 

include an explanation for the decision 

and would instruct the parties what 

action(s) to take. 

The proposed language for paragraph 

(e) restates portions of the current rules 

found in § 26.89(e) and (f)(1) and (2), in 

plain language and aggregates them. 

There is no substantive change. 

We are also proposing a paragraph to 

clarify the parameters within which we 

give recipients technical advice. At 

present, we provide technical advice 

about the overall meaning and general 

implementation of the provisions of part 

26 concerning DBE/ACDBE 

certification. Recipients sometimes give 

the Department a description of a 

specific firm’s certification application 

and ask the Department to opine on the 

firm’s eligibility. When that happens, 

the Department reminds recipients that 

determining certification eligibility is 

not within the Department’s purview. If 

we issued advisory opinions, we would 

be effectively directing certifier’s actions 

and altering the result. Doing so would 

violate basic separation of functions 

principles, as eligibility decisions are 

squarely the responsibility of the 

certifier, while we are responsible for 

considering appeals of certifiers’ 

decisions. To make the reminder more 

permanent, we propose adding 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43653 

38See www.transportation.gov/civil-rights/

disadvantaged-business-enterprise/ready-apply. 

§ 26.89(g) to definitively state that the 

Department does not issue advisory 

opinions. 

We also wish to remove the references 

to SBA from § 26.89 because the former 

memorandum of understanding between 

SBA and DOT is no longer in effect. 

Section 26.89(i) states a Departmental 

‘‘policy’’ to make an appeal decision 

within 180 days of receiving the 

complete administrative record, that the 

Department will notify the parties of the 

reason(s) for a delay beyond this point, 

and to provide a date by which an 

appeal decision will be made. 

Recipients and appellants alike interpret 

this policy as a requirement that the 

Department issue decisions in 180 days 

and to do so by an absolute date. That 

was never the Department’s intent, and 

we would like to clarify that the 

Department will issue a decision in 180 

days ‘‘if practicable,’’ and changing the 

phrase ‘‘date by which’’ to 

‘‘approximate date.’’ 

27. Updates to Appendices F and G 

The Department proposes to remove 

from part 26 forms in Appendices F 

(Uniform Certification Application/ 

UCA) and G (Personal Net Worth 

Statement). Official forms are not 

required to be reproduced in the Code 

of Federal Regulations (CFR). Moreover, 

the UCA and PNW Statement are readily 

available on DOT’s website.38 Removing 

the forms from the CFR is an 

administrative action and does not 

impact the ability of the public to 

comment on any amendments to the 

information collections contained in 

these forms. 

The changes we are proposing to the 

UCA are largely technical in nature. 

They include updating website 

addresses, clarifying definitions, 

minimizing the use of pronouns, and 

providing more details on how 

applicants can learn more about the 

DBE and ACDBE Programs. The only 

substantive change we recommend is 

changing the term ‘‘Affidavit of 

Certification’’ to ‘‘Declaration of 

Eligibility.’’ We propose that change so 

that the same form can also be used in 

lieu of the current annual affidavit of no 

change that certified firms must 

annually submit. Using the same form 

for both purposes will increase 

efficiency and decrease burden for firms 

and certifiers alike. 

On the PNW Statement, we propose 

adding a sentence in the introductory 

paragraph specifying the rule’s PNW 

limit, changing the ‘‘Spouse’s Full 

Name’’ field to ‘‘Spouse or Domestic 

Partner’s Full Name,’’ and removing the 

‘‘Retirement Accounts’’ field from the 

Assets column, consistent with our 

proposal of fully excluding retirement 

accounts from the personal net worth 

calculation. 

Part 23 

Subpart A—General 

28. Aligning Part 23 With Part 26 

Objectives (§ 23.1) 

The program objectives for the DBE 

Program currently identified in § 26.1 

are inconsistent with the program 

objectives for the ACDBE Program 

currently identified in § 23.1. Although 

the objectives are largely identical, a 

2014 revision to § 26.1 added the 

following two objectives that are not 

included in § 23.1: 

• To promote the use of DBEs in all 

types of federally assisted contracts and 

procurement activities conducted by 

recipients (‘‘program objective 1’’); and 

• To assist the development of firms 

that can compete successfully in the 

marketplace outside the DBE Program 

(‘‘program objective 2’’). 

For consistency with the program 

objectives in part 26, the proposed rule 

adds program objectives similar to 

§ 26.1 of the DBE Program to § 23.1 for 

the ACDBE Program. Importantly, the 

concepts found in the DBE Program 

§ 26.1 objectives 1 and 2 are already 

included in the ACDBE Program at 

§ 23.25(c) and (d)(7). 

29. Definitions (§ 23.3) 

In the Department’s experience, 

recipients need clarity on terms already 

used in this provision. Discussed below 

are a few of the definitions we propose 

adding or amending to clarify existing 

requirements in part 23 and to make 

provisions in part 23 consistent with the 

provisions of 49 CFR part 26. 

Affiliation 

The definition of ‘‘affiliation’’ under 

§ 23.3 incorrectly references ‘‘13 CFR 

121.103(f),’’ titled ‘‘affiliation based on 

identity of interest.’’ The SBA amended 

its regulation in 2004 redesignating ‘‘(f)’’ 

to ‘‘(h).’’ When the part 23 rule was 

finalized in 2005, the reference to 13 

CFR 121.103(f) was inadvertently not 

updated to reference ‘‘(h).’’ See 58 FR 

52050 (Oct. 8, 1993); 62 FR 29548 (May 

30, 1997); and 65 FR 54454 (Sept. 8, 

2000). Accordingly, the correct 

reference is to 13 CFR 121.103(h), titled 

‘‘affiliation based on joint ventures.’’ 

Therefore, the proposed rule would 

make a technical correction to address 

the aforementioned error in the 

definition of ‘‘affiliation’’ in § 23.3. 

Airport Concession Disadvantaged 

Business Enterprise (ACDBE) 

Based on the definitions of ‘‘Airport 

Concession Disadvantaged Business 

Enterprise’’ and ‘‘concession’’ under 

§ 23.3, certifying agencies are not clear 

when providing an ACDBE designation 

to an applicant if the firm does not 

currently operate an airport concession. 

The current § 23.3 defines 

‘‘concession’’ in part as one or more of 

the types of for-profit businesses in item 

1 or 2. 

1. A business, located on an airport 

subject to part 23, that is engaged in the 

sale of consumer goods or services to 

the public under an agreement with the 

recipient, another concessionaire, or the 

owner or lessee of a terminal, if other 

than the recipient. 

2. A business conducting one or more 

of the following covered activities, even 

if it does not maintain an office, store, 

or other business location on an airport 

subject to part 23, as long as the 

activities take place on the airport: 

Management contracts and subcontracts, a 

web-based or other electronic business in a 

terminal or which passengers can access at 

the terminal, an advertising business that 

provides advertising displays or messages to 

the public on the airport, or a business that 

provides goods and services to 

concessionaires. 

The 2000 supplemental notice of 

proposed rulemaking (SNPRM) opines 

that a ‘‘small business concern’’ must be 

an ‘‘existing’’ business but notes that the 

firm does not need to be operational or 

demonstrate that it previously 

performed contracts at the time of its 

application for certification. See 65 FR 

54454, 54456 (2000). The terms 

‘‘engaged in’’ and ‘‘conducting’’ in the 

current definition of ‘‘ACDBE’’ have led 

some certifying agencies to believe that 

they cannot provide an ACDBE 

designation to an applicant firm unless 

the firm already is engaged in an 

operational airport concession activity. 

Part 23, subpart C, ‘‘Certification and 

Eligibility of ACDBEs’’, does not address 

this. We agree with the perspective 

described in the 2000 SNPRM and 

propose amending. the definition of 

‘‘ACDBE’’ under § 23.3 to clarify that a 

firm does not need to be operational or 

demonstrate that it previously 

performed contracts at the time it 

applies for certification. 

Concession 

A ‘‘concession’’ is defined as ‘‘[a] 

business, located on an airport subject 

to this part, that is engaged in the sale 

of consumer goods or services to the 

public under an agreement with the 

recipient, another concessionaire, or the 


lotter on DSK11XQN23PROD with PROPOSALS2
43654 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

owner or lessee of a terminal, if other 

than the recipient.’’ See § 23.3 

(emphasis added). Some stakeholders 

contend that the definition of 

‘‘concession’’ should apply only to 

businesses that serve the ‘‘traveling 

public.’’ In other words, even though 

the definition of ‘‘concession’’ in part 23 

applies the term ‘‘public,’’ this should 

be interpreted to mean exclusively to 

the ‘‘traveling public.’’ 

In the past, the Department 

considered the issue of whether 

businesses that may occupy a portion of 

airport property serving the public in 

general, but that do not focus on serving 

passengers who use airport for air 

transportation, should be deemed 

‘‘concessions’’ for purposes of the 

program. See 65 FR 54455 (2000). The 

Department determined that businesses 

on airport property that do not primarily 

serve the public should not be viewed 

as concessions. See 70 FR 14496, 14501 

(2005). Instead, the term ‘‘concession’’ 

in part 23 refers only to businesses that 

serve the traveling public, except as 

otherwise provided in the definition of 

‘‘concession’’ in the rule (e.g., a hotel 

located anywhere on airport property is 

considered to be a concession). 

The proposed rule revises the 

definition of ‘‘concession’’ to reflect the 

Department’s interpretation that 

concessions are businesses who serve 

the ‘‘traveling public.’’ 

Personal Net Worth 

The current definition of ‘‘personal 

net worth’’ (PNW) in § 23.3 exempts 

from inclusion in the PNW calculation 

the values of a maximum of $3 million 

dollars in assets, which an owner/ 

applicant could demonstrate were 

necessary to obtain financing for 

purposes of entering or expanding a 

concessions business subject to part 23 

at an airport (the ‘‘PNW Third 

exemption’’). This exemption was 

instituted in 2005 when the Department 

determined that raising the PNW cap for 

ACDBEs to enter the concessions 

industry was not the best solution to 

mitigate the high capital requirements of 

the industry. Instead, the Department 

determined that it was more appropriate 

to adopt exceptions such as the PNW 

third exemption. This exemption 

considered an individual’s 

circumstances in order to avoid a ‘‘glass 

ceiling’’ effect of an across-the-board 

PNW standard. When adopting the PNW 

third exemption in 2005, the 

Department made clear that it believed 

the additional burdens of implementing 

the exemption were justified in the 

interest of opening business 

opportunities to ACDBEs. See 70 FR 

14496, 14498 (Mar. 22, 2005). 

Nonetheless, in the preamble to the 

2012 final rule, the Department cited 

evidence showing that the PNW third 

exemption was infrequently used. The 

evidence also showed that when the 

exemption was applied, it often 

appeared to be the subject of 

considerable uncertainty and confusion 

on the part of ACDBEs and certifying 

agencies alike. Therefore, the 

Department suspended the exemption to 

consider whether the provision should 

be retained, modified, or deleted. See 77 

FR 36924, 36928 (June 20, 2012). 

The Department contemplated 

whether the inflationary adjustment of 

the underlying PNW cap to $1.32 

million, which maintained the real 

dollar value of the previous $750,000 

cap, may have the effect of mitigating 

what the Department had seen in 2005, 

as the need for adopting a provision of 

this kind. This NPRM proposes raising 

the PNW cap to $1.60 million, further 

obviating the need for the PNW third 

exemption. Also, given the indefinite 

state of suspension of the exemption 

with no firm applying it since 2012, the 

Department is proposing to delete the 

PNW third exemption from the 

definition of ‘‘personal net worth’’ in 

§ 23.3. 

Instead of removing the above 

exemption and other proposed changes 

to § 26.67(a)(2)(i), the Department 

proposes to simplify the definition of 

‘‘personal net worth’’ in § 23.3 by 

amending the definition to have the 

same meaning as the term ‘‘personal net 

worth, in part 26. See discussion above. 

Socially and Economically 

Disadvantaged Individual 

The term ‘‘Native Americans’’ within 

the definition of ‘‘socially and 

economically disadvantaged 

individual’’ in 49 CFR part 26 was 

revised in the Department’s 2014 final 

rule to make it consistent with the 

SBA’s definition of the term. See 79 FR 

59566, 59579 (Oct. 2, 2014). This 

revision clarified that an individual 

must be an enrolled member of a 

federally or state recognized Indian tribe 

to receive the presumption of social 

disadvantage as a Native American in 

the DBE certification process. 

Consequently, the current definition of 

‘‘Native Americans’’ in § 26.5 ‘‘includes 

persons who are enrolled members of a 

federally or State recognized Indian 

tribe, Alaska Natives or Native 

Hawaiians.’’ 

In contrast, the term ‘‘Native 

Americans’’ included within the 

definition of ‘‘socially and economically 

disadvantaged individual’’ in § 23.3 for 

the ACDBE Program fails to incorporate 

the requirement of Federal or state 

recognition. It includes ‘‘persons who 

are American Indians, Eskimos, Aleuts, 

or Native Hawaiians.’’ The existing 

definition of ‘‘Native Americans’’ in 

§ 23.3 has not been updated to mirror its 

counterpart definition of ‘‘Native 

Americans’’ in § 26.5. The proposed rule 

amends the term ‘‘Native Americans’’ 

included under the definition of 

‘‘socially and economically 

disadvantaged individual’’ in § 23.3 to 

conform to the wording of the term 

‘‘Native Americans’’ included under the 

definition of ‘‘socially and economically 

disadvantaged individual’’ in § 26.5. 

Sublease 

Airports are encountering more 

complex subtenant arrangements 

between ACDBEs and primes. For 

instance, there are a growing number of 

agreements with primes that include 

provisions that bind tenants to more 

than simply the payment of rent. For 

example, these provisions might include 

providing services and supplies and 

profit-sharing. These new types of 

agreements raise questions of control, 

ownership, and the manner of counting 

ACDBE participation. They have given 

rise to the need for clarification as to 

what terms and provisions are 

appropriate in a sublease operation that 

would allow the ACDBE participation to 

count as direct ownership toward the 

ACDBE goal. 

The term ‘‘sublease’’ is used in several 

sections of the regulation but is not 

defined. This has created uncertainty as 

to how to determine if the ACDBE 

participation should be counted as a 

sublease agreement. Other terms used in 

the regulation to reference sublease 

relationships include subconcession 

(§ 23.55 and the Uniform Report) and 

subcontract (§§ 23.3, 23.9, 23.47, and 

23.55). The term ‘‘subconcession’’ is 

defined in the Uniform Report as ‘‘a 

firm that has a sublease or other 

agreement with a prime concessionaire, 

rather than with the airport itself, to 

operate a concession at the airport.’’ The 

regulation defines the term direct 

ownership arrangement as ‘‘a joint 

venture, partnership, sublease, licensee, 

franchise, or other arrangement in 

which a firm owns and controls a 

concession.’’ 

In 2011, the Airport Cooperative 

Research Program (ACRP), ‘‘an industrydriven, applied research program that 

develops near-term, practical solutions 

to airport challenges’’ published a 

Resource Manual for Airport InTerminal Concessions intended to 

provide guidance on the development of 

airport concessions programs. Under the 

discussion of subtenant agreements (i.e., 

subleases), it states that ‘‘subtenants are 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43655 

39The National Acadmey of Sciences, 

Engineering, & Medicine 2011, ‘‘Resource Manual 

for Airport In-Terminal Concessions,’’ Washington, 

DC: The National Academies Press., available at 

https://doi.org/10.17226/13326. 

40See ‘‘What are the Good Faith Efforts 

Obligations of Car Rental Companies to Meet 

ACDBE Goals at an Airport?’’ available at https:// 

www.transportation.gov/sites/dot.gov/files/2020-01/ 

docr-20160329-001carrentalcompaniesgoodfaith

effortsguidance.pdf. 

usually responsible for all aspects of 

their operations. Subtenants may be 

franchisees or licensees, or they may 

operate brands and concepts that they 

developed. Counting concession gross 

receipts generated by subtenants toward 

ACDBE goals is, for the most part, 

straightforward when subtenants use 

their own capital and workforce and 

manage the overall and day-to-day 

operations of their business.’’ 39

Airports are encountering an 

increasing number of unconventional 

subtenant arrangements that are termed 

‘‘subleases’’ which in many cases 

contain restrictions that limit the 

ACDBE’s control of its operations. In 

order to determine how to count ACDBE 

participation, a recipient must 

determine in what capacity the ACDBE 

is performing and whether the firm 

owns and controls the concession 

location. 

The proposed rule would add a 

definition for ‘‘sublease’’ to clarify that 

the use of the words ‘‘sublease, 

subconcession, or subcontract’’ in 

describing the type of agreement is not 

controlling as to whether the 

participation should be counted as 

direct ownership. The proposed rule 

would also add the definition of the 

term ‘‘subconcession’’ to § 23.3, which 

currently only is found in the Uniform 

Report to part 23. 

Subpart B—ACDBE Programs 

30. Direct Ownership, Goal Setting, and 

Good Faith Efforts Requirements 

(§ 23.25) 

By statute (49 U.S.C. 47107(e)(3)), 

recipients and businesses at the airport 

must ‘‘make good faith efforts to explore 

all available options to achieve, to the 

maximum extent practicable, 

compliance with the goal through direct 

ownership arrangements, including 

joint ventures and franchises.’’ This 

statutory good faith efforts requirement 

is addressed in the regulations at 

§ 23.25(f), which mandates that a 

recipient include in its ACDBE Program 

a requirement for businesses subject to 

ACDBE goals at the airport, other than 

car rental companies, to make good faith 

efforts to explore all available options to 

meet goals, to the maximum extent 

practicable, through direct ownership 

arrangements with ACDBEs. 

The current § 23.25(e) provides for the 

‘‘use of race-conscious measures when 

race-neutral measures, standing alone, 

are not projected to be sufficient to meet 

an overall goal.’’ Establishing 

concession-specific goals is an example 

of an acceptable race-conscious measure 

that can be implemented. In establishing 

contract goals, § 23.25(e)(1)(i) and (ii) 

mandates that the goal can be set 

through direct ownership arrangements 

or through the purchase and/or leases of 

good and services. Additionally, 

§ 23.25(e)(1)(iii) addresses the good faith 

efforts requirement, and states that ‘‘to 

be eligible to be awarded the 

concession, competitors must make 

good faith efforts to meet this goal,’’ 

referencing the narrowly tailored goal 

that was set in accordance with 49 CFR 

part 23, subpart D. 

Some airports have interpreted the 

requirement under § 23.25(e) to mean 

that they must require competitors to 

always make good faith efforts to meet 

the goal through direct ownership 

arrangement regardless of how the goal 

was set. Stakeholders have requested 

clarification on when concessionaires 

must make good faith efforts to explore 

participation through direct ownership 

arrangements when a goal is established 

based on goods and services provided 

by ACDBEs as well as when a goods and 

services goal can or should be used. 

It is important to note the 

parenthetical ‘‘except car rental 

companies’’ in § 23.25(f) is intended 

only to implement the statutory 

limitation in 49 U.S.C. 47107(e)(4)(C) 

against requiring car rental companies 

to change their corporate structure to 

include direct ownership arrangements 

as a means of meeting ACDBE goals. 

Notwithstanding this exception, car 

rental companies are still obligated to 

make good faith efforts to meet such 

goals.40

The proposed rule would amend 

§ 23.25(e) and (f) to clarify direct 

ownership goal setting and good faith 

efforts requirements. 

31. Fostering ACDBE Small Business 

Participation (§ 23.26) 

This NPRM proposes a conforming 

amendment to add a small business 

requirement as under part 26 to the DBE 

Program (49 CFR part 23). The rationale 

for this proposed change is similar to 

the corresponding rationale for the 

requirement under the DBE Program. 

See 76 FR 5083, 5094 (Jan. 28, 2011). 

The Department previously amended 

the ACDBE part 23 regulation to 

conform in several respects to the DBE 

rule via a June 20, 2012, final rule. 

However, in the preamble for this final 

part 23 rule, we contemplated but 

decided not to issue a parallel small 

business program requirement for the 

ACDBE Program. We explained that at 

the time, it was primarily focused on 

applying this provision to federally 

assisted contracting and associated 

issues such as ‘‘unbundling.’’ However, 

we acknowledged indications of barriers 

to ACDBEs in the concessions program 

that a small business element may help 

to alleviate. See 77 FR 36924, 36926 

(June 20, 2012). We further stated that 

it would consider the comments in 

deciding whether to proceed with a 

small business provision for the ACDBE 

Program in the future, and that it hoped 

to learn from airport recipients’ 

implementation of the small business 

element part 26. 

The Department learned about the 

implementation of a small business 

element from airport recipients and 

their success in achieving race-neutral 

participation from small businesses, 

including DBEs, through this process. 

Moreover, we continue to receive 

feedback from stakeholders stating that 

there is a lack of concession 

opportunities of a size and nature that 

small businesses, including ACDBEs, 

can compete for fairly. Given the 

continued concerns expressed by 

stakeholders, we believe the inclusion 

of a small business element focused on 

concessions is warranted. Therefore, we 

propose adding a provision in part 23 

that would closely mirror the § 26.39 

requirement for recipients to create an 

element for their ACDBE Program 

specifically designed to foster small 

business participation. For purposes of 

monitoring compliance, this element 

would include a requirement for 

recipients to periodically report on the 

implementation of race-neutral 

strategies under the small business 

element for their programs. 

32. Retaining and Reporting 

Information About ACDBE Program 

Implementation (§ 23.27) 

Active Participants List 

The Department proposes adding a 

‘‘bidders list’’ requirement to part 23 

like the one in part 26. Section 26.11(c) 

instructs recipients to create and 

maintain a bidders list with certain 

information about DBE and non-DBE 

contractors and subcontractors who seek 

work on federally assisted contracts. 

However, for part 23, this proposed rule 

would add a requirement for recipients 

to develop and maintain an ‘‘active 

participants list.’’ The term ‘‘active 

participants list’’ is used in place of 

‘‘bidders list;’’ ‘‘bidding,’’ is generally 


lotter on DSK11XQN23PROD with PROPOSALS2
43656 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

not used in the context of concessions. 

The active participants list would 

include all firms that have participated 

or attempted to participate in airport 

concession programs in previous years. 

See § 23.51(c)(2). 

Similar to § 26.11(c)(1), one of the 

purposes of the ‘‘active participants list’’ 

would be to provide recipients with 

data that is as accurate as possible about 

the universe of ACDBE and nonACDBEs who seek concession 

opportunities for use in helping 

recipients set overall goals for car 

rentals and concessions other than car 

rental. See § 23.41(a). Recipients could 

also use all the already available data 

methods of reporting and 

communication with their concessions 

community. See 64 FR 5096, 5104 (Feb. 

2, 1999). Recipients may obtain 

information on firms interested in 

seeking concession opportunities from a 

number of sources, such as past 

experience with firms that have run 

concessions or sought concession 

contracts or leases, knowledge about the 

universe of firms in certain areas of 

retail and food and beverage service that 

tend to be interested in participating in 

airport concessions, and attendance lists 

from informational and outreach 

meetings about upcoming concessions 

opportunities. See 70 FR 14496, 14506 

(Mar. 22, 2005). 

As with the proposed change to 

§ 26.11(c), the Department proposes to 

require recipients to enter this active 

participant list information into a 

centralized database that the FAA 

would specify. Requiring recipients to 

report this information into a 

centralized database would create a data 

source that would allow a more accurate 

analysis of firms actively seeking 

concession opportunities. In addition, a 

searchable, centralized database with 

information about active participants 

that includes an expanded dataset 

would aid recipients in evaluating 

ACDBE availability for goal-setting 

purposes. 

We list in proposed § 23.27(c)(2) the 

types of data that recipients would be 

required to obtain and report. Recipients 

would be required to obtain and report 

for the active participants list 

requirement the same data sets under 

the proposed § 26.11(c)(2). In 

conjunction with the Department’s 

proposal to add a similar MAP–21 

reporting requirement to § 23.27, and its 

changes to the Uniform Report, the 

proposed active participants list 

reporting requirement would provide 

the Department with data showing how 

many and what types of ACDBEs are 

certified, how many ACDBEs are 

actively seeking concession 

opportunities as primes, joint venture 

participants or sub-concessions, and 

which of them are actually awarded 

concession opportunities. 

To ensure uniformity of data 

collection for proper analysis, the 

Department proposes to add 

§ 23.27(c)(3) to require a standard 

practice of requesting the information 

with proposals and initial responses to 

negotiated procurements. 

As the Department noted for part 26 

with the bidders list, the active 

participants list is a promising method 

for accurately determining the 

availability of ACDBE and non-ACDBEs. 

We also believe that creating and 

maintaining an active participants list 

will give recipients another valuable 

tool to measure the relative availability 

of ready, willing, and able ACDBEs 

when setting their overall goals. See 64 

FR 5096, 5104 (Feb. 2, 1999). For this 

reason, the Department proposes to add 

a new paragraph (c) to § 23.27 to require 

recipients to develop and maintain an 

‘‘active participants list’’ for their 

ACDBE programs. 

Subpart C—Certification and Eligibility 

of ACDBEs 

33. Size Standards (§ 23.33) 

See discussion on § 26.65 above. 

34. Certifying Firms That Do Not 

Perform Work Relevant to the Airport’s 

Concessions (§ 23.39) 

The regulatory definition of 

‘‘concession’’ under § 23.3 allows firms 

that provide goods and services to 

concessionaires and do not maintain 

physical locations on airport property to 

be certified as ACDBEs. Firms that 

provide construction services for the 

build-out of concession facilities to 

concessionaires (e.g., food and beverage, 

retailers, etc.) at airports satisfy the 

definition of ‘‘concession’’ under part 

23. Hence, suppliers of goods and 

services (e.g., architects, engineers, etc.) 

to these construction firms also meet the 

definition of ‘‘concession’’ and are not 

excluded from receiving ACDBE 

certification. 

While the firms that perform these 

construction-related activities for 

concessions may qualify as ACDBEs, 

§ 23.55(k) prohibits recipients from 

counting toward ACDBE goals the costs 

incurred in connection with the ‘‘buildout’’ of a concession facility, such as 

costs related to renovation, repair or 

construction. Section 23.55(k) was 

promulgated to address concerns that 

primes may use participation from 

construction firms completing build-out 

projects to primarily satisfy their goals 

instead of having ACDBEs meaningfully 

participate in as many other concession 

activities outside of construction. 

Given that the definition of 

‘‘concession’’ under § 23.3 includes 

suppliers of goods and services to 

concessionaires without excepting 

suppliers of goods and services for 

build-outs, stakeholders report that 

certifiers continue to provide ACDBE 

certification to construction firms and 

firms that supply goods and services to 

the construction industry. However, 

these firms often do not realize that 

their participation as ACDBEs cannot be 

counted until after they have gone 

through the certification process. Thus, 

many are left with having undergone the 

burden of obtaining certification and not 

obtaining airport jobs. 

Firms seeking their ACDBE 

designation to perform constructionrelated activities exclusively in 

connection with build-out of concession 

facilities should not be granted 

certification given that the participation 

derived from those activities cannot be 

counted toward goals. Although existing 

regulations provide certifiers the 

discretion to withhold certification of 

firms that are certified as DBEs that seek 

ACDBE certification if they do not 

perform work relevant to the Program, 

the regulations are not explicit regarding 

whether certifiers possess the same 

discretion to deny certification to 

ACDBE applicants that are not certified 

as DBEs. See § 23.37(b). Therefore, the 

proposed rule would add a paragraph to 

§ 23.39 explaining that certifiers must 

not certify applicant firms if they intend 

to perform activities exclusively related 

to the renovation, repair, or construction 

of a concession facility (sometimes 

referred to as the ‘‘build-out’’) for which 

participation cannot be counted toward 

an ACDBE goal. 

Subpart D—Goals, Good Faith Efforts, 

and Counting 

35. Removing Consultation 

Requirement When No New Concession 

Opportunities Exist (§ 23.43) 

The current § 23.43 requires 

recipients to consult with stakeholders 

before submitting overall goals to the 

FAA. Recipients must submit goals 

every three years, which may include 

periods when there are no concession 

opportunities to evaluate. See § 23.45(b). 

Examples of stakeholders with whom 

recipients must consult include, but are 

not limited to, minority and women’s 

business groups, community 

organizations, trade associations 

representing concessionaires currently 

located at the airport, as well as existing 

concessionaires themselves. See 

§ 23.43(b). Meaningful consultation with 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43657 

41See ‘‘Tips for Goal Setting in the Disadvantaged 

Business Enterprise (DBE) Program’’ available at 

https://www.transportation.gov/osdbu/

disadvantaged-business-enterprise/tips-goal-settingdisadvantaged-business-enterprise. 

stakeholders is an important, costeffective means of obtaining relevant 

information from the public concerning 

the methodology, data, and analysis that 

support the overall ACDBE goal. See 79 

FR 59566, 59581 (Oct. 2, 2014). The 

type of information that might be 

derived from these consultations 

includes the availability of 

disadvantaged businesses, the effects of 

discrimination on opportunities for 

ACDBEs, and recipients’ efforts to 

increase participation of ACDBEs. See 

§ 23.43(b). 

The Department’s guidance, titled 

‘‘Tips for Goal Setting,’’ discusses the 

need for consultation as a source in 

determining an adjustment to the base 

goal figure. It states, in part: ‘‘In 

determining whether or not your base 

figure should be adjusted to account for 

the effects of past discrimination, you 

should consider consulting with the 

following organizations and institutions 

to determine whether they can direct 

you to information about past 

discrimination in public contracting; 

discrimination in private contracting; 

discrimination in credit, bonding or 

insurance; data on employment, selfemployment, training or union 

apprenticeship programs; and/or data 

on firm formation.’’ 41

Stakeholders expressed that the 

regulatory requirement for recipients to 

perform consultation when there are no 

concession opportunities to evaluate or 

promote is misleading and burdensome. 

They argue that it would be more 

meaningful if they only had to conduct 

stakeholder consultation when their 

goal methodology would include new 

concession opportunities. 

The Department agrees that 

consultation work is most appropriate 

in gathering narrative data to adjust the 

base goal figure and when there are 

concession opportunities to promote. 

The consultation requirement becomes 

unnecessary without relative 

availability of new concessions 

opportunities to analyze or a base figure 

to adjust. 

The proposed rule would require 

consultation only when the ACDBE goal 

methodology includes opportunities for 

new concession agreements. 

36. Non-Car Rental Concession Goal 

Base (§ 23.47) 

Section 23.47 requires recipients to 

include in the base of the overall goal 

for concessions other than car rentals 

the total gross receipts of all concessions 

at the airport, with the following 

specific exclusions: (1) the gross 

receipts of car rental operations; (2) the 

dollar amount of a management contract 

or subcontract with a non-ACDBE; (3) 

the gross receipts of business activities 

to which a management or subcontract 

with a non-ACDBE pertains; and (4) any 

portion of a firm’s estimated gross 

receipts that will not be generated from 

a concession. 

However, § 23.25(e)(1) provides for 

establishing concession-specific goals 

for particular concession opportunities. 

Specifically, it provides that if the 

objective of the concession-specific goal 

is to obtain ACDBE participation 

through a direct ownership arrangement 

with an ACDBE, recipients must 

calculate the goal as a percentage of the 

total estimated annual gross receipts 

from the concession. See § 23.25(e)(1)(i). 

It further provides that if the goal 

applies to purchases and/or leases of 

goods and services, recipients must 

calculate the goal by dividing the 

estimated dollar value of such 

purchases and/or leases from ACDBEs 

by the total estimated dollar value of all 

purchases to be made by the 

concessionaire. See § 23.25(e)(1)(ii). 

Since the overall goal is an analysis of 

concessions opportunities and 

concession-specific goals set on those 

opportunities, recipients have requested 

clarification on what to use as their base 

for their overall goal when the 

concessions opportunities will yield 

participation through the purchase of 

goods and services from 

concessionaires. Recipients report 

situations where participation for some 

non-car rental concessions can only be 

reasonably expected to be achieved in 

the form of goods and services 

purchases. 

The Department explained in the 

2000 SNPRM for parts 23 and 26 that 

‘‘[c]onsistent with statutory 

requirements, management contracts 

and purchases by concessions from DBE 

suppliers form part of the goal.’’ 65 FR 

54454, 54457 (Sept. 8, 2000) Where 

direct ownership arrangements are not 

practicable, it is permissible to add the 

potential value of management contracts 

or subcontracts with ACDBEs and goods 

and services to be purchased by 

concessionaires from ACDBEs when 

calculating overall goals. These amounts 

are added to the base for the overall goal 

in both the numerator and denominator. 

The proposed rule would amend 

§ 23.47(a) to provide for the goal setting 

requirements set forth in § 23.25. 

37. Counting ACDBE Participation After 

Decertification (§ 23.55) 

Both §§ 23.39(e) and 23.55(j) provide 

that upon an ACDBE firm losing its 

ACDBE certification because the firm 

exceeded the small business size 

standard or because an owner has 

exceeded the PNW, the participation of 

the ACDBE firm may be counted toward 

ACDBE goals during the remainder of 

the term of a concession agreement. 

Specifically, § 23.39(e) also requires that 

‘‘the firm in all other respects remains 

an eligible DBE’’ as a condition to 

continue counting their participation. 

When a firm is certified, it is required 

to report changes that impact its 

eligibility by submitting annual 

affidavits that provide either notice of 

no changes or notification of changes in 

accordance with § 26.83(i) and (j), made 

applicable to part 23 by § 23.31. 

However, there is currently no provision 

in the regulation to monitor whether a 

firm whose ACDBE certification was 

removed solely for exceeding the size 

standard or PNW cap, but remains 

eligible for ACDBE certification in all 

other respects, remains an eligible 

ACDBE for the purpose of counting its 

participation. Of note, once a firm loses 

its certification as an ACDBE due to 

exceeding the business size standard or 

PNW cap, it is no longer obligated to 

provide the information or affidavits 

required by § 26.83. 

Section 23.39(e) provides that firms 

whose ACDBE certification has been 

removed because of size or PNW must 

continue to meet the ownership and 

control eligibility requirements to be 

counted for the duration of a concession 

agreement. Stakeholders have 

highlighted the need to monitor if it is 

appropriate to continue counting the 

participation of ACDBEs once they lose 

their ACDBE certification due to size or 

personal net worth standards. This type 

of monitoring is necessary and the 

proposed rule amends § 23.55(j) to 

require those firms to continue to report 

changes by submitting declarations 

similar to those affidavits required of 

DBEs by § 26.83(i) and (j). This should 

be carried out only with respect to their 

ability to meet ownership and control 

requirements, as a condition to continue 

counting their participation. 

Under the proposed rule, firms would 

report changes to recipients rather than 

UCPs, given that the firms’ participation 

is counted by airports. That is, as a 

condition to counting a firm’s continued 

participation in the ACDBE Program 

upon losing certification due to failure 

to meet size or PNW standards, the firm 

would be required to submit an annual 

declaration that provides either notice 


lotter on DSK11XQN23PROD with PROPOSALS2
43658 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

42See ‘‘Principles for Evaluating Long-term, 

Exclusive Agreements in the ACDBE Program’’ 

available at https://www.faa.gov/sites/faa.gov/files/ 

about/office_org/headquarters_offices/acr/ 

LTE_Guidance_Final.pdf. 

of no changes or notification of changes 

similar to those required by § 26.83(i) 

and (j). More specifically, firms would 

be required to submit a declaration to 

report any change in their 

circumstances affecting their ability to 

meet ownership and control 

requirements under part 23. In addition, 

a ‘‘no change declaration,’’ submitted 

annually to the airport, would affirm 

that there have been no changes in the 

firm’s circumstances affecting its ability 

to meet these ownership or control 

requirements. Should an ACDBE firm 

fail to provide a no change declaration, 

the recipient would cease counting the 

firm’s participation toward ACDBE 

goals. 

Firms would need to report a change 

in ownership through a notice of change 

declaration because the change might 

impact the recipient’s ability to count 

the participation of that firm. For 

example, if a previously certified 

ACDBE firm was sold or a controlling 

interest in the firm was sold to a nonACDBE, its participation would cease to 

be counted as of the date of the sale 

based on § 23.39(e). A sale constitutes a 

material change that impacts the 

ownership and control eligibility 

requirements in part 23. Therefore, the 

counting of the ACDBE’s participation 

would no longer meet the requirements 

of § 23.39(e), which states in part that 

‘‘in all other respects [the firm] remains 

an eligible [AC]DBE.’’ However, if the 

sale is made to a ACDBE firm that meets 

all eligibility criteria under the ACDBE 

Program, recipients should not 

disqualify the firm’s participation from 

counting under § 23.55(j). 

Upon notice of a sale or change of 

ownership, recipients should verify via 

state electronic directories whether the 

firm or a controlling interest in the firm 

was sold to a ACDBE. Once the sale or 

change of ownership is verified, the 

recipient’s monitoring obligation as well 

as the selling firm’s reporting 

requirements under this 

recommendation would cease. 

Therefore, the UCP would be solely 

responsible for keeping current on the 

status of the acquiring firm’s ACDBE’s 

certification status and the ACDBE 

would continue to comply with its 

reporting obligations under § 26.83(i) 

and (j) as required, prior to acquiring the 

firm or a controlling interest therein. 

The Department proposes to delete 

§ 23.39(e), and redesignate paragraphs 

(f) and (g) as paragraphs (e), (f), and (g) 

under § 23.39. Both §§ 23.39(e) and 

23.55(j) address the identical issue 

concerning continued counting, and 

therefore, there is no valid justification 

for having these two differently worded 

sections instituting the same rule. 

38. Shortfall Analysis Submission Date 

(§ 23.57) 

Section 23.57(b) requires recipients to 

conduct a shortfall analysis and 

establish steps and milestones as 

corrective actions (collectively, 

‘‘Shortfall Analysis’’) if the recipient 

fails to meet its overall goal for the fiscal 

year. See § 23.57(b)(1) and (2). The 

Shortfall Analysis must be submitted to 

FAA within 90 days of the end of the 

Federal fiscal year. See § 23.57(b)(3)(i). 

In contrast, § 23.27(b) requires 

recipients to submit an annual Uniform 

Report of ACDBE Participation 

(‘‘Uniform Report’’) by March 1 of each 

year. Stakeholders expressed concerns 

over the due date of the Shortfall 

Analysis under part 23 as it becomes 

due before the Uniform Report is due. 

Part 26 includes a similar 

requirement; however, the shortfall 

analysis is due 30 days after the 

Uniform Report is due. This affords 

recipients 30 days after they are 

required to submit the report to analyze 

the data in the Uniform Report. See 

§ 26.47(c)(3)(i). 

The proposed rule would extend the 

due date of the part 23 Shortfall 

Analysis by amending § 23.57(b)(3)(i) to 

allow recipients to submit the Shortfall 

Analysis 30 days after they submit their 

Uniform Report. 

Subpart E—Other Provisions 

39. Long-Term Exclusive Agreements 

(§ 23.75) 

Five-Year Term for Long-Term 

Agreements 

Section 23.75(a) prohibits recipients 

from entering into ‘‘long-term, exclusive 

agreements’’ (LTE) for concessions 

without prior FAA approval based on 

very limited conditions that are outlined 

in the regulation. The reason for this 

general prohibition is to limit situations 

where an entire category of business 

activity is not subject to competition for 

an extended period through the use of 

an LTE agreement. See Principles for 

Evaluating Long-Term, Exclusive 

Agreements in the ACDBE Program, 

June 10, 2013 (LTE Guidance).42

Stakeholders suggest that the five-year 

term in the definition contained in 

§ 23.75(a) is too short. As an alternative, 

stakeholders suggested that ‘‘long-term’’ 

should be re-defined to a minimum of 

ten years given that the term of the 

typical concession lease agreement is 

generally ten years or longer, per 

industry standards. 

The Department discussed the 

definition of ‘‘long-term agreement’’ 

under § 23.75 in the preamble to the 

2005 final rule, which states that ‘‘[o]ne 

airport suggested making 10 years rather 

than 5 years the criterion for a long-term 

exclusive lease subject to this section. 

We have not adopted this comment 

because doing so would reduce the 

degree of oversight FAA can exercise 

under the rule to make sure that longterm concession agreements include 

adequate ACDBE participation.’’ (70 FR 

14496, 14507 (March 22, 2005)) 

The need for oversight remains 

unchanged. It is worth noting that 

concession agreements with terms that 

exceed five years but do not meet the 

definition of ‘‘exclusive’’ need not be 

submitted for FAA approval under the 

rule. The Department seeks comments 

on keeping the term at 5 years rather 

than revising it to 10 years. See section 

1.2 of LTE Guidance. 

Long-Term Agreements and Options 

Section 23.75(a) does not address 

whether a concession agreement 

becomes ‘‘long-term’’ if its duration 

exceeds the five-year threshold as a 

result of options. The LTE Guidance 

explains that a long-term agreement is 

one that has a term of more than five 

years, including any combination of 

base term and options (e.g., options to 

extend the term of the lease agreement, 

or to expand the scope of the agreement 

to a new section or terminal, or to enter 

into a new contract, etc.) if the effect is 

a lease period of more than five years. 

See section 1.3 LTE Guidance. The 

Department proposes to amend the 

definition of ‘‘long-term agreement’’ 

under § 23.75(a) to state that options are 

subject to the regulation’s requirements 

if the options result in a lease period of 

more than five years. 

Long-Term Agreements and Holdovers 

Holdover provisions of an airport 

lease typically allow the airport sponsor 

to extend the terms of an existing airport 

lease without execution of a new lease, 

which are distinct from options. 

Options involve an extension of the 

lease and sometimes an adjustment in 

rental rates for the extended period set 

by the option. In contrast, holdover 

provisions are meant to provide a shortterm extension of the protections and 

terms described within the lease 

document. Notwithstanding the fact that 

holdover provisions are designed to 

bridge gaps to meet the short-term needs 

of the parties, holdover tenancies that 

cause an exclusive agreement to extend 

the term beyond five years may 

preclude potential ACDBE competitors 

from participating in the agreement in 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43659 

43 Id. 

the same manner as long-term exclusive 

agreements requiring approval by the 

FAA per § 23.75. 

The Department seeks public 

comment on how to address holdovers 

that would result in short-term 

exclusive agreements becoming longterm without FAA oversight, leading to 

the possible circumvention of § 23.75. 

Definition of Exclusive Agreement 

Section 23.75 prohibits sponsors from 

entering into long-term exclusive 

agreements for the operation of 

concessions except under limited 

conditions and subject to FAA approval. 

Section 23.75(a) contains a definition of 

‘‘long-term agreement’’ but does not 

define an ‘‘exclusive agreement.’’ 

However, the FAA’s LTE Guidance 

defines the term ‘‘exclusive’’ as follows: 

For purposes of this guidance and in 

accord with 49 CFR Section 23.75, the term 

‘‘exclusive’’ is defined as a type of business 

activity that is conducted solely by a single 

business entity on the entire airport. In the 

context of this guidance, the concept of 

‘‘exclusive’’ includes the absence of any 

ACDBE participation. (LTE Guidance, section 

1.2) 43

The intent of § 23.75 is to provide for 

the review of LTE agreements to ensure 

adequate ACDBE participation 

throughout the term of the agreement, 

irrespective of whether an ACDBE or a 

non-ACDBE enterprise is the prime 

concessionaire being considered for 

award of an exclusive, long-term 

agreement. See 57 FR 18400, 18401 

(Apr. 30, 1992). Therefore, the 

Department proposes to add the 

definition of ‘‘exclusive agreement’’ to 

§ 23.75(a) to be consistent with the LTE 

guidance’s discussion of the term 

‘‘exclusive.’’ 

Amending Document Requirements 

Section 23.75(c) requires recipients to 

submit to the FAA various documents 

and information to obtain approval from 

the FAA of an exclusive LTE agreement. 

In Fiscal Year 2020, the FAA held 

several listening sessions with 

stakeholders in reference to part 23. 

Stakeholders shared their concerns 

regarding LTE requirements for 

documentation, specifically, that some 

of the LTE requirements for 

documentation and information were 

unclear, not feasible, or pertinent. 

Moreover, we understand that certain 

documentation and information 

required under the existing rule are 

typically not available before a 

concession opportunity solicitation is 

published. 

The Department believes these 

concerns merit addressing and proposes 

the following changes to § 23.75(c): 

• Amend the introductory text in 

§ 23.75(c) to allow for certain 

documentation and information 

required for approval of an LTE 

agreement under this section to be 

submitted prior to the release of the 

solicitation or request for proposals and 

others, prior to award of the contract. 

• Delete § 23.75(c)(2)(i) as there may 

not be opportunities for direct 

ownership. 

• Delete § 23.75 (c)(2)(ii) as the 

existing rule can be improperly read to 

permit the prime concessionaire to 

terminate ACDBEs on an operation, after 

the ACDBEs made an investment. 

Relatedly, delete § 23.75(c)(2)(iii), as the 

termination provision language is 

inconsistent with the requirements of 

§ 26.53 and the provisions of § 26.53(f). 

These termination provisions apply to 

part 23 by reference and address 

replacement or substitution of ACDBEs. 

• Replace the current provision in 

§ 23.75(c)(3) that requires ACDBE 

participants to be in an acceptable form 

such as a sublease, joint venture, or 

partnership, with a requirement for 

recipients to submit an ACDBE contract 

goal analysis developed in accordance 

with part 23. 

• Amend § 23.75(c)(4) to specify that 

documentation that ACDBE participants 

are certified in the appropriate NAICS 

code need only be provided before 

award of the concession contract. 

• Amend § 23.75(c)(5) to only require 

a general description, including location 

and concept of the ACDBE operation, 

and require the information to be 

submitted only prior to final award, i.e., 

allowing information to be submitted 

after prime concessionaire selected. 

• Lastly, delete the current provisions 

in § 23.75(c)(7) as actual information on 

estimated gross receipts and net profits 

are not available at the solicitation stage. 

Requesting data on net profit to be 

earned by the ACDBE is not equitable 

because the process does not require the 

same information from the non-ACDBE. 

Insert in its place, a provision to allow 

recipients to submit agreements in draft 

form prior to the release of the 

solicitation or RFP, and to subsequently 

provide the final agreements prior to 

award of the contract. 

40. Local Geographic Preferences 

(§ 23.79) 

This NPRM provision proposes to 

revise § 23.79 to make it clear that local 

geographic preferences are not 

permitted regardless of concession 

certification status. This change is 

needed to address confusion about 

whether the local geographic preference 

limitation under § 23.79 applies only to 

ACDBEs. 

This change would be consistent with 

the Department’s views from 2005 part 

23 final rule. The ACDBE Program is a 

national program, and some concession 

markets are national markets. Under 

these conditions, a local preference 

program is out of place. The 

disadvantages of local preferences, such 

as the elimination of benefits of wider 

competition for business opportunities 

and the possible loss of opportunities 

for ACDBEs who are not located in the 

locality served by an airport, continue to 

be important to warrant prohibiting 

local preferences in the context of the 

ACDBE Program. (70 FR 14496, 14507 

(March 22, 2005)) 

Revising this section would make 

clear that a local geographic preference 

that gives a concession located in a local 

area an advantage over concessions from 

other places in obtaining business as, or 

with, a concession at an airport is 

prohibited. However, while recipients 

cannot limit solicitations to local 

concessionaires or use local geographic 

preference as a selection criterion, 

recipients may request concepts that are 

local to a specific region when soliciting 

proposals. We understand the objective 

of local concepts is to create a sense of 

place for passengers, but this does not 

extend to local geographic preferences 

that limit concession awards to local 

concessionaires. 

41. Appendix A to Part 23: Uniform 

Report of ACDBE Participation Form 

The Department proposes removing 

the Uniform Report of ACDBE 

Participation from appendix A to part 

23. Official forms are not required to be 

reproduced in the CFR; this report will 

be posted on the DOT website. 

Removing this form from the CFR is an 

administrative action and would not 

impact the ability of the public to 

comment on any amendments to the 

information collections contained in the 

form. 

Section 23.27(b) requires recipients to 

complete and submit an annual report 

on ACDBE participation using the 

Uniform Report found in appendix A. 

The Department proposes several 

amendments to the Uniform Report to 

enhance the accuracy of participation 

reported and address stakeholder 

concerns. In lieu of the above proposal 

to remove appendix A from the CFR, the 

following amendments would be found 

in the Uniform Report. 


lotter on DSK11XQN23PROD with PROPOSALS2
43660 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

Block #5 Instructions of Appendix A, 

Definition of Goods and Services 

The Uniform Report’s block #5 

instructions state that ‘‘[ . . . ] ‘Goods/ 

services’ refers to those goods and 

services purchased by the airport itself 

or by concessionaires and management 

contractors from DBEs.’’ Block #5 

encompasses all non-car rental 

cumulative ACDBE participation during 

the reporting period. 

There are several participation 

categories (e.g., prime concessions; 

subconcession; management contracts; 

and goods and services) listed in the 

Uniform Report under which gross 

revenues, and goods and service 

expenditures are to be reported. These 

categories include ‘‘prime concession’’ 

which is defined as ‘‘concessions who 

have a direct relationship with the 

airport (e.g., a company who has a lease 

agreement directly with the airport to 

operate a concession).’’ The category 

‘‘subconcession’’ is defined as ‘‘a firm 

that has a sublease or other agreement 

with a prime concessionaire, rather than 

with the airport itself, to operate a 

concession at the airport.’’ Because 

airport recipients do not meet either the 

definition of a ‘‘concession’’ or 

‘‘concessionaire,’’ it is the Department’s 

view that goods and services purchased 

by recipients should not be reported in 

the Uniform Report. 

The proposed rule would amend the 

definition of ‘‘goods/services’’ in the 

block #5 instructions to clarify that only 

participation in the form of goods and 

services purchased by concessionaires 

and management contractors from DBEs 

should be reported. The definition of 

‘‘subconcession’’ is currently in the 

Uniform Report but not in the § 23.3 list 

of definitions. The Department proposes 

adding the definition to § 23.3. 

Block #5 New Joint Venture 

Participation Category 

Stakeholders expressed that the 

Uniform Report should be modified to 

address the reporting of participation of 

joint venture partnerships as compared 

to participation from goods/services 

purchases or sub-concessions. The 

proposed rule would amend blocks #5, 

#6, #8, and #9 to incorporate a separate 

row for reporting joint venture 

participation. The proposed rule also 

would amend the instructions in all 

blocks of the Uniform Report to include 

the definition of ‘‘joint venture’’ as 

defined in § 23.3 as a new participation 

category and provides directions on 

how to count ACDBE participation 

derived from joint ventures. 

Blocks #10 and #11 Reporting of 

ACDBEs Owned by Members of Different 

Socially Disadvantaged Groups 

The Uniform Report does not provide 

for the reporting of ACDBEs owned by 

multiple partners who are from different 

groups whose members are presumed 

socially and economically 

disadvantaged (SED). Block #10 

instructs recipients to break down the 

cumulative ACDBE participation figures 

from blocks #5 and #8 by race and 

gender categories. The data reported 

under block #10 only permits reporting 

of firms by race and gender by one 

group whose members are presumed 

SED. Block #10 does provide a column 

for ‘‘other,’’ but this is used to report 

participation by individuals who are 

found disadvantaged on an 

individualized basis. 

To enhance the accuracy of 

participation reported in the Uniform 

Report, the Department proposes to 

amend the requirements under block 

#11 in the Uniform Report to allow for 

participation to be reported by ACDBEs 

that are owned by multiple individuals 

of different races, ethnicities, and/or 

genders. 

42. Technical Corrections 

In addition to substantive proposed 

changes to part 23, the Department is 

proposing a number of technical 

amendments. These amendments fall 

into the following categories: (1) 

additions and amendments to make 

provisions in part 23 consistent with the 

provisions of Part 26; (2) additions or 

amendments to provisions to clarify 

existing requirements in part 23; and (3) 

corrections of typographical errors, and 

revisions to obsolete and/or duplicative 

provisions, and cross-references within 

the regulation. Some of these proposed 

technical amendments to part 23 are 

discussed below. 

Obsolete Dates in § 23.31 

Regulatory changes instituted in 2005 

direct airports or UCPs to review the 

eligibility of ACDBEs to make sure that 

they met the eligibility standards of part 

23. More specifically, § 23.31(c)(1) and 

(2) direct airports or UCPs to complete 

these eligibility reviews by no later than 

April 21, 2006, or three years from the 

anniversary date of each firm’s recent 

certification. Additionally, recipients 

are obligated by these regulations to 

direct DBEs to submit by April 21, 2006, 

a PNW statement, a certification of 

disadvantage, and a No Change 

Affidavit. 

These deadlines have expired. In 

addition, the date is confusing, 

especially to participants new to the 

ACDBE Program. Section 23.31(c)(1) 

and (2) was promulgated in 2005 to 

account for new PNW criteria instituted 

in 2005, triggering the need to review 

certified firms to ascertain their PNW. 

During the 17 years following the 

adoption of the 2005 regulation, there 

has been ample time for review of PNW 

standards. In addition, § 26.83(h) 

through (j), made applicable by 

§ 23.31(a), provides for certification 

reviews of DBEs, annual certification of 

disadvantage, and notification of 

changes regarding circumstances 

affecting certification, including size 

and PNW standards. Hence, § 23.31(c) is 

unnecessary and the Department 

recommends deleting it. 

Uniform Certification Application 

(UCA) Inconsistencies 

The current § 23.39(g) which would 

become paragraph (f) under the above 

proposed redesignation, requires UCPs 

to use the UCA to certify firms for the 

ACDBE Program. However, the language 

of § 23.39(g) is inconsistent with 

§ 26.83(c)(2), made applicable to part 23 

by § 23.31. In addition, § 23.39(g) is 

inconsistent with the revised UCA that 

the Department published in 2019. The 

proposed rule would therefore delete 

§ 23.39(g)(1) through (3) and revise 

§ 23.39 to be consistent with 

§ 26.83(c)(2) and the revised UCA. 

Enhanced Consistency with Part 26 

Sections 23.39(a) and 26.83(c)(1) 

detail the requirements for determining 

the eligibility of firms for the ACDBE 

and DBE programs. The introductory 

text in paragraph (a) of § 23.39 lists by 

reference several provisions in 

§ 26.83(c) that are not to be applied to 

part 23; the provisions that are not 

specifically excluded remain applicable 

to part 23 via § 23.31(a). 

Notwithstanding slight differences 

between part 23 and part 26 

certification, all of the requirements of 

§ 26.83(c)(1)(i) through (viii) generally 

apply to part 23 certification, but 

various modifications to the crossreferences make § 23.39 difficult to 

follow as written. To address this, the 

Department proposes to simplify the 

rule by excluding all of the provisions 

of § 26.83(c)(1)(i) through (viii) and 

stating each of those requirements in 

§ 23.39(a) in a manner that is consistent 

with the ACDBE Program. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43661 

44See ‘‘DOT Order 2100.6A, Rulemaking and 

Guidance Procedures’’ available at https://

www.transportation.gov/sites/dot.gov/files/2021-06/ DOT-2100.6A-Rulemaking-and-Guidance- 

%28003%29.pdf. 

Regulatory Analyses And Notices 

A. Executive Order: 12866 (‘‘Regulatory 

Planning and Review’’), Executive Order 

13563 (‘‘Improving Regulation and 

Regulatory Review’’), and DOT 

Regulatory Policies and Procedures (49 

CFR Parts 23, 26) 

The proposed rule is not a significant 

regulatory action under Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ as supplemented by Executive 

Order 13563, ‘‘Improving Regulation 

and Regulatory Review.’’ Accordingly, 

OMB has not reviewed it under that 

Executive order. It is also not significant 

under the Department’s regulatory 

policies and procedures.44

The proposed rule would amend 

reporting and eligibility requirements 

for the Department’s Airport Concession 

Disadvantaged Business Enterprises 

(ACDBE) program and Disadvantaged 

Business Enterprise (DBE) program. 

These programs are implemented and 

overseen by recipients of certain 

Department funds. The changes to the 

proposed rule would affect businesses 

participating in the programs, recipients 

of Department funds who oversee the 

programs, and the Department. 

The Department conducted a 

regulatory impact analysis, available in 

the docket, to assess the effects of the 

proposed rule. Businesses, recipients, 

and the Department would incur some 

costs due to increased reporting 

requirements. At the same time, they 

would experience cost savings overall 

because the rule would relax 

requirements—for example, by allowing 

recipients to conduct virtual on-site 

visits—and clarify regulations. 

Table 1 summarizes the estimated 

costs and cost savings of the rule over 

a ten-year analysis period. The rule has 

annualized net cost savings of $6.2 

million at a 3 percent discount rate and 

$6.1 million at a 7 percent discount rate. 

DOT requests comment on the 

assumptions made and conclusions 

drawn in the regulatory impact analysis. 

TABLE 1—COSTS AND COST SAVINGS OF THE PROPOSED RULE, 10-YEAR PERIOD

[Rounded to thousands] 

Undiscounted Present value 3% Annualized 3% Present value 7% Annualized 7% 

Total cost savings .................................. 202,778,000 177,991,000 20,865,000 152,057,000 21,649,000 

Total cost ............................................... 140,623,000 125,153,000 14,672,000 108,953,000 15,513,000 

Net cost savings .................................... 62,155,000 52,838,000 6,193,000 43,104,000 6,136,000 

B. Executive Order 13132 

(‘‘Federalism’’) 

This proposed rule has been analyzed 

in accordance with the principles and 

criteria contained in Executive Order 

13121 (‘‘Federalism’’). It would not 

include any provision that: (1) has 

substantial direct effects on the states, 

the relationship between the National 

Government and the states, or the 

distribution of power and the 

responsibilities among the various 

levels of government; (2) imposes 

substantial direct compliance costs on 

state and local governments; or (3) 

preempts state law. The DBE and 

ACDBE programs are governed by 

Federal regulations 49 CFR parts 26 and 

23. Therefore, the consultation and 

funding requirements of Executive 

Order 13132 do not apply. 

C. Executive Order 13084 (‘‘Tribal 

Consultation and Coordination’’) 

This rulemaking has been analyzed in 

accordance with the principles and 

criteria contained in Executive Order 

13084 (‘‘Consultation and Coordination 

with Indian Tribal Governments’’). 

Because this rulemaking does not 

significantly or uniquely affect the 

communities of the Indian Tribal 

governments or impose substantial 

direct compliance costs on them, the 

funding and consultation requirements 

of Executive Order 13084 do not apply. 

D. Unfunded Mandates Reform Act 

The Department has determined that 

the requirements of the Title II of the 

unfunded Mandates Reform Act of 1995 

do not apply to this rulemaking. 

E. National Environmental Policy Act 

The Department has analyzed the 

environmental impacts of this action 

pursuant to the National Environmental 

Policy Act of 1969 (NEPA) (42 U.S.C 

4321 et seq.) and has determined that it 

is categorically excluded pursuant to 

DOT Order 5610.1C, Procedures for 

Considering Environmental Impacts (44 

FR 56420, Oct. 1, 1979). Categorical 

exclusions are actions identified in an 

agency’s NEPA implementing 

procedures that do not normally have a 

significant impact on the environment 

and therefore do not require either an 

environmental assessment (EA) or 

environmental impact statement (EIS). 

The purpose of this rulemaking is to 

amend the Department’s DBE and 

ACDBE regulations. Paragraph 4(c)(5) of 

DOT Order 5610.1C incorporates by 

reference the categorical exclusions for 

all DOT Operating Administrations. 

This action is covered by the categorical 

exclusion listed in the Federal Transit 

Administration’s implementing 

procedures, ‘‘[p]lanning and 

administrative activities that do not 

involve or lead directly to construction, 

such as: . . . promulgation of rules, 

regulations, directives. . .’’ 23 CFR 

771.118(c)(4). In analyzing the 

applicability of a categorical exclusion, 

the agency must also consider whether 

extraordinary circumstances are present 

that would warrant the preparation of 

an EA or EIS. The Department does not 

anticipate any environmental impacts, 

and there are no extraordinary 

circumstances present in connection 

with this rulemaking. 

F. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 

1980, as amended, (5 U.S.C. 601 et seq.) 

and E.O. 13272 (67 FR 53461, Aug. 16, 

2002) requires agency review of 

proposed and final rules to assess their 

impacts on small entities. An agency 

must prepare an Initial Regulatory 

Flexibility Analysis (IRFA) unless it 

determines and certifies that a rule, if 

issued, would not have a significant 

economic impact on a substantial 

number of small entities. DOT has not 

determined whether the NPRM would 

have a significant economic impact on 

a substantial number of small entities. 

The Department prepared an IRFA as 

part of the Department’s regulatory 

impact analysis (appendix C of the 

regulatory impact analysis), available in 

the docket. DOT invites all interested 

parties to submit data and information 

regarding the potential economic impact 

on small entities that would come from 

promulgating the NPRM. DOT will 

consider all information and comments 


lotter on DSK11XQN23PROD with PROPOSALS2

I I 
43662 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

45A ‘‘collection of information’’ is defined as ‘‘the 

obtaining, causing to be obtained, soliciting, or 

requiring the disclosure to an agency, requiring the 

disclosure to an agency, third parties or the public 

of information by or for an agency by means of 

identical questions posed to, or identical reporting, 

recordkeeping, or disclosure requirements imposed 

on, ten or more persons.’’ 5 CFR 1320.3(c)(1). The 

activities that constitute the ‘‘burden’’ associated 

with a collection are defined in 5 CFR 1320.3(b)(1) 

as ‘‘the total time, effort, or financial resources 

expended by persons to generate, maintain, retain, 

or disclose or provide information to or for a 

Federal agency.’’ 

46The instruments are the Uniform Report of DBE 

Awards or Commitments and Payments, Uniform 

Certification Application, Annual Affidavit of No 

Change, Personal Net Worth Statement, and 

Percentages of DBEs in Various Categories. 

47For part 23 recipient wage rates, the 

Department calculated the total annual cost burden 

by multiplying the total annual burden hours (56 

hours × 396 respondents) against the fully loaded 

state government wage rate taken from Bureau of 

Labor and Statistics’ (BLS) estimate of median 

wages for employees in ‘‘Management 

Occupations’’ (SOC 11–000) working in ‘‘State 

Government, excluding schools and hospitals’’ 

(NAICS 999200) at https://www.bls.gov/oes/current/ 

naics4_999200.htm#11-0000. The wage rate 

($44.66/hour) is multiplied by 1.62 to get a fully 

loaded wage rate (compensation rate) or $72.35 to 

account for the cost of employer provided benefits. 

For part 26, recipient staff hourly wage rate is taken 

from the BLS estimate of an Eligibility Interviewer 

in Government Programs (OEWS Designation). The 

wage rate is multiplied by 1.62 to get a fully loaded 

hourly wage rate of $34.77 to account for the cost 

of employer provided benefits. For state and local 

government workers, wages represent 61.9% of total 

compensation in 2020, therefore the multiplier is 

1.62 (1/0.619). 

received in the public comment process 

when preparing the Final Regulatory 

Flexibility Analysis. 

G. Paperwork Reduction Act 

The Paperwork Reduction Act (PRA) 

of 1995 (Pub. L. 104–13, 49 U.S.C. 3501, 

3507) requires Federal agencies to 

obtain approval from the Office of 

Management and Budget (OMB) before 

undertaking a new collection of 

information imposed on ten or more 

persons, or continuing a collection 

previously approved by OMB that is set 

to expire.45 On March 1, 2022, OMB 

renewed its approval of five information 

collection instruments that were 

previously approved in 2018 (OMB 

Control No. 2105–0510).46 Nonetheless, 

the Department is resubmitting them to 

OMB because the proposed rule 

modifies, and in some cases, reduces 

PRA burdens. On March 10, 2022, OMB 

took under consideration the 

Department’s request for an OMB 

Control Number for 17 additional part 

26 information collection instruments 

that had not previously been submitted 

for approval (ICR Reference No: 

202203–2105–001). On April 27, 2022, 

OMB took under consideration the 

Department’s request for an OMB 

Control Number for part 23 collection 

instruments that had not previously 

been submitted for approval (ICR 

Reference No: 202204–2120–002). 

This proposed rule would add new 

collection instruments as well as modify 

existing collection instruments in both 

parts 23 and 26. The following is a 

description of the sections that contain 

new and modified information 

collection requirements, along with the 

estimated hours and cost to fulfill 

them.47

1. ACDBE Small Business Element (New 

Requirement) 

CFR Section: 49 CFR 23.26. 

Respondents: Primary airports. 

Number of respondents: 396. 

Frequency: Once each year. 

Number of responses: 396. 

Hours per response: 5.6 hours. 

Wage rate: $72.35/hour. 

Total annual burden: 14,097.6 hours 

and $1,019,961.36. 

2. ACDBE Active Participants List (New 

Requirement) 

CFR Section: 49 CFR 23.27(c). 

Respondents: Primary airports and 

ACDBE and non-ACDBEs that seek to 

work on concession opportunities. 

Number of respondents: 396 primary 

airports; 3,945 ACDBE and nonACDBEs. 

Frequency: once each year. 

Number of responses: 396 primary 

airports; 3,945 ACDBE and nonACDBEs. 

Hours per response: 42 hours per 

primary airport; .5 hours per ACDBE 

and non-ACDBE firm. 

Wage rate: $72.35/hour. 

Total annual burden: 16,632 hours 

and $1,203,325.20 for primary and nonhub airports; 1,972.5 hours and $0 for 

ACDBE and non-ACDBEs. 

3. ACDBE Annual Report of Percentages 

of ACDBEs in Various Categories (New 

Requirement) 

CFR Section: 49 CFR 23.27(d). 

Respondents: 49 state departments of 

transportation, District of Columbia, and 

Puerto Rico. 

Number of respondents: 51. 

Frequency: once each year. 

Number of responses: 51. 

Hours per response: 3.2. 

Wage rate: $72.35/hour. 

Total annual burden: 161.6 hours and 

$11,807.52. 

4. Counting of ACDBE Participation 

Following Eligibility Removal (§ 23.55) 

(New Requirement) 

Respondents: ACDBE firms. 

Number of respondents: 1,233. 

Frequency: once each year. 

Number of responses: 1,233. 

Total annual burden: 25,276.5 hours 

and $1,259,528. 

5. Long-Term Exclusive Agreements 

(§ 23.75) (Modification of Existing 

Requirement) 

Proposed modification: Amend and/ 

or remove LTE requirements for 

documentation and information that are 

unclear, not feasible, or pertinent. 

Respondents: Recipients of FAA 

airport development grants. 

Number of respondents: 7. 

Frequency: once. 

Number of responses: 7. 

Total annual burden: 35.09 hours and 

$2,130.23. 

6. Personal Net Worth Statement 

(Modification of Existing Requirement) 

Proposed modification: Remove the 

requirement for firms to report their 

retirement assets, thus reducing the 

hours and cost burden of completing the 

form. 

CFR Section: Appendix G of 49 CFR 

part 26. 

Respondents: DBE and ACDBE 

certification applicants. 

Number of respondents: 9,500. 

Frequency: once each year. 

Number of responses: 9,500. 

Hours per response: 8. 

Wage rate: There is no applicable 

wage rate because there is no 

standardized way in which firms 

operate and how they pay their 

employees and/or contractors It is not 

possible for DOT to contact firms for 

estimates. 

Total annual burden: 76,000 hours. 

7. Uniform Certification Application 

(UCA) (Modification of Existing 

Requirement) 

Proposed modification: Add clarifying 

instructions and terminology to assist 

applicants in filling out the application, 

thereby reducing the hours and cost 

burdens of completing it. 

CFR Section: Appendix F of 49 CFR 

part 26. 

Respondents: DBE and ACDBE 

certification applicants. 

Number of respondents: 9,500. 

Frequency: once. 

Number of responses: 9,500. 

Hours per response: 35. 

Wage rate: There is no applicable 

wage rate because there is no 

standardized way in which firms 

operate and how they pay their 

employees or contractors It is not 

possible for DOT to contact firms for 

estimates. 

Total annual burden: 332,500 hours. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43663 

8. Declaration of Eligibility (Currently 

Titled ‘‘Annual No Change Affidavit’’) 

(Modification of Existing Requirement) 

Proposed modification: Eliminate the 

notarization requirement, thus reducing 

the hours and cost burden of completing 

and submitting the form. 

CFR Section: 49 CFR 26.83(j). 

Respondents: DBE and ACDBE firms. 

Number of respondents: 45,525. 

Frequency: once each year. 

Number of responses: 45,525. 

Hours per response: .5 hour (30 

minutes). 

Wage rate: There is no applicable 

wage rate because there is no 

standardized way in which firms 

operate and how they pay their 

employees or contractors It is not 

possible for DOT to contact firms for 

estimates. 

Total annual burden: 22,762 hours. 

9. Maintaining Bidders Lists 

(Modification of Existing Requirement) 

Proposed modification: Recipients 

would obtain additional data sets and 

enter all bidders list information into a 

centralized database. 

CFR Section: 49 CFR 26.11(c). 

Respondents: DOT funding recipients. 

Number of respondents: 1,198. 

Frequency: 3 times per year. 

Number of responses: 3,594. 

Hours per response: 8. 

Wage rate: $34.77. 

Total annual burden: 86,256 hours 

and $2,999,121.12. 

10. Reporting Percentages of DBEs in 

Various Categories (MAP–21 Data 

Report) (Modification of Existing 

Requirement) 

Proposed modification: Expand data 

collection to cover the number of firms 

denied certification, summarily 

suspended, or decertified. The data 

would be disaggregated by ethnicity, 

gender, and the number of prequalified 

certified firms in each North American 

Industry Classification System (NAICS) 

code. 

CFR Section: 49 CFR 26.11(e). 

Respondents: state departments of 

transportation, District of Columbia, and 

Puerto Rico. 

Number of respondents: 52. 

Frequency: once per year. 

Number of responses: 52. 

Hours per response: 315. 

Wage rate: $34.77. 

Total annual burden: 16,380 hours 

and $569,532.60. 

11. Updating and Maintaining State 

Directories of DBEs and ACDBEs 

(Modification of Existing Requirement) 

Proposed modifications: Eliminate the 

requirement of publishing printed 

directories. Add additional information 

fields to the directories. 

CFR Section: 49 CFR 26.31 and 

26.81(g). 

Respondents: Certifying agencies of 

DOT funding recipients. 

Number of respondents: 132. 

Frequency: Each respondent does this 

12 times each year. 

Number of responses: 1,584. 

Hours per response: 2. 

Wage rate: $34.77. 

Total annual burden: 38,016 hours 

and $1,321,816.32. 

12. DBE Performance Plan (New 

Requirement) 

CFR Section: 49 CFR 26.53(e). 

Respondents: Recipients of FHWA 

funds that let design-build contracts. 

Number of respondents: 50. 

Frequency: 15 times each year. 

Number of responses: 750. 

Hours per response: 3. 

Wage rate: $34.77. 

Total annual burden: 33,750 hours 

and $1,173,487.50. 

13. Mailing and Maintaining Copies of 

Notices of Summary Suspension 

(Modification of Existing Requirement) 

Proposed modification: Remove the 

requirement for sending notices of 

summary suspension by mail and allow 

respondents to send the notices by 

email. 

CFR Section: 49 CFR 26.88. 

Respondents: Certifying agencies of 

DOT funding recipients. 

Number of respondents: 132. 

Frequency: 5 times each year. 

Number of responses: 660. 

Hours per response: .25 hours (15 

minutes). 

Wage rate: $34.77. 

Total annual burden: 165 hours and 

$5,737.05. 

14. Uniform Report of DBE Awards or 

Commitments and Payments 

(Modification of Existing Requirement) 

Proposed modification: Recipients 

would fill out 10 additional data fields. 

CFR Section: 49 CFR 26.11(a). 

Respondents: DOT funding recipients. 

Number of respondents: 1,198. 

Frequency: once each year. 

Number of responses: 1,198. 

Hours per response: 317. 

Wage rate: $34.77. 

Total annual burden: 377,370 hours 

and $11,022. 

Pursuant to 44 U.S.C 3506(c)(2)(B), 

DOT solicits comments about the 

accuracy of the hours and costs burden 

estimates. Comments should be 

submitted to Walter Bohorfoush, 

Supervisory Information Technology 

Specialist, Office of the Chief 

Information Officer, Department of 

Transportation, at 202–366–0560 or 

Walter.Bohorfoush@dot.gov or to Joseph 

Nye, Office of the Secretary Desk 

Officer, Office of Management and 

Budget, at Joseph.B.Nye@omb.eop.gov. 

The Office of Management and Budget 

(OMB) is required to make a decision 

concerning the collection of information 

requirements contained in this proposed 

rule between 30 and 60 days after 

publication of this document in the 

Federal Register. Therefore, a comment 

to OMB is best assured of having its full 

effect if OMB receives it within 30 days 

of publication. The final rule will 

respond to any OMB or public 

comments on the information collection 

requirements contained in this proposal. 

List of Subjects in 49 CFR Parts 23 and 

26 

Administrative practice and 

procedure, Airports, Civil rights, 

Government contracts, Grant 

programs—transportation, Mass 

transportation, Minority businesses, 

Reporting and recordkeeping 

requirements. 

Issued on July 5, 2022, in Washington, DC. 

Peter Paul Montgomery Buttigieg, 

Secretary of Transportation. 

For the reasons set forth in the 

preamble, the Department of 

Transportation proposes to amend 49 

CFR parts 23 and 26 as follows: 

PART 23—PARTICIPATION OF 

DISADVANTAGED BUSINESS 

ENTERPRISE IN AIRPORT 

CONCESSIONS 

■ 1. Revise the authority citation for part 

23 to read as follows: 

Authority: 49 U.S.C. 47107; 42 U.S.C. 

2000d; 49 U.S.C. 322; E.O. 12138, 44 FR 

29637, 3 CFR, 1979 Comp., p. 393. 

■ 2. In part 23, remove ‘‘a ACDBE’’ 

wherever the term appears and add in 

its place ‘‘an ACDBE’’. 

■ 3. Amend § 23.1 by: 

■ a. In paragraph (e), removing the word 

‘‘and’’ at the end of the paragraph. 

■ b. Redesignating paragraph (f) as 

paragraph (h). 

■ c. Adding new paragraph (f) and 

paragraph (g). 

The additions read as follows: 

§ 23.1 What are the objectives of this part? 

* * * * * 

(f) To promote the use of ACDBEs in 

all types of concessions activities at 

airports receiving DOT financial 

assistance; 

(g) To assist the development of firms 

that can compete successfully in the 


lotter on DSK11XQN23PROD with PROPOSALS2
43664 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

marketplace outside the ACDBE 

program; and 

* * * * * 

■ 4. Amend § 23.3 by: 

■ a. Removing ‘‘13 CFR 121.103(f)’’ in 

the definition of Affiliation and adding 

in its place ‘‘13 CFR 121.103(h).’’ 

■ b. Removing the phrase ‘‘a concession 

that’’ from the introductory text in the 

definition of Airport Concession 

Disadvantaged Business Enterprise 

(ACDBE) and adding in its place ‘‘a firm 

seeking to operate as a concession that.’’ 

■ c. Adding the definitions of Alaska 

Native and Assets in alphabetical order. 

■ d. In the definition of Concession: 

■ i. In the introductory text, adding the 

phrase ‘‘that serve the traveling public’’ 

after ‘‘the types of for-profit businesses.’’ 

■ ii. Adding the phrase ‘‘traveling’’ after 

‘‘sale of consumer goods or services to 

the’’ in paragraph (1). 

■ e. Adding the definitions of 

Contingent liability and Days in 

alphabetical order. 

■ f. Removing the definition 

Department (DOT) and adding the 

definition Department or DOT in its 

place. 

■ g. Adding the definition of Home 

State in alphabetical order. 

■ h. Removing the phrase ‘‘or registered 

domestic partner’’ from the definition of 

Immediate family member and adding 

in its place ‘‘and domestic partner and 

civil unions recognized under State 

law.’’ 

■ i. Adding the definitions of Liabilities 

and Operating Administration or OA in 

alphabetical order. 

■ j. Revising the definitions of Part 26 

and Personal net worth. 

■ k. Removing the definition of Primary 

recipient. 

■ l. Moving the definition of Recipient 

into alphabetical order and revising the 

definition. 

■ m. Revising the introductory text and 

paragraphs (1) and (2)(iii) and (iv) in the 

definition of Socially and economically 

disadvantaged individual. 

■ n. Adding the definitions of 

Subconcession or subcontractor and 

Sublease in alphabetical order. 

The revisions and additions read as 

follows: 

§ 23.3 What do the terms used in this part 

mean? 

* * * * * 

Alaska Native means a citizen of the 

United States who is a person of onefourth degree or more Alaskan Indian 

(including Tsimshian Indians not 

enrolled in the Metlakatla Indian 

Community), Eskimo, or Aleut blood, or 

a combination of those bloodlines. The 

term includes, in the absence of proof of 

a minimum blood quantum, any citizen 

whom a Native village or Native group 

regards as an Alaska Native if their 

father or mother is regarded as an 

Alaska Native. 

* * * * * 

Assets mean all the property of a 

person available for paying debts or for 

distribution, including one’s respective 

share of jointly held assets. This 

includes, but is not limited to, cash on 

hand and in banks, savings accounts, 

individual retirement account (IRA) or 

other retirement accounts, accounts 

receivable, life insurance, stocks and 

bonds, real estate, and personal 

property. 

* * * * * 

Contingent liability means a liability 

that depends on the occurrence of a 

future and uncertain event. This 

includes, but is not limited to, guaranty 

for debts owed by the applicant firm, 

legal claims and judgments, and 

provisions for Federal income tax. 

Days means calendar days. In 

computing any period of time described 

in this part, the day from which the 

period begins to run is not counted, and 

when the last day of the period is a 

Saturday, Sunday, or Federal holiday, 

the period extends to the next day that 

is not a Saturday, Sunday, or Federal 

holiday. Similarly, in circumstances 

where the recipient’s offices are closed 

for all or part of the last day, the period 

extends to the next day on which the 

agency is open. 

Department or DOT means the U.S. 

Department of Transportation, including 

the Office of the Secretary. 

* * * * * 

Home State means the state in which 

an ACDBE firm or applicant for ACDBE 

certification maintains its principal 

place of business. 

* * * * * 

Liabilities mean financial or 

pecuniary obligations. This includes, 

but is not limited to, accounts payable, 

notes payable to bank or others, 

installment accounts, mortgages on real 

estate, and unpaid taxes. 

* * * * * 

Operating Administration or OA 

means any of the following: Federal 

Aviation Administration (FAA), Federal 

Highway Administration (FHWA), and 

Federal Transit Administration (FTA). 

The ‘‘Administrator’’ of an OA includes 

his or her designees. 

Part 26 means 49 CFR part 26, DOT’s 

Disadvantaged Business Enterprise 

Program regulation. 

Personal net worth or PNW has the 

same meaning the term has in 49 CFR 

part 26. 

* * * * * 

Recipient is any entity, public or 

private, to which DOT financial 

assistance is extended, whether directly 

or through another recipient, through 

the programs of the FAA, FHWA, or 

FTA, or who has applied for such 

assistance. 

* * * * * 

Socially and economically 

disadvantaged individual means any 

individual who is a citizen (or lawfully 

admitted permanent resident) of the 

United States and has been subjected to 

racial or ethnic prejudice or cultural 

bias within American society because of 

his or her identity as a member of a 

certain group and without regard to his 

or her individual qualities. The social 

disadvantage must stem from 

circumstances beyond the individual’s 

control. Socially and economically 

disadvantaged individuals include: 

(1) Any individual determined by a 

recipient to be a socially and 

economically disadvantaged individual 

on a case-by-case basis. An individual 

must demonstrate that he or she has 

held himself or herself out, as a member 

of a designated group if you require it. 

(2) * * * 

(iii) ‘‘Native Americans,’’ which 

includes persons who are enrolled 

members of a federally or state 

recognized Indian tribe, Alaska Natives, 

or Native Hawaiians. 

(iv) ‘‘Asian-Pacific Americans,’’ 

which includes persons whose origins 

are from Japan, China, Taiwan, Korea, 

Burma (Myanmar), Vietnam, Laos, 

Cambodia (Kampuchea), Thailand, 

Malaysia, Indonesia, the Philippines, 

Brunei, Samoa, Guam, the U.S. Trust 

Territories of the Pacific Islands 

(Republic of Palau), the Commonwealth 

of the Northern Marianas Islands, 

Macao, Fiji, Tonga, Kiribati, Tuvalu, 

Nauru, Federated States of Micronesia, 

or Hong Kong. 

Subconcession or subcontractor 

means a firm that has a sublease or other 

agreement with a prime concessionaire, 

rather than with the airport itself, to 

operate a concession at the airport. 

Sublease means a lease by a lessee 

(tenant) to a sublessee (subtenant). 

Sublease is an example of a direct 

ownership arrangement in which the 

concessionaire operates a concession 

location at the airport. Under a sublease 

arrangement, the subtenant is 

responsible for the full operation of the 

concession and all requirements 

applicable to that concession under the 

master lease including proportionate 

share of the rent, and owns and controls 

the concession. 

* * * * * 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43665 

§ 23.13 [Amended] 

■ 5. Amend § 23.13 by: 

■ a. In paragraph (b), removing ‘‘of’’ that 

appears after the word 

‘‘interpretations.’’ 

■ b. In paragraph (d) introductory text, 

removing the phrase ‘‘are for the 

purpose of authorizing’’ and adding in 

its place the word ‘‘authorize.’’ 

§ 23.21 [Amended] 

■ 6. Amend § 23.21 by: 

■ a. In paragraph (a) introductory text, 

removing the word ‘‘revisesd’’ and add 

in its place the word ‘‘revised.’’ 

■ b. In paragraph (b), removing the term 

‘‘a DBE concessions’’ and add in its 

place ‘‘an ACDBE’’. 

■ c. In the second sentence of paragraph 

(c), removing the phrase ‘‘If you do so,’’ 

and add in its place the word 

‘‘However,’’. 

■ 7. Amend § 23.25 by: 

■ a. In paragraph (d)(3), removing the 

words ‘‘so as’’ after the word 

‘‘activities’’ and adding a semicolon at 

the end of the sentence. 

■ b. Revising paragraphs (e) and (f). 

The revisions read as follows: 

§ 23.25 What measures must recipients 

include in their ACDBE programs to ensure 

nondiscriminatory participation of ACDBEs 

in concessions? 

* * * * * 

(e) Your ACDBE program must also 

provide for the use of race-conscious 

measures when race-neutral measures, 

standing alone, are not projected to be 

sufficient to meet an overall goal. The 

following are examples of raceconscious measures you can implement: 

(1) Establishing concession-specific 

goals for particular concession 

opportunities. 

(i) In setting concession-specific goals 

for concession opportunities other than 

car rental, you are required to explore, 

to the maximum extent practicable, all 

available options to set goals that 

concessionaires can meet through direct 

ownership arrangements. A concessionspecific goal for any concession other 

than car rental may be based on 

purchases or leases of goods and 

services only when the analysis for the 

relative availability of ACDBEs and all 

relevant evidence reasonably supports 

that proposition. 

(ii) In setting car rental concessionspecific goals, you cannot require a car 

rental company to change its corporate 

structure to provide for participation via 

direct ownership arrangement. When 

your overall goal for car rental 

concessions is based on purchases or 

leases of goods and services, you are not 

required to explore options for direct 

ownership arrangements prior to setting 

a car rental concession-specific goal 

based on purchases or leases of goods 

and services. 

(iii) If the objective of the concessionspecific goal is to obtain ACDBE 

participation through a direct 

ownership arrangement with an ACDBE, 

calculate the goal as a percentage of the 

total estimated annual gross receipts 

from the concession. 

(iv) If the goal applies to purchases or 

leases of goods and services, calculate 

the goal by dividing the estimated dollar 

value of such purchases or leases from 

ACDBEs by the total estimated dollar 

value of all purchases to be made by the 

concessionaire. 

(v) To be eligible to be awarded the 

concession, competitors must make 

good faith efforts to meet this goal. A 

competitor may do so either by 

obtaining enough ACDBE participation 

to meet the goal or by documenting that 

it made sufficient good faith efforts to 

do so. 

(vi) The administrative procedures 

applicable to contract goals in part 26, 

§§ 26.51 through 26.53, apply with 

respect to concession-specific goals. 

(2) Negotiation with a potential 

concessionaire to include ACDBE 

participation, through direct ownership 

arrangements or measures, in the 

operation of the non-car rental 

concession. 

(3) With the prior approval of FAA, 

other methods that take a competitor’s 

ability to provide ACDBE participation 

into account in awarding a concession. 

(f) Your ACDBE program must require 

businesses subject to car rental and noncar rental ACDBE goals at the airport to 

make good faith efforts to meet goals 

when set pursuant to paragraph (e) of 

this section. 

* * * * * 

■ 8. Add § 23.26 to read as follows: 

§ 23.26 Fostering small business 

participation. 

(a) Your ACDBE program must 

include an element to provide for the 

structuring of concession opportunities 

to facilitate competition by small 

business concerns, taking all reasonable 

steps to eliminate obstacles to their 

participation, including unnecessary 

and unjustified bundling of concession 

opportunities that may preclude small 

business participation in solicitations. 

(b) This element must be submitted to 

the FAA for approval as a part of your 

ACDBE program. As part of this 

program element you may include, but 

are not limited to including, the 

following strategies: 

(1) Establish a race-neutral small 

business set-aside for certain concession 

opportunities. Such a strategy would 

include the rationale for selecting small 

business set-aside concession 

opportunities which may include 

consideration of size and availability of 

small businesses to operate the 

concession. 

(2) Consider the concession 

opportunities available through all 

concession models, including but not 

limited to direct leasing, third party 

developer, and leasing manager. 

(3) On concession opportunities that 

do not include ACDBE contract goals, 

require prime concessionaires to 

provide subleasing opportunities of a 

size that small businesses, including 

ACDBEs, can reasonably operate. 

(4) Identify alternative concession 

contracting approaches to facilitate the 

ability of small businesses, including 

ACDBEs, to compete for and obtain 

direct leasing opportunities. 

(c) This element should include an 

objective, definition of small business, 

verification process, monitoring plan, 

implementation timeline, and required 

assurances. 

(d) A state, local or other program, in 

which eligibility requires satisfaction of 

race/gender or other criteria in addition 

to business size, may not be used to 

comply with the requirements of this 

part. 

(e) This element must not include 

local geographic preferences per § 23.79. 

(f) You must submit an annual report 

on small business participation obtained 

through the use of your small business 

element. This report must be submitted 

in a format acceptable to the FAA based 

on a schedule established and posted to 

the agency’s website, available at 

https://www.faa.gov/about/office_org/ 

headquarters_offices/acr/bus_ent_

program. 

(g) You must actively implement your 

program elements to foster small 

business participation. Doing so is a 

requirement of good faith 

implementation of your ACDBE 

program. 

■ 9. Amend § 23.27 by revising 

paragraph (b) and adding paragraphs (c) 

and (d) to read as follows: 

§ 23.27 What information does a recipient 

have to retain and report about 

implementation of its ACDBE program? 

* * * * * 

(b) You must submit an annual report 

on ACDBE participation to the FAA by 

March 1 following the end of each fiscal 

year. This report must be submitted in 

the format acceptable to the FAA and 

contain all of the information described 

in the Uniform Report of ACDBE 

Participation. 

(c) You must create and maintain 

active participants list information as 


lotter on DSK11XQN23PROD with PROPOSALS2
43666 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

described in paragraph (c)(2) of this 

section and enter it into a system 

designated by the FAA. 

(1) The purpose of this active 

participants list is to ensure that you 

have the most accurate data possible 

about the universe of ACDBE and nonACDBEs who seek work in your airport 

concessions program as a tool to help 

you set your overall goals and, to 

provide the Department with data for 

evaluating the extent to which the 

objectives of § 23.1 are being achieved. 

(2) You must obtain the following 

active participant list information about 

ACDBE and non-ACDBEs who seek to 

work on each of your concession 

opportunities. 

(i) Firm name; 

(ii) Firm address including zip code; 

(iii) Firm status as an ACDBE or nonACDBE; 

(iv) Race and gender information for 

the firm’s majority owner; 

(v) NAICS code applicable to each 

scope of work the firm sought to 

perform in its proposal; 

(vi) Age of the firm; and 

(vii) The annual gross receipts of the 

firm. You may obtain this information 

by asking each firm to indicate into 

what gross receipts bracket they fit (e.g., 

less than $1 million; $1–3 million; $3– 

6 million; $6–10 million, etc.) rather 

than requesting an exact figure from the 

firm. 

(3) You must collect the data from all 

active participants for your concession 

opportunities by requiring the 

information in paragraph (c)(2) of this 

section to be submitted with their 

proposals or initial responses to 

negotiated procurements. You must 

enter this data in FAA’s designated 

system no later than December 1 

following the fiscal year in which the 

relevant concession opportunity was 

awarded. 

(d) The state department of 

transportation in each Unified 

Certification Program (UCP) established 

pursuant to 49 CFR 26.81 must report to 

DOT’s Departmental Office of Civil 

Rights, by January 1st each year, the 

information in the UCP directory: 

(1) Number and percentage of in-state 

and out-of-state ACDBE certifications 

for socially and economically 

disadvantaged by gender and ethnicity 

(Black American, Asian-Pacific 

American, Native American, Hispanic 

American, Subcontinent-Asian 

Americans, and non-minority); 

(2) Number of ACDBE certification 

applications received from in-state and 

out-of-state firms and the number found 

eligible and ineligible; 

(3) Number of in-state and out-of-state 

ACDBEs decertified and/or summarily 

suspended; 

(4) Number of in-state and out-of-state 

ACDBE applications received for an 

individualized determination of social 

and economic disadvantage status; and 

(5) Number of in-state and out-of-state 

ACDBEs whose owner(s) made an 

individualized showing of social and 

economic disadvantaged status. 

§ 23.31 [Amended] 

■ 10. Amend § 23.31 by removing 

paragraph (c). 

■ 11. Revise § 23.33 to read as follows: 

§ 23.33 What size standards do recipients 

use to determine the eligibility of applicants 

and ACDBEs? 

(a) As a recipient, you must, except as 

provided in paragraph (b) of this 

section, treat a firm as a small business 

eligible to be certified as an ACDBE if 

the gross receipts of the applicant firm 

and its affiliates, calculated in 

accordance with 13 CFR 121.104 

averaged over the firm’s previous five 

fiscal years, do not exceed $56.42 

million. 

(b) The following types of businesses 

have size standards that differ from the 

standard set forth in paragraph (a) of 

this section: 

(1) Banks and financial institutions. 

$1 billion in assets; 

(2) Passenger car rental companies. 

$75.23 million average annual gross 

receipts over the firm’s previous five 

fiscal years; and 

(3) New car dealers. 350 employees. 

(c) For size purposes, gross receipts 

(as defined in 13 CFR 121.104(a)), of 

affiliates should be included in a 

manner consistent with 13 CFR 

121.104(d), except in the context of joint 

ventures. For gross receipts attributable 

to joint venture partners, a firm must 

include in its gross receipts its 

proportionate share of joint venture 

receipts, unless the proportionate share 

already is accounted for in receipts 

reflecting transactions between the firm 

and its joint ventures (e.g., subcontracts 

from a joint venture entity to joint 

venture partners). 

■ 12. Revise § 23.35 to read as follows: 

§ 23.35 What is the personal net worth 

(PNW) limit for disadvantaged owners of 

ACDBEs? 

The PNW limit used in determining 

eligibility for purposes of this part is 

$1.60 million. Any individual who has 

a PNW exceeding this amount is not a 

socially and economically 

disadvantaged individual for purposes 

of this part, even if the individual is a 

member of a group otherwise presumed 

to be disadvantaged. 

§ 23.37 [Amended] 

■ 13. Amend § 23.37 in the second 

sentence of paragraph (b) by removing 

the phrase ‘‘does not do work relevant 

to the airport’s concessions program’’ 

and adding the phrase ‘‘does not 

perform work or provide services 

relevant to the airport’s concessions 

program’’ in its place. 

■ 14. Revise § 23.39 to read as follows: 

§ 23.39 What are other ACDBE certification 

requirements? 

(a) The provisions of 49 CFR 

26.83(c)(1) do not apply to certifications 

for purposes of this part. Instead, in 

determining whether a firm is an 

eligible ACDBE, you must take the 

following steps: 

(1) Perform an on-site visit, virtually 

or in person, to the firm’s principal 

place of business. You must obtain the 

re ́sume ́s or work histories of the 

principal owners of the firm and 

personally interview these individuals. 

You must interview the principal 

officers and review their re ́sume ́s and/ 

or work histories. You may interview 

key personnel of the firm if necessary. 

You must also perform an on-site visit 

to job sites if there are such sites on 

which the firm is working at the time of 

the eligibility investigation in your 

jurisdiction or local area; 

(2) Analyze documentation related to 

the legal structure, ownership, and 

control of the applicant firm. This 

includes, but is not limited to, articles 

of incorporation/organization; corporate 

by-laws or operating agreements; 

organizational, annual and board/ 

member meeting records; stock ledgers 

and certificates; and state-issued 

certificates of good standing; 

(3) Analyze the bonding and financial 

capacity of the firm; lease and loan 

agreements; and bank account signature 

cards; 

(4) Determine the work history of the 

firm, including any concession contracts 

or other contracts it may have received; 

and payroll records; 

(5) Obtain or compile a list of the 

licenses of the firm and its key 

personnel to perform the concession 

contracts or other contracts it wishes to 

receive; 

(6) Obtain a statement from the firm 

of the type(s) of concession(s) it prefers 

to operate or the type(s) of other 

contract(s) it prefers to perform; 

(7) Obtain complete Federal income 

tax returns (or requests for extensions) 

filed by the firm, its affiliates, and the 

socially and economically 

disadvantaged owners for the last 5 

years. A complete return includes all 

forms, schedules, and statements filed 

with the Internal Revenue Service; and 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43667 

(8) Require applicants for ACDBE 

certification to complete and submit an 

appropriate application form, except as 

otherwise provided in 49 CFR 26.85. 

(b) In reviewing the Declaration of 

Eligibility required by 49 CFR 26.83(j), 

you must ensure that the ACDBE 

applicant provides documentation that 

it meets the applicable size standard in 

§ 23.33. 

(c) For purposes of this part, the term 

prime contractor in 49 CFR 26.87(j) 

includes a firm holding a prime contract 

with an airport concessionaire to 

provide goods or services to the 

concessionaire or a firm holding a prime 

concession agreement with a recipient. 

(d) With respect to firms owned by 

Alaska Native Corporations (ANCs), the 

provisions of 49 CFR 26.63(c)(2) do not 

apply. The eligibility of ANC-owned 

firms for purposes of this part is 

governed by § 26.63(c)(1). 

(e) You must use the Uniform 

Certification Application found in part 

26 without change. However, you may 

provide in your ACDBE program, with 

the written approval of the concerned 

Operating Administration, for 

supplementing the form by requesting 

specified additional information 

consistent with this part. In the same 

space available in section 1(A) of the 

form, the applicant must state that it is 

applying for certification as an ACDBE 

and complete all of section 5. 

(f) Car rental companies and private 

terminal owners or lessees are not 

authorized to certify firms as ACDBEs. 

As a car rental company or private 

terminal owner or lessee, you must 

obtain ACDBE participation from firms 

which a recipient or UCPs have certified 

as ACDBEs. 

(g) You are not required to certify an 

applicant firm if the firm intends to 

perform activities exclusively related to 

the renovation, repair, or construction of 

a concession facility (sometimes 

referred to as the ‘‘build-out’’) for which 

participation cannot be counted toward 

an ACDBE goal. 

■ 15. Revise § 23.41 to read as follows: 

§ 23.41 What is the basic overall goal 

requirement for recipients? 

(a) If you are a recipient who must 

implement an ACDBE program, you 

must establish two separate overall 

ACDBE goals. The first is for car rentals 

and the second is for concessions other 

than car rentals. 

(b) If your annual car rental 

concession revenues, averaged over the 

three-years preceding the date on which 

you are required to submit overall goals, 

do not exceed $200,000, you are not 

required to submit a car rental overall 

goal. If your annual revenues for 

concessions other than car rentals, 

averaged over the three years preceding 

the date on which you are required to 

submit overall goals, do not exceed 

$200,000, you are not required to submit 

a non-car rental overall goal. 

(c) Each overall goal must cover a 

three-year period. You must review your 

goals annually to make sure they 

continue to fit your circumstances 

appropriately. You must report to the 

FAA any significant adjustments that 

you make to your goal before your next 

scheduled submission. 

(d) Your goals established under this 

part must provide for participation by 

all DBEs and may not be subdivided 

into group-specific goals. 

(e) If you fail to establish and 

implement goals as provided in this 

section, you are not in compliance with 

this part. If you establish and implement 

goals in a way different from that 

provided in this part, you are not in 

compliance with this part. If you fail to 

comply with this requirement, you are 

not eligible to receive FAA financial 

assistance. 

(f) If you fail to establish and 

implement goals as provided in this 

section, you are not in compliance with 

this part. If you establish and implement 

goals in a way different from that 

provided in this part, you are not in 

compliance with this part. If you fail to 

comply with this requirement, you are 

not eligible to receive FAA financial 

assistance. 

■ 16. Amend § 23.43 by adding 

paragraph (c) as to read follows: 

§ 23.43 What are the consultation 

requirements in the development of 

recipients’ overall goals? 

* * * * * 

(c) The requirements of this section 

do not apply if no opportunities for new 

concession agreements will become 

available during the goal period. 

However, recipients must take 

appropriate outreach steps to encourage 

available ACDBEs to participate as 

concessionaires whenever there is a 

concession opportunity. 

■ 17. Amend § 23.45 by: 

■ a. Revising the second sentence of 

paragraph (a) introductory text. 

■ b. Removing paragraphs (a)(1) through 

(3). 

■ c. Removing the word ‘‘new’’ in 

paragraph (b). 

■ d. Removing the words ‘‘on you’’ in 

paragraph (h) in the last sentence. 

The revision reads as follows: 

§ 23.45 What are the requirements for 

submitting overall goal information to the 

FAA? 

(a) * * * Your overall goals meeting 

the requirements of this subpart are due 

based on a schedule established by the 

FAA and posted on the FAA’s website. 

* * * * * 

■ 18. Amend § 23.47 by revising 

paragraph (a) to read as follows: 

§ 23.47 What is the base for a recipient’s 

goal for concessions other than car 

rentals? 

(a) When setting your overall goal you 

must evaluate all available 

opportunities for participation that can 

be obtained, to the maximum extent 

practicable, through direct ownership 

arrangements. You may use an 

alternative method as allowed by 

§ 23.51(c)(5) for the portion of your 

overall goal for circumstances where 

there is no relative availability for direct 

ownership participation by ACDBEs in 

a particular concession opportunity. 

* * * * * 

§ 23.51 [Amended] 

■ 19. Amend § 23.51 in paragraph (c)(1) 

by removing the hyperlink 

‘‘www.census.gov/epcd/cbp/view/ 

cbpview.html’’ and adding in its place 

the hyperlink ‘‘https://www.census.gov/ 

programs-surveys/cbp.html.’’ 

■ 20. Amend § 23.55 by: 

■ a. In paragraphs (e) and (h)(1) and (2), 

removing the phrase ‘‘the entire 

amount’’ and adding ‘‘100 percent’’ in 

its place. 

■ b. Revising paragraph (j). 

The revision reads as follows: 

§ 23.55 How do recipients count ACDBE 

participation toward goals for items other 

than car rentals? 

* * * * * 

(j) When an ACDBE is decertified 

because one or more of its 

disadvantaged owners exceed the PNW 

cap or the firm exceeds the business size 

standards of this part during the 

performance of a contract or other 

agreement, the firm’s participation may 

continue to be counted toward ACDBE 

goals for the remainder of the term of 

the contract or other agreement. 

However, you must verify that the firm 

in all other respects remains an eligible 

ACDBE and you must not count the 

concessionaire’s participation toward 

ACDBE goals beyond the termination 

date for the concession agreement in 

effect at the time of the decertification 

(e.g., in a case where the agreement is 

renewed or extended, or an option for 

continued participation beyond the 

current term of the agreement is 

exercised). 

(1) The firm must inform the recipient 

in writing of any change in 

circumstances affecting its ability to 

meet ownership or control requirements 

of subpart C of this part or any material 


lotter on DSK11XQN23PROD with PROPOSALS2
43668 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

change. Reporting must be made as 

provided in 49 CFR 26.83(i). 

(2) The firm must provide to the 

recipient, annually on December 1, a 

Declaration of Eligibility, affirming that 

there have been no changes in the firm’s 

circumstances affecting its ability to 

meet ownership or control requirements 

of subpart C of this part or any other 

material changes, other than changes 

regarding the firm’s business size or the 

owner’s personal net worth. 

* * * * * 

■ 21. Amend § 23.57 by revising the first 

sentence of paragraph (b)(3)(i) to read as 

follows: 

§ 23.57 What happens if a recipient falls 

short of meeting its overall goals? 

* * * * * 

(b) * * * 

(3) * * * 

(i) If you are a CORE 30 airport or 

other airport designated by the FAA, 

you must submit, by April 1, the 

analysis and corrective actions 

developed under paragraphs (b)(1) and 

(2) of this section to the FAA for 

approval. * * * 

* * * * * 

§ 23.59 [Amended] 

■ 22. Amend § 23.59 in paragraph (b) by 

removing the word ‘‘DBEs’ ’’ and adding 

‘‘ACDBEs’ ’’ in its place. 

§ 23.71 [Amended] 

■ 23. Amend § 23.71 by removing the 

first sentence. 

■ 24. Revise § 23.75 to read as follows: 

§ 23.75 Can recipients enter into longterm, exclusive agreements with 

concessionaires? 

(a) Except as provided in paragraph 

(b) of this section, you must not enter 

into long-term, exclusive agreements for 

concessions. 

(1) For purposes of this section, a 

long-term agreement is one having a 

term longer than five years including 

any combination of base term and 

options to extend the term of the 

agreement, if the effect is a term of more 

than five years. 

(2) For purposes of this section, an 

exclusive agreement is one having a 

type of business activity that is 

conducted solely by a single business 

entity on the entire airport, irrespective 

of ACDBE participation. 

(b) You may enter into a long-term, 

exclusive concession agreement only 

under the following conditions: 

(1) Special local circumstances exist 

that make it important to enter such 

agreement; and 

(2) The responsible FAA regional 

office approves your plan for meeting 

the standards of paragraph (c) of this 

section. 

(c) In order to obtain FAA approval of 

a long-term-exclusive concession 

agreement, you must submit the 

following information to the FAA 

regional office, the items in paragraphs 

(c)(1) through (3) of this section must be 

submitted at least 90 days before the 

solicitation is released and items in 

paragraphs (c)(4) through (7) of this 

section must be submitted at least 45 

days before contract award: 

(1) A description of the special local 

circumstances that warrant a long-term, 

exclusive agreement. 

(2) A copy of the solicitation. 

(3) ACDBE contract goal analysis 

developed in accordance with this part. 

(4) Documentation that ACDBE 

participants are certified in the 

appropriate NAICS code in order for the 

participation to count towards ACDBE 

goals. 

(5) A general description of the type 

of business or businesses to be operated 

by the ACDBE, including location and 

concept of the ACDBE operation. 

(6) Information on the investment 

required on the part of the ACDBE and 

any unusual management or financial 

arrangements between the prime 

concessionaire and ACDBE. 

(7) Final long-term-exclusive 

concession agreement, subleasing or 

other agreements. 

§ 23.77 [Amended] 

■ 25. Amend § 23.77 in paragraph (b) by 

removing the term ‘‘disadvantaged 

business enterprise’’ and adding in its 

place ‘‘Disadvantaged Business 

Enterprise’’. 

■ 26. Revise § 23.79 to read as follows: 

§ 23.79 Does this part permit recipients to 

use local geographic preferences? 

No. As a recipient you must not use 

a local geographic preference. For 

purposes of this section, a local 

geographic preference is any 

requirement that gives a concessionaire 

located in one place (e.g., your local 

area) an advantage over concessionaires 

from other places in obtaining business 

as, or with, a concession at your airport. 

Appendix A to Part 23 [Removed] 

■ 27. Remove appendix A to part 23. 

PART 26—PARTICIPATION BY 

DISADVANTAGED BUSINESS 

ENTERPRISES IN DEPARTMENT OF 

TRANSPORTATION FINANCIAL 

ASSISTANCE PROGRAMS 

■ 28. The authority citation for part 26 

is revised to read as follows: 

Authority: 23 U.S.C. 304 and 324; 42 

U.S.C. 2000d, et seq.; 49 U.S.C. 47113, 47123; 

Sec. 1101(b), Pub. L. 114–94, 129 Stat. 1312, 

1324 (23 U.S.C. 101 note); Sec. 150, Pub. L. 

115–254, 132 Stat. 3215 (23 U.S.C. 101 note); 

Pub. L. 117–58, 135 Stat. 429 (23 U.S.C. 101 

note). 

■ 29. In part 26, remove the word 

‘‘actually’’ wherever it appears. 

§ 26.1 [Amended] 

■ 30. Amend § 26.1 in paragraph (f) by 

removing ‘‘federally-assisted’’ and add 

in its place ‘‘federally assisted’’. 

■ 31. Revise § 26.3 to read as follows: 

§ 26.3 To whom does this part apply? 

(a) If you are a recipient of any of the 

following types of funds, this part 

applies to you: 

(1) Federal-aid highway funds 

authorized under Titles I (other than 

Part B) and V of the Intermodal Surface 

Transportation Efficiency Act of 1991 

(ISTEA), Pub. L. 102–240, 105 Stat. 

1914, or Titles I, III, and V of the 

Transportation Equity Act for the 21st 

Century (TEA–21), Pub. L. 105–178, 112 

Stat. 107. Titles I, III, and V of the Safe, 

Accountable, Flexible, Efficient 

Transportation Equity Act: A Legacy for 

Users (SAFETEA–LU), Pub. L. 109–59, 

119 Stat. 1144; Divisions A and B of the 

Moving Ahead for Progress in the 21st 

Century Act (MAP–21), Pub. L. 112– 

141, 126 Stat. 405; Titles I, II, III, and 

VI of the Fixing America’s Surface 

Transportation Act (FAST Act) Pub. L. 

114–94, 23 U.S.C. 204; section 403 of 

Title 23, U.S. Code, and Division C of 

the Bipartisan Infrastructure Law (BIL), 

Pub. L. 117–58. 

(2) Federal transit funds authorized by 

Titles I, III, V and VI of ISTEA, Pub. L. 

102–240 or by Federal transit laws in 

Title 49, U.S. Code, or Titles I, III, and 

V of the TEA–21, Pub. L. 105–178. 

Titles I, III, and V of the Safe, 

Accountable, Flexible, Efficient 

Transportation Equity Act: A Legacy for 

Users (SAFETEA–LU), Pub. L. 109–59, 

119 Stat. 1144; Divisions A and B of the 

Moving Ahead for Progress in the 21st 

Century Act (MAP–21), Pub. L. 112– 

141, 126 Stat. 405; Titles I, II, III, and 

VI of the Fixing America’s Surface 

Transportation Act (FAST Act) Pub. L. 

114–94, and Division C of the Bipartisan 

Infrastructure Law (BIL), Pub. L. 117– 

58. 

(3) Airport funds authorized by 49 

U.S.C. 47101, et seq. 

(4) [Reserved] 

(b) [Reserved] 

(c) If you are letting a contract, and 

that contract is to be performed entirely 

outside the United States, its territories 

and possessions, Puerto Rico, Guam, or 

the Northern Mariana Islands, this part 

does not apply to the contract. 

(d) If you are letting a contract in 

which DOT financial assistance does 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43669 

not participate, this part does not apply 

to the contract. 

■ 32. Amend § 26.5 by: 

■ a. Revising the definitions of Alaska 

Native and Department or DOT. 

■ b. Removing the definition 

Disadvantaged business enterprise or 

DBE and adding the definition 

Disadvantaged Business Enterprise or 

DBE in its place. 

■ c. Removing the definition Indian 

tribe and adding the definition Indian 

tribe or Native American tribe in its 

place. 

■ d. Removing the definition Personal 

net worth and adding the definition 

Personal net worth or PNW in its place. 

■ e. Revising the definitions of Primary 

industry classification, Principal place 

of business, Recipient, and Secretary. 

■ f. In the definition of Socially and 

economically disadvantaged individual: 

■ g. In the introductory text, removing 

the phrase ‘‘as a members of groups’’ 

and adding in its place the phrase ‘‘as 

a member of a group’’. 

■ ii. In paragraph (2)(iv), removing the 

locations ‘‘Republic of the Northern 

Marianas Islands’’ and ‘‘Kirbati’’ and 

adding in their place the locations 

‘‘Republic of the Northern Mariana 

Islands’’ and ‘‘Kiribati’’, respectively. 

■ iii. In paragraph (2)(v), removing the 

location ‘‘the Maldives Islands’’ and 

adding in its place the location 

‘‘Maldives’’. 

■ f. Adding the definitions of Transit 

vehicle and Transit vehicle dealership 

in alphabetical order. 

■ g. Removing the definition of Transit 

vehicle manufacturer and adding in its 

place the definition Transit vehicle 

manufacturer (TVM). 

■ h. Adding the definition of Unsworn 

declaration in alphabetical order. 

The revisions and additions read as 

follows: 

§ 26.5 Definitions 

* * * * * 

Alaska Native means a citizen of the 

United States who is a person of onefourth degree or more Alaskan Indian 

(including Tsimshian Indians not 

enrolled in the Metlakatla Indian 

Community), Eskimo, or Aleut blood, or 

a combination of those bloodlines. The 

term includes, in the absence of proof of 

a minimum blood quantum, any citizen 

whom a Native village or Native group 

regards as an Alaska Native if their 

father or mother is regarded as an 

Alaska Native. 

* * * * * 

Department or DOT means the U.S. 

Department of Transportation, including 

the Office of the Secretary, the 

Departmental Office of Civil Rights, the 

Federal Highway Administration 

(FHWA), the Federal Transit 

Administration (FTA), and the Federal 

Aviation Administration (FAA). 

Disadvantaged Business Enterprise or 

DBE means a for-profit small business 

concern engaged in transportationrelated industries: 

(1) That is at least 51 percent owned 

by one or more individuals who are 

both socially and economically 

disadvantaged; and 

(2) Whose management and daily 

business operations are controlled by 

one or more of the socially and 

economically disadvantaged individuals 

who own it. 

* * * * * 

Indian tribe or Native American tribe 

means any federally or state-recognized 

tribe, band, nation, or other organized 

group of Indians (Native Americans), or 

an ANC. 

* * * * * 

Personal net worth or PNW means the 

net value of an individual’s reportable 

assets and liabilities, per the calculation 

rules in § 26.68. 

Primary industry classification means 

the most current North American 

Industry Classification System (NAICS) 

designation which best describes the 

primary business of a firm. The NAICS 

is described in the North American 

Industry Classification Manual—United 

States which is available online on the 

U.S. Census Bureau website: 

www.census.gov/naics/. 

* * * * * 

Principal place of business means the 

business location where the individuals 

who manage the firm’s day-to-day 

operations spend most working hours. If 

the offices from which management is 

directed and where the business records 

are kept are in different locations, the 

recipient will determine the principal 

place of business. The term does not 

include construction trailers or other 

temporary construction sites. 

* * * * * 

Recipient means any entity, public or 

private, to which DOT financial 

assistance is extended, whether directly 

or through another recipient, through 

the programs of the FAA, FHWA, or 

FTA, or that has applied for such 

assistance. 

Secretary means DOT’s Secretary of 

Transportation or the Secretary’s 

designee. 

* * * * * 

Transit vehicle means a vehicle 

manufactured by a TVM. A vehicle 

manufactured by a non-TVM is not 

considered a transit vehicle for purposes 

of this part, notwithstanding the 

vehicle’s ultimate use. 

Transit vehicle dealership means a 

business that is primarily engaged in 

selling transit vehicles but that does not 

manufacture vehicles itself. 

Transit vehicle manufacturer (TVM) 

means any manufacturer whose primary 

business purpose is to manufacture 

vehicles built for mass transportation. 

Such vehicles include, but are not 

limited to buses, rail cars, trolleys, 

ferries, and vehicles manufactured 

specifically for paratransit purposes. 

Businesses that perform retrofitting or 

post-production alterations to vehicles 

so that such vehicles may be used for 

public transportation purposes are also 

considered TVMs. Businesses that 

manufacture, mass-produce, or 

distribute vehicles primarily for 

personal use are not considered TVMs. 

* * * * * 

Unsworn declaration means an 

unsworn statement, dated and in 

writing, subscribed as true under 

penalty of perjury. 

* * * * * 

■ 33. Revise § 26.11 to read as follows: 

§ 26.11 What records do recipients keep 

and report? 

(a) You must submit a report on DBE 

participation to the concerned 

Operating Administration containing all 

the information described in the 

Uniform Report to this part. This report 

must be submitted at the intervals 

required by, and in the format 

acceptable to, the concerned Operating 

Administration. 

(b) You must continue to provide data 

about your DBE program to the 

Department as directed by DOT 

operating administrations. 

(c) You must obtain bidders list 

information as described in paragraph 

(c)(2) of this section and enter it into a 

system designated by the Department. 

(1) The purposes of this bidders list 

information is to compile as accurate 

data as possible about the universe of 

DBE and non-DBE contractors and 

subcontractors who seek to work on 

your federally assisted contracts for use 

in helping you set your overall goals; 

and, to provide the Department with 

data for evaluating the extent to which 

the objectives of § 26.1 are being 

achieved. 

(2) You must obtain the following 

bidders list information about all DBE 

and non-DBEs who bid as prime 

contractors and subcontractors on each 

of your federally assisted contracts: 

(i) Firm name; 

(ii) Firm address including zip code; 

(iii) Firm’s status as a DBE or nonDBE; 

(iv) Race and gender information for 

the firm’s majority owner; 


lotter on DSK11XQN23PROD with PROPOSALS2
43670 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

(v) NAICS code applicable to each 

scope of work the firm sought to 

perform in its bid; 

(vi) Age of the firm; and 

(vii) The annual gross receipts of the 

firm. You may obtain this information 

by asking each firm to indicate into 

what gross receipts bracket they fit (e.g., 

less than $1 million; $1–3 million; $3– 

6 million; $6–10 million; etc.) rather 

than requesting an exact figure from the 

firm. 

(3) You must collect the data from all 

bidders for your federally assisted 

contracts by requiring the information 

in paragraph (c)(2) of this section to be 

submitted with their bids or initial 

responses to negotiated procurements. 

You must enter this data in the 

Department’s designated system no later 

than December 1 following the fiscal 

year in which the relevant contract was 

awarded. In the case of a ‘‘design-build’’ 

contracting situation where subcontracts 

will be solicited throughout the contract 

period as defined in a DBE Performance 

Plan pursuant to § 26.53(e), the data 

must be entered no later than December 

1 following the fiscal year in which the 

design-build contractor awards the 

relevant subcontract(s). 

(d) You must maintain records 

documenting a firm’s compliance with 

the requirements of this part. At a 

minimum, you must keep a complete 

application package for each certified 

firm and all Declarations of Eligibility, 

change notices, and on-site visit reports. 

These records must be retained in 

accordance with applicable record 

retention requirements for the 

recipient’s financial assistance 

agreement. Other certification or 

compliance related records must be 

retained for a minimum of three (3) 

years unless otherwise provided by 

applicable record retention 

requirements for the recipient’s 

financial assistance agreement, 

whichever is longer. 

(e) The department of transportation 

in each Unified Certification Program 

(UCP) established pursuant to § 26.81 

must report to DOT’s Departmental 

Office of Civil Rights each year, the 

following information in the UCP 

directory: 

(1) The number and percentage of instate and out-of-state DBE and Airport 

Concession Disadvantaged Business 

Enterprise (ACDBE) certifications by 

gender and ethnicity (Black American, 

Asian-Pacific American, Native 

American, Hispanic American, 

Subcontinent-Asian Americans, and 

non-minority); 

(2) The number of DBE certification 

applications received from in-state and 

out-of-state firms and the number found 

eligible and ineligible; 

(3) The number of in-state and out-ofstate firms decertified and/or summarily 

suspended; 

(4) The number of in-state and out-ofstate applications received for an 

individualized determination of social 

and economic disadvantage status; 

(5) The number of in-state and out-ofstate firms certified whose owner(s) 

made an individualized showing of 

social and economic disadvantaged 

status; and 

(6) The number of DBEs pre-qualified 

in their work type by the recipient. 

■ 34. Revise the heading for subpart B 

to read as follows: 

Subpart B—Administrative 

Requirements for DBE Programs for 

Federally Assisted Contracting 

■ 35. Revise § 26.21 to read as follows: 

§ 26.21 Who must have a DBE program? 

(a) If you are in one of these categories 

and let DOT-assisted contracts, you 

must have a DBE program meeting the 

requirements of this part: 

(1) All FHWA primary recipients 

receiving funds authorized by a statute 

to which this part applies; 

(2) All FTA recipients receiving 

planning, capital and/or operating 

assistance must maintain a program 

locally that includes the requirements of 

reporting and recordkeeping under 

§ 26.11; contract assurances under 

§ 26.13; policy statement under § 26.23; 

fostering small business participation 

under § 26.39; and transit vehicle 

manufacturers under § 26.49. FTA 

recipients receiving planning, capital 

and/or operating assistance to award 

prime contracts (excluding transit 

vehicle purchases) the cumulative total 

value of which exceeds $670,000 in 

FTA funds in a Federal fiscal year must 

have a DBE program meeting all the 

requirements of this part; and 

(3) FAA recipients receiving grants for 

airport planning or development that 

will award prime contracts the 

cumulative total value of which exceeds 

$250,000 in FAA funds in a Federal 

fiscal year. 

(b)(1) You must submit a conforming 

DBE program to the concerned 

Operating Administration (OA). Once 

the OA has approved your program, the 

approval counts for all of your DOTassisted programs (except goals that are 

reviewed by the relevant OA). 

(2) You do not have to submit regular 

updates of your DBE program plan if 

you remain in compliance with this 

part. However, you must submit 

significant changes to the relevant OA 

for approval. 

(c) You are not eligible to receive DOT 

financial assistance unless DOT has 

approved your DBE program and you 

are in compliance with it and this part. 

You must continue to carry out your 

DBE program until all funds from DOT 

financial assistance have been 

expended. 

■ 36. Amend § 26.29 by: 

■ a. Revising paragraph (d). 

■ b. Redesignating paragraph (e) as 

paragraph (g). 

■ c. Adding new paragraph (e) and 

paragraph (f). 

The revision and additions read as 

follows: 

§ 26.29 What prompt payment 

mechanisms must recipients have? 

* * * * * 

(d) Your DBE program must include 

the mechanisms you will use for 

proactive monitoring and oversight of a 

prime contractor’s compliance with 

subcontractor prompt payment and 

return of retainage requirements in this 

part. Reliance on complaints or 

notifications from subcontractors about 

a contractor’s failure to comply with 

prompt payment and retainage 

requirements is not a sufficient 

monitoring and oversight mechanism. 

(e) Your DBE program must provide 

appropriate means to enforce the 

requirements of this section. These 

means must be described in your DBE 

program and should 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. 

(f) Prompt payment and return of 

retainage requirements in this part also 

apply to lower-tier subcontractors. 

* * * * * 

■ 37. Revise § 26.31 to read as follows: 

§ 26.31 What information must a UCP 

include in its DBE/ACDBE directory? 

(a) In the directory required under 

§ 26.81(g), you must list all firms 

eligible to participate as a DBE and/or 

ACDBE in your program. In the listing 

for each firm, you must include its 

business address, business phone 

number, the types of work the firm has 

been certified to perform as a DBE and/ 

or ACDBE, and all the following 

information that the firm chooses to 

make public: 

(1) State licenses held; 

(2) Pre-qualifications; 

(3) Bonding capacity; 

(4) Equipment capability; 

(5) Recently completed projects; and 

(6) website. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43671 

(b) You must list each type of work a 

DBE and/or ACDBE is eligible to 

perform by using the most specific 

NAICS code available to describe each 

type of work. Pursuant to § 26.81(n)(1) 

and (3), your directory must allow for 

NAICS codes to be supplemented with 

specific descriptions of the type(s) of 

work the firm performs. 

(c) Your directory must permit the 

public to search and/or filter for DBEs 

and/or using the following criteria: 

(1) Physical location; 

(2) NAICS code(s); 

(3) Keyword search of work 

descriptions; or 

(4) The information in paragraphs 

(a)(1) through (6) of this section: 

(i) State license(s); 

(ii) Pre-qualifications; 

(iii) Bonding and maximum bonding 

capacity; 

(iv) Equipment type and number of 

each equipment type; 

(v) Dollar value of largest completed 

project and keyword search of project 

descriptions; and 

(vi) Firms that have websites. 

(d) You must make any changes to 

your current directory entries by 

January 1, 2024, or within [DATE 180 

DAYS AFTER DATE OF PUBLICATION 

OF FINAL RULE]. The directory should 

clearly indicate that the information 

displayed pursuant to paragraphs (a)(1) 

through (6) of this section was 

submitted by the DBE and/or ACDBE 

and has not been reviewed for accuracy 

by the members of the UCP. 

■ 38. Amend § 26.35 by revising 

paragraph (b)(2) introductory text to 

read as follows: 

§ 26.35 What role do business 

development and mentor-prote ́ge ́ programs 

have in the DBE program? 

* * * * * 

(b) * * * 

(2) In the mentor-prote ́ge ́ relationship, 

you must: 

* * * * * 

■ 39. Revise § 26.37 to read as follows: 

§ 26.37 What are a recipient’s 

responsibilities for monitoring? 

(a) You must implement appropriate 

mechanisms to ensure compliance with 

the requirements in this part by all 

program participants (e.g., applying 

legal and contract remedies available 

under Federal, state, and local law). You 

must set forth these mechanisms in your 

DBE program. 

(b) Your DBE program must also 

include a monitoring and enforcement 

mechanism to ensure that work 

committed to all DBEs at contract award 

or subsequently, including race- neutral 

participation, is actually performed by 

the DBEs to which the work was 

committed, and such work is counted 

according to the requirements of § 26.55. 

This mechanism must include a written 

verification that you have reviewed 

contracting records and monitored the 

work site to ensure the counting of each 

DBE’s participation is consistent with 

its function on the contract. The 

monitoring to which this paragraph (b) 

refers may be conducted in conjunction 

with monitoring of contract 

performance for other purposes. 

(c) This mechanism must also provide 

for running tallies of actual DBE 

attainments toward the overall goal and 

for each DBE commitment submitted 

pursuant to meeting a contract goal. 

Regarding the running tally used to 

monitor the overall goal, this 

mechanism must provide a means to 

compare current DBE attainments to 

anticipated contract awards for the 

remainder of the annual reporting 

period. This mechanism should ensure 

that contract goals are applied in 

accordance with § 26.51(d). Regarding 

the running tally used to monitor the 

fulfillment of each DBE commitment, 

this mechanism must provide a means 

of comparing cumulative payments 

made to the DBE to the work listed for 

each. This mechanism should assess 

whether the commitment will be 

fulfilled or whether the prime contractor 

has demonstrated good faith efforts, or 

should be required to demonstrate good 

faith efforts, to address any projected 

shortfall per § 26.53(g). 

§ 26.39 [Amended] 

■ 40. Amend § 26.39 in paragraph (b) 

introductory text by removing the 

phrase ‘‘by February 28, 2012’’. 

■ 41. Amend § 26.45 by: 

■ a. Revising paragraph (a). 

■ b. Removing in paragraph (c)(1) the 

hyperlink ‘‘www.census.gov/epcd/cbp/ 

view/cbpview.html’’ and adding in its 

place the hyperlink ‘‘https://

www.census.gov/programs-surveys/ 

cbp.html.’’ 

■ c. Removing in paragraph (f)(1)(i) the 

words ‘‘website’’ and adding in their 

place the word ‘‘Web site’’. 

■ d. Removing in paragraph (f)(3) the 

text ‘‘incuding’’, ‘‘race-consioous’’, and 

‘‘26.51(c)’’ and adding in their places 

the text ‘‘including’’, ‘‘race-conscious’’, 

and ‘‘§ 26.51(c)’’, respectively. 

The revision reads as follows: 

§ 26.45 How do recipients set overall 

goals? 

(a) General rule. (1) Except as 

provided in paragraph (a)(2) of this 

section, you must set an overall goal for 

DBE participation in your DOT-assisted 

contracts. 

(2) If you are an FTA or FAA recipient 

who reasonably anticipates awarding 

(excluding transit vehicle purchases) 

$670,000 or less in FTA or $250,000 or 

less in FAA funds in prime contracts in 

a Federal fiscal year, you are not 

required to develop overall goals for 

FTA or FAA respectively for that fiscal 

year. 

* * * * * 

§ 26.47 [Amended] 

■ 42. Amend § 26.47 in paragraph 

(c)(3)(i) by removing the words 

‘‘Operational Evolution Partnership 

Plan’’ and adding in their place the term 

‘‘CORE 30’’. 

■ 43. Revise § 26.49 to read as follows: 

§ 26.49 What are the requirements for 

transit vehicle manufactures (TVMs) and for 

awarding DOT-assisted contracts to TVMs? 

(a) If you are an FTA recipient, you 

must require in your DBE program that 

each TVM, as a condition of being 

authorized to bid or propose on FTAassisted transit vehicle procurements, 

certify that it has complied with the 

requirements of this section. You do not 

include FTA assistance used in transit 

vehicle procurements in the base 

amount from which your overall goal is 

calculated. 

(1) Only those TVMs listed on FTA’s 

list of eligible TVMs, or that have 

submitted a goal methodology to FTA 

that has been approved or has not been 

disapproved, at the time of solicitation 

are eligible to bid. 

(2) A TVM’s failure to follow the 

requirements of this section and 

throughout this part will be deemed as 

non-compliant, which will result in 

removal from FTA’s eligible TVMs list 

and will become ineligible to bid. 

(3) An FTA recipient’s failure to 

comply with the requirements set forth 

in paragraph (a) of this section may 

result in formal enforcement action or 

appropriate sanction as determined by 

FTA (e.g., FTA declining to participate 

in the vehicle procurement). 

(4) Within 30 days of becoming 

contractually obligated to procure a 

transit vehicle, an FTA recipient must 

report to FTA: 

(i) The name of the TVM that was the 

successful bidder; and 

(ii) The Federal share of the 

contractual commitment at that time. 

(5) A contract with a transit vehicle 

dealership to procure vehicles does not 

qualify as a contract with a TVM, 

notwithstanding the manufacturer of the 

vehicles procured. 

(b) If you are a TVM, you must 

establish and submit to FTA an annual 

overall percentage goal for DBE 

participation. 


lotter on DSK11XQN23PROD with PROPOSALS2
43672 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

(1) In setting your overall goal, you 

should be guided, to the extent 

applicable, by the principles underlying 

§ 26.45. The base from which you 

calculate this goal is the amount of FTA 

financial assistance included in transit 

vehicle contracts on which you will bid 

during the fiscal year in question, less 

the portion(s) attributable to the 

manufacturing process performed 

entirely by your own forces. 

(i) You must consider and include in 

your base figure all domestic contracting 

opportunities made available to nonDBEs. 

(ii) You must exclude from this base 

figure funds attributable to work 

performed outside the United States and 

its territories, possessions, and 

commonwealths. 

(iii) In establishing an overall goal, 

you must provide for public 

participation. This includes 

consultation with interested parties 

consistent with § 26.45(g). 

(2) The requirements of this part with 

respect to submission and approval of 

overall goals apply to you as they do to 

recipients, except that TVMs set and 

submit their goals annually and not on 

a triennial basis. 

(c) TVMs must comply with the 

reporting requirements of § 26.11, 

including the requirement to submit the 

Uniform Report of DBE Awards or 

Commitments and Payments, in order to 

remain eligible to bid on FTA-assisted 

transit vehicle procurements. 

(d) TVMs must implement all other 

requirements of this part, except those 

relating to UCPs and DBE certification 

procedures. 

(e) If you are an FHWA or FAA 

recipient, you may, with FHWA or FAA 

approval, use the procedures of this 

section with respect to procurements of 

vehicles or specialized equipment. If 

you choose to do so, then the 

manufacturers of the equipment must 

meet the same requirements (including 

goal approval by FHWA or FAA) that 

TVMs must meet in FTA-assisted 

procurements. 

(f) As a recipient you may, with FTA 

approval, establish project-specific goals 

for DBE participation in the 

procurement of transit vehicles in lieu 

of complying with the procedures of 

this section. 

§ 26.51 [Amended] 

■ 44. Amend § 26.51 in paragraph (f)(4) 

by removing the words ‘‘through the use 

of’’ and adding in their place the word 

‘‘using.’’ 

■ 45. Amend § 26.53 by revising 

paragraphs (b)(3)(ii), (e), and (f) to read 

as follows: 

§ 26.53 What are the good faith efforts 

procedures recipients follow in situations 

where there are contract goals? 

* * * * * 

(b) * * * 

(3) * * * 

(ii) Provided that, in a negotiated 

procurement, such as a procurement for 

professional services, the bidder/offeror 

may make a contractually binding 

commitment to meet the goal at the time 

of bid submission or the presentation of 

initial proposals but provide the 

information required by paragraph (b)(2) 

of this section before the final selection 

for the contract is made by the recipient. 

This paragraph (b)(3)(ii) does not apply 

to a design-build procurement, which 

must follow the provisions in paragraph 

(e) of this section. 

* * * * * 

(e) In a design-build contracting 

situation, in which the recipient solicits 

proposals to design and build a project 

with minimal-project details at time of 

letting, the recipient may set a DBE goal 

that proposers must meet by submitting 

a DBE Performance Plan (DPP) with the 

proposal. The DPP replaces the 

requirement to provide the information 

required in paragraph (b) of this section 

that applies to design-bid-build 

contracts. To be considered responsive, 

the DPP must include a commitment to 

meet the goal and provide details of the 

types of subcontracting work or services 

(with projected dollar amount) that the 

proposer will solicit DBEs to perform. 

The DPP must include an estimated 

time frame in which actual DBE 

subcontracts would be executed. Once 

the design-build contract is awarded, 

the recipient must provide ongoing 

monitoring and oversight to evaluate 

whether the design-builder is using 

good faith efforts to comply with the 

DPP and schedule. The recipient and 

the design-builder may agree to make 

written revisions of the DPP throughout 

the life of the project, e.g., replacing the 

type of work items the design builder 

will solicit DBEs to perform and/or 

adjusting the proposed schedule, as long 

as design-builder continues to use good 

faith efforts to meet the goal. 

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

contractor not terminate a DBE 

subcontractor or any portion of its work 

listed in response to paragraph (b)(2) of 

this section (or an approved substitute 

DBE firm per paragraph (g) of this 

section) without your prior written 

consent. This includes, but is not 

limited to, instances in which a prime 

contractor seeks to perform work 

originally designated for a DBE 

subcontractor with its own forces or 

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

with another DBE firm. 

(ii) You must include in each prime 

contract a provision stating that: 

(A) The contractor must utilize the 

specific DBEs listed to perform the work 

and supply the materials for which each 

is listed unless the contractor obtains 

your written consent as provided in 

paragraph (f) of this section; and 

(B) Unless your consent is provided 

under paragraph (f) of this section, the 

prime contractor must not be entitled to 

any payment for work or material unless 

it is performed or supplied by the listed 

DBE. 

(2) You may provide such written 

consent only if you agree, for reasons 

stated in your concurrence document, 

that the prime contractor has good cause 

to terminate the listed DBE or any 

portion of its work. 

(3) Good cause does not exist if the 

prime contractor seeks to terminate a 

DBE it relied upon to obtain the contract 

so that the prime contractor can selfperform the work for which the DBE 

contractor was engaged or so that the 

prime contractor can substitute another 

DBE or non-DBE contractor after 

contract award. For purposes of this 

paragraph (f)(3), good cause includes the 

following circumstances: 

(i) The listed DBE subcontractor fails 

or refuses to execute a written contract; 

(ii) The listed DBE subcontractor fails 

or refuses to perform the work of its 

subcontract in a way consistent with 

normal industry standards. Provided, 

however, that good cause does not exist 

if the failure or refusal of the DBE 

subcontractor to perform its work on the 

subcontract results from the bad faith or 

discriminatory action of the prime 

contractor; 

(iii) The listed DBE subcontractor fails 

or refuses to meet the prime contractor’s 

reasonable, nondiscriminatory bond 

requirements; 

(iv) The listed DBE subcontractor 

becomes bankrupt, insolvent, or exhibits 

credit unworthiness; 

(v) The listed DBE subcontractor is 

ineligible to work on public works 

projects because of suspension and 

debarment proceedings pursuant to 2 

CFR parts 180, 215, and 1200 or 

applicable state law; 

(vi) You have determined that the 

listed DBE subcontractor is not a 

responsible contractor; 

(vii) The listed DBE subcontractor 

voluntarily withdraws from the project 

and provides to you written notice of its 

withdrawal; 

(viii) The listed DBE is ineligible to 

receive DBE credit for the type of work 

required; 

(ix) A DBE owner dies or becomes 

disabled with the result that the listed 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43673 

DBE contractor is unable to complete its 

work on the contract; and 

(x) Other documented good cause that 

you determine compels the termination 

of the DBE subcontractor. 

(4) Before transmitting to you its 

request to terminate a DBE 

subcontractor or any portion of its work, 

the prime contractor must give notice in 

writing to the DBE subcontractor, with 

a copy to you sent concurrently, of its 

intent to request to terminate and the 

reason for the proposed request. 

(5) The prime contractor’s written 

notice must give the DBE five days to 

respond, advising you and the 

contractor of the reasons, if any, why it 

objects to the proposed termination of 

its subcontract/or portion thereof and 

why you should not approve the prime 

contractor’s request. If required in a 

particular case as a matter of public 

necessity (e.g., safety), you may provide 

a response period shorter than five days. 

(6) In addition to post-award 

terminations, the provisions of this 

section apply to pre-award deletions or 

changes to DBEs or their listed work put 

forward by offerors in negotiated 

procurements. 

* * * * * 

■ 46. Amend § 26.55 by: 

■ a. In paragraph (c)(2), removing the 

words ‘‘in order’’. 

■ b. In paragraph (c)(3), removing the 

words ‘‘on the basis of’’ and adding in 

their place the word ‘‘within’’. 

■ c. Revising paragraph (e). 

■ d. In paragraph (f), removing the 

cross-reference ‘‘§ 26.87(i)’’ and adding 

in its place the cross-reference 

‘‘§ 26.87(j)’’. 

■ e. Revising paragraph (h). 

The revisions read as follows: 

§ 26.55 How is DBE participation counted 

toward goals? 

* * * * * 

(e) Count expenditures with DBEs for 

materials or supplies toward DBE goals 

as provided in the following: 

(1)(i) If the materials or supplies are 

obtained from a DBE manufacturer, 

count 100 percent of the cost of the 

materials or supplies. 

(ii) For purposes of paragraph (e)(1) of 

this section, a manufacturer is a firm 

that owns (or leases) and operates a 

factory or establishment that produces, 

on the premises, the materials, supplies, 

articles, or equipment required under 

the contract and of the general character 

described by the specifications. 

Manufacturing includes blending or 

modifying raw materials or assembling 

components to create the product to 

meet contract specifications. When a 

DBE makes minor modifications to the 

materials, supplies, articles, or 

equipment, the DBE is not a 

manufacturer. 

(2)(i) If the materials or supplies are 

purchased from a DBE regular dealer, 

count 60 percent of the cost of the 

materials or supplies (including 

transportation costs). 

(ii) For purposes of this section, a 

regular dealer is a firm that owns (or 

leases) and-operates, a store, warehouse, 

or other establishment in which the 

materials, supplies, articles or 

equipment of the general character 

described by the specifications and 

required under the contract are bought, 

kept in sufficient quantities, and 

regularly sold or leased to the public in 

the usual course of business. 

(iii) Items kept and regularly sold by 

the DBE are of the ‘‘general character’’ 

when they share the same material 

characteristics and application as the 

items specified by the contract. 

(iv) You should establish a system to 

determine that a DBE regular dealer, 

over time, keeps sufficient quantities 

and regularly sells the items in question. 

This system should ensure that each 

DBE supplier is eligible for 60% credit 

based on its demonstrated capacity to 

perform a commercially useful function 

(CUF) as a regular dealer. This 

determination is intended to prevent 

overcounting at the pre-award or 

subcontract approval stage and is 

contingent upon the outcome of a final 

CUF and counting determination. 

(A) To be a regular dealer, the firm 

must be an established business that 

engages, as its principal business and 

under its own name, in the purchase 

and sale or lease of the products in 

question. A DBE supplier performs a 

CUF as a regular dealer and receives 

credit for 60% of the cost of materials 

or supplies (including transportation 

cost) when all, or the major portion of, 

the items under a purchase order or 

subcontract are provided from the DBE’s 

inventory, and when necessary, any 

minor quantities delivered from and by 

other sources are of the general 

character as those provided from the 

DBE’s inventory. Recipients should 

establish procedures to ensure that 

preliminary counting determinations at 

the pre-award/subcontract approval 

stage include an evaluation of the type 

and quantity of items the DBE intends 

to have delivered by other sources. 

(B) A DBE may be a regular dealer in 

such bulk items as petroleum products, 

steel, cement, gravel, stone, or asphalt 

without owning, operating, or 

maintaining a place of business as 

provided in paragraph (e)(2)(ii) of this 

section if the person both owns and 

operates distribution equipment used to 

deliver the products. Any 

supplementing of regular dealers’ own 

distribution equipment must be by a 

long-term operating lease and not on an 

ad hoc or contract-by-contract basis. 

Recipients should establish procedures 

to make preliminary counting 

determinations at the pre-award/ 

subcontract approval stage based on the 

DBE’s capacity and intent to comply 

with the requirement of this paragraph 

(e)(2)(iv)(B). 

(C) A DBE supplier of items that are 

not typically stocked due to their 

unique characteristics (e.g., limited shelf 

life or specialty items) should be 

considered in the same manner as a 

regular dealer of bulk items per 

paragraph (e)(2)(iv)(B) of this section. If 

the DBE supplier of these items does not 

own or lease distribution equipment, as 

descried above, it is not a regular dealer. 

(D) Packagers, brokers, manufacturers’ 

representatives, or other persons who 

arrange, facilitate, or expedite 

transactions are not regular dealers 

within the meaning of paragraph (e)(2) 

of this section. 

(3) If the materials or supplies are 

purchased from a DBE distributor that 

neither maintains sufficient inventory 

nor uses its own distribution equipment 

for the products in question, count 40% 

of the cost of materials or supplies 

(including transportation costs). A DBE 

distributor is an established business 

that engages in the regular sale or lease 

of the items specified by the contract 

and described under a valid 

distributorship agreement. A DBE 

distributor performs a CUF when it 

operates in accordance with the terms of 

its distributorship agreement; with 

respect to shipping, the DBE distributor 

must assume risk for lost or damaged 

goods. You should review the language 

in distributorship agreements to 

determine their validity relevant to each 

purchase order/subcontract and the risk 

assumed by the DBE. Where the DBE 

distributor does not assume risk or, 

otherwise, does not operate in 

accordance with its distributorship 

agreement, counting is limited to fees 

and commissions. 

(4) With respect to materials or 

supplies purchased from a DBE that is 

neither a manufacturer, a regular dealer, 

nor a distributor, count the entire 

amount of fees or commissions charged 

for assistance in the procurement of the 

materials and supplies, or fees or 

transportation charges for the delivery 

of materials or supplies required on a 

job site, provided you determine the 

fees to be reasonable and not excessive 

as compared with fees customarily 

allowed for similar services. Do not 

count any portion of the cost of the 


lotter on DSK11XQN23PROD with PROPOSALS2
43674 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

materials and supplies themselves, 

however. 

(5) You must determine the amount of 

credit awarded to a firm for the 

provisions of materials and supplies 

(e.g., whether a firm is acting as a 

regular dealer, distributor, or a 

transaction facilitator) on a contract-bycontract basis. 

(6) The total allowable credit for a 

prime contractor’s expenditures with 

DBE suppliers (manufacturers, regular 

dealers, distributors, and transaction 

facilitators) is limited to 50% of the 

participation used by a prime contractor 

to meet a contract goal. Exceptions to 

this cap for material-intensive projects 

may be granted on a contract-bycontract basis with prior approval of the 

appropriate OA. 

* * * * * 

(h) Do not count the participation of 

a DBE subcontractor toward a 

contractor’s final compliance with its 

DBE obligations on a contract until the 

contractor has actually paid the DBE the 

amount being counted. 

■ 47. Revise § 26.61 to read as follows: 

§ 26.61 How are burdens of proof allocated 

in the certification process? 

(a) In determining whether to certify 

a firm as eligible to participate as a DBE, 

you must apply the standards of this 

subpart. 

(b) The firm seeking certification has 

the burden of demonstrating to you, by 

a preponderance of the evidence (i.e., 

more likely than not) that it meets all 

the certification eligibility requirements 

in this subpart. In determining whether 

the firm has met its burden, you must 

consider all the information in the 

record, viewed as a whole. 

(1) Exception 1. In proceedings to 

decertify a firm, you bear the burden of 

proving, by a preponderance of the 

evidence, that the firm is no longer 

eligible for certification under the rules 

of this part. 

(2) Exception 2. If you seek to rebut 

an individual’s claim of presumed 

social and/or economic disadvantage, 

you bear the burden of proving, by a 

preponderance of the evidence, why the 

individual is not entitled to the 

presumption of social and economic 

disadvantage. See § 26.67(c). 

■ 48. Revise § 26.63 to read as follows: 

§ 26.63 General certification rules. 

(a) General rules. Except as otherwise 

provided: 

(1) The firm must be for-profit and 

operational. 

(2) Whether a firm performs a 

commercially useful function is 

irrelevant to certification eligibility. 

(3) Certification cannot be 

conditioned on state pre-qualification 

requirements for bidding on contracts. 

(4) Entering into a fraudulent 

transaction is disqualifying per se. 

(5) The certifier determines eligibility 

based on the evidence it has at the time 

of its decision, not on the basis of 

historical or outdated information, 

giving full effect to the ‘‘curative 

measures’’ provisions of this part. 

(b) Indirect ownership. A firm (i.e., a 

subsidiary, denoted S) that socially and 

economically disadvantaged owners 

(SEDOs) own and control indirectly is 

eligible, assuming it satisfies the other 

requirements of this part, only under the 

following circumstances. 

(1) Look-through. SEDOs own at least 

51 percent of S cumulatively, as shown 

in the examples following. 

(2) Control. The same SEDOs control 

P, and P controls S. 

(3) One tier only. The SEDOs 

indirectly own S through a single P and 

not through, for example, a parent of P 

(grandparent). 

(4) Examples. The following examples 

assume that S and its SEDOs satisfy all 

other requirements in this part. 

Example 1 to paragraph (b)(4). SEDOs 

own 100 percent of P, and P owns 100% 

of S. S is eligible for certification. 

Example 2 to paragraph (b)(4). Same 

facts, except P owns 51 percent of S. S 

is eligible. 

Example 3 to paragraph (b)(4). SEDOs 

own 80 percent of P, and P owns 70 

percent of S. S is eligible because 

SEDOs indirectly own 56 percent of S. 

The calculation is 80 percent of 70 

percent or .8 × .7 = .56. 

Example 4 to paragraph (b)(4). SEDOs 

own and control P, and they own 52 

percent of S by operation of this part. 

However, a non-SEDO controls S. S is 

ineligible. 

Example 5 to paragraph (b)(4). SEDOs 

own 60 percent of P, and P owns 51 

percent of S. S is ineligible because 

SEDOs own just 31 percent of S. 

Example 6 to paragraph (b)(4). P 

indirectly owns and controls S and has 

other affiliates. S is eligible only if its 

gross receipts plus those of all of its 

affiliates, including those of P, do not 

exceed the applicable small business 

size cap. Note that all of P’s affiliates are 

affiliates of S by virtue of P’s ownership 

and/or control of S. 

(c) Indian tribes, NHOs, and ANCs— 

(1) Indian tribes and NHOs. A firm that 

is owned by an Indian tribe or Native 

Hawaiian organization (NHO), rather 

than by Indians or Native Hawaiians as 

individuals, is eligible if it meets all 

other certification requirements in this 

part. Such a firm must satisfy all 

requirements of this part. 

(2) Alaska Native Corporations 

(ANCs). (i) Notwithstanding any other 

provisions of this subpart, a subsidiary 

corporation, joint venture, or 

partnership entity of an ANC is eligible 

for certification as a DBE if it meets all 

the following requirements: 

(A) The Settlement Common Stock of 

the underlying ANC and other stock of 

the ANC held by holders of the 

Settlement Common Stock and by 

Natives and descendants of Natives 

represents a majority of both the total 

equity of the ANC and the total voting 

power of the corporation for purposes of 

electing directors; 

(B) The shares of stock or other units 

of common ownership interest in the 

subsidiary, joint venture, or partnership 

entity held by the ANC and by holders 

of its Settlement Common Stock 

represent a majority of both the total 

equity of the entity and the total voting 

power of the entity for the purpose of 

electing directors, the general partner, or 

principal officers; and 

(C) The subsidiary, joint venture, or 

partnership entity has been certified by 

the Small Business Administration 

under the 8(a) or small disadvantaged 

business program. 

(ii) As a certifier to whom an ANCrelated entity applies for certification, 

you do not use the DOT Uniform 

Certified Application. You must obtain 

from the firm documentation sufficient 

to demonstrate that the entity meets the 

requirements of paragraph (c)(2)(i) of 

this section. You must also obtain 

sufficient information about the firm to 

allow you to administer your program 

(e.g., information that would appear in 

your UCP directory). 

(iii) If an ANC-related firm does not 

meet all the conditions of paragraph 

(c)(2)(i) of this section, then it must 

meet the requirements of paragraph 

(c)(1) of this section in order to be 

certified. 

■ 49. Revise § 26.65 to read as follows: 

§ 26.65 What rules govern business size 

determinations? 

(a) To be an eligible DBE, a firm 

(including its affiliates) must be an 

existing small business, as defined by 

Small Business Administration (SBA) 

standards. You must apply current SBA 

business size standard(s) found in 13 

CFR part 121 appropriate to the type(s) 

of work the firm seeks to perform in 

DOT-assisted contracts, including the 

primary industry classification of the 

applicant. A firm is not an eligible DBE 

in any Federal fiscal year if the firm 

(including its affiliates) has had average 

annual gross receipts, as defined in 13 

CFR 121.104, over the firm’s previous 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43675 

five fiscal years, in excess of the 

applicable SBA size standard(s). 

(b) Even if it meets the requirements 

of paragraph (a) of this section, a firm 

is not an eligible DBE for the purposes 

of FHWA and FTA-assisted work in any 

Federal fiscal year if the firm (including 

its affiliates) has had average annual 

gross receipts, as defined in 13 CFR 

121.104, over the firm’s previous three 

fiscal years, in excess of $28.48 million 

(as of March 1, 2022). The Department 

will adjust this amount for inflation on 

an annual basis. The adjusted amount 

will be published on the Department’s 

website in subsequent years. 

■ 50. Revise § 26.67 to read as follows: 

§ 26.67 What rules determine social and 

economic disadvantage? 

(a) Group membership—(1) General 

rule. Citizens of the United States (or 

lawfully admitted permanent residents) 

who are women, Black American, 

Hispanic American, Native American, 

Asian Pacific American, Subcontinent 

Asian American, or other minorities 

found to be disadvantaged by the Small 

Business Administration (SBA), are 

rebuttably presumed to be socially and 

economically disadvantaged. 

(2) Evidence of group membership. To 

claim group membership, a firm owner 

must indicate on the Declaration of 

Eligibility (DOE), found in the Uniform 

Certification Application (UCA), in 

which of the group(s) in paragraph (a)(1) 

of this section the owner is a member 

and submit the signed and sworn DOE 

with the applicant firm’s UCA. The DOE 

is the only evidence of group 

membership an owner must provide 

with the UCA. 

(3) Questioning group membership. 

You may not question an individual’s 

claim of group membership as a matter 

of course. You must not impose a 

disproportionate burden on members of 

any particular group. Imposing a 

disproportionate burden on members of 

a particular group could violate Title VI 

of the Civil Rights Act of 1964, 

paragraph (b) of this section, and/or 49 

CFR part 21. 

(i) If you have a well-founded 

reason(s) to question an individual’s 

claim of membership in a group in 

paragraph (a)(1) of this section, you 

must email the individual a written 

explanation of your reason(s), using the 

email address for the firm or individual 

provided in the UCA (for applicants) or 

the most recent you have on file (for 

certified firms). The individual bears the 

burden of proving, by a preponderance 

of the evidence, that the individual is a 

member of the group in question. 

(ii) Your written explanation must 

meet all the following criteria: 

(A) Specifically describe the evidence 

that forms the basis for your wellfounded reason(s). 

(B) Instruct the individual to submit 

evidence demonstrating that the 

individual has held herself/himself/ 

themself/themselves out publicly as a 

member of the group for at least 5 years 

prior to applying for DBE certification, 

and that the relevant community 

considers the individual a member. You 

may not require the individual to 

provide evidence beyond that related to 

group membership. 

(iii) The owner must email you the 

evidence described in paragraph 

(a)(3)(ii)(B) of this section no later than 

15 days of your written explanation. If 

the owner untimely sends you 

information, you may use your 

discretion whether to consider it; 

however, you must still email the owner 

a final decision no later than 30 days 

after receiving timely submitted 

evidence. 

(iv) If you determine that an 

individual has not demonstrated group 

membership by a preponderance of the 

evidence, your final decision must 

specifically reference the evidence in 

the record that formed the basis for your 

conclusion and give a detailed 

explanation of why the evidence 

submitted was insufficient. It must also 

inform the individual of the right to 

appeal, as provided in § 26.89(c), and of 

the right to reapply at any time by 

amending the original UCA with 

evidence of individual social and 

economic disadvantage under paragraph 

(d) of this section. 

(b) Evidence and rebuttal of social 

disadvantage. (1) If you have a 

reasonable basis to believe that an 

individual who is a member of a group 

in paragraph (a)(1) of this section is not, 

in fact, socially disadvantaged, you 

must initiate a proceeding to determine 

whether the individual’s presumption 

should be regarded as rebutted. Your 

proceeding must fully comply with the 

requirements of § 26.87. You have the 

burden of demonstrating, by a 

preponderance of the evidence, that the 

individual is not, in fact, socially 

disadvantaged. To meet the burden, you 

must produce evidence that the 

individual has not been subjected to 

racial or ethnic prejudice or cultural 

bias within American society because of 

the individual’s identity as a member of 

a group in paragraph (a)(1) of this 

section and without regard to individual 

qualities. Social disadvantage must stem 

from circumstances beyond the 

individual’s control. 

(2) If an individual’s presumption of 

social disadvantage has been rebutted 

based on a finding, by the 

preponderance of the evidence, that the 

individual is not socially disadvantaged, 

your final decision must inform the 

individual of the right to appeal, as 

provided in § 26.89(c), and of the right 

to reapply at any time by amending the 

original UCA with evidence of 

individual social and economic 

disadvantage under paragraph (d) of this 

section. 

(c) Evidence and rebuttal of economic 

disadvantage. (1) Each owner(s) on 

whom the applicant firm relies for 

certification eligibility must submit the 

DOE found in the UCA. The owner(s) 

must declare that the owner’s personal 

net worth (PNW) does not exceed $1.60 

million and corroborate the declaration 

by completing the PNW Statement 

available at https://

www.transportation.gov/civil-rights/ 

disadvantaged-business-enterprise/ 

ready-apply without alteration and by 

using the calculation rules in § 26.68. 

You must not attempt to rebut presumed 

economic disadvantage as a matter of 

course. 

(i) An owner whose PNW exceeds the 

regulation’s $1.60 million limit is not 

presumed economically disadvantaged. 

The limit is exact. Rounding down is 

impermissible. 

(ii) A certifier may require an owner 

to provide additional information on a 

case-by-case basis to verify the accuracy 

and completeness of the PNW 

Statement. The certifier must have a 

demonstrable need for the additional 

information and avoid imposing an 

unnecessary burden on an owner. Nor 

may you impose a disproportionate 

burden on members of any particular 

group as doing so could violate Title VI 

of the Civil Rights Act of 1964, 

paragraph (b) of this section, and/or 49 

CFR part 21. 

(2)(i) If you have a reasonable basis to 

believe that an individual who submits 

a PNW Statement that is below the 

$1.60 million limit is not economically 

disadvantaged, you may rebut the 

individual’s presumption of economic 

disadvantage. 

(ii) In determining whether an 

individual’s presumption of economic 

disadvantage should be rebutted, you 

must initiate a proceeding fully 

complying with the requirements of 

§ 26.87. You have the burden of 

demonstrating, by a preponderance of 

the evidence, that a reasonable person 

would not consider the individual 

economically disadvantaged. To meet 

the burden, you must produce evidence 

that demonstrates that a reasonable 

person would not consider the 

individual economically disadvantaged. 

You may consider indicators including, 

but not limited to ready access to 


lotter on DSK11XQN23PROD with PROPOSALS2
43676 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

wealth; lavish lifestyle; income or assets 

of a type or magnitude inconsistent with 

economic disadvantage; or other 

circumstances that economically 

disadvantaged people typically do not 

enjoy. This inquiry gives the § 26.68 

asset exclusions, and limitations on 

inclusions, no effect. It disregards 

liabilities entirely. 

(iii) If you determine that the owner’s 

presumption of economic disadvantage 

is rebutted, your decision must inform 

the firm of the right to appeal as 

provided in § 26.89(c). 

(d) Individualized determinations of 

social and economic disadvantage—(1) 

Burden of proof. Firms owned and 

controlled by individual(s) who are not 

presumed SED may be eligible for DBE 

certification. The firm must prove, by a 

preponderance of the evidence, that the 

owner seeking to establish an 

individualized showing of social and 

economic disadvantage meets the 

criteria in paragraphs (d)(3) and (4) of 

this section. 

(i) You must consider the evidence 

presented as a whole. There is no 

checklist of required evidence. 

(ii) An individual need not have filed 

a complaint of discrimination in order 

to successfully demonstrate social and/ 

or economic disadvantage. 

(2) Individuals with disabilities. The 

Department acknowledges that 

individuals with disabilities encounter 

many physical and attitudinal barriers 

that individuals without disabilities do 

not have to overcome. It is plausible that 

many individuals with disabilities— 

including ‘‘invisible’’ disabilities such 

as (but not limited to) post-traumatic 

stress disorder, major depressive 

disorder, dyslexia, anxiety disorder— 

may be socially and economically 

disadvantaged. As public entities, 

certifiers must fully comply with Title 

II of the American Disabilities Act, 

which includes ensuring that their DBE 

programs are fully accessible to 

individuals with disabilities. 

(3) Individualized determination of 

social disadvantage. (i) An owner 

seeking to establish an individualized 

showing of social disadvantage must 

identify at least one objective 

distinguishing feature that resulted in 

racial, ethnic, cultural, or other 

prejudice within American society 

because of the owner’s membership in 

a group and without regard to 

individual identity. 

(ii) The owner must describe with 

particularity how the objective 

distinguishing feature identified in 

paragraph (d)(3)(i) of this section has 

resulted in the owner’s social 

disadvantage. The owner may provide 

evidence related to the owner’s 

education, employment, or any other 

evidence the owner considers relevant. 

Example 1 to paragraph (d)(3). A 

White male claiming to have 

experienced disadvantage in 

employment must provide evidence that 

his status of belonging to a particular 

group, e.g., persons with dyslexia, 

contributed to his disadvantage, as 

opposed to, e.g., a nationwide economic 

recession that resulted in widespread 

unemployment. 

(4) Individualized determination of 

economic disadvantage. (i) The owner 

must submit the Personal Net Worth 

Statement, available at https://

www.transportation.gov/civil-rights/ 

disadvantaged-business-enterprise/ 

ready-apply, using the calculation rules 

in § 26.68. An owner whose PNW 

exceeds $1.60 million is not 

economically disadvantaged under any 

circumstance. 

(ii) The owner must describe with 

particularity how the owner’s objective 

distinguishing feature identified in 

paragraph (d)(3)(i) of this section has 

resulted in the owner’s economic 

disadvantage. The owner may provide 

any financial or other information that 

the owner considers relevant. 

■ 51. Add § 26.68 to read as follows: 

§ 26.68 Personal net worth. 

(a) Calculation. (1) Exclude the 

SEDO’s ownership interest in the 

applicant or certified firm. 

(2) Exclude the SEDO’s equity in the 

SEDO’s primary residence, without 

reference to state marital laws or 

community property rules. Title to the 

property governs. 

Example 1 to paragraph (a)(2). The 

SEDO and their spouse hold joint title 

to their primary residence, for which 

they paid $300,000 and are coequal 

debtors on a bank mortgage and a home 

equity line of credit with current 

combined balances of $150,000. The 

SEDO may exclude the SEDO’s $75,000 

share of the equity. There is no 

exclusion when the SEDO does not own 

the home or when attributable debt 

balances exceed the purchase price. 

(3) One hundred percent of the 

contents of the SEDO’s primary 

residence belong to the SEDO. The total 

value of household contents is at least 

the total amount for which they are 

insured, taking into account all policies, 

riders, amendments, and endorsements. 

If the SEDO’s spouse or domestic 

partner cohabits with the SEDO, and the 

SEDO’s primary residence is also the 

spouse or domestic partner’s primary 

residence, then, subject to the following 

special rules, the SEDO is deemed to 

own 50% of those assets. 

(4) Motor vehicles of any type belong 

to the natural person who holds title. 

(5) Exclude liabilities contingent on a 

future event, of unfixed value, and those 

not owed in full on the date of the PNW 

Statement. 

Example 2 to paragraph (a)(5). The 

SEDO may not report a projected 

liability for Federal income tax unless 

and until the SEDO has reported the 

precise amount of the SEDO’s tax 

liability on a personal, Federal tax 

return, duly signed, dated, and filed 

with the Internal Revenue Service (IRS). 

If the SEDO has so reported to the IRS, 

the SEDO may exclude from the PNW 

Statement only the net amount still 

owed to the IRS, and not in arrears, on 

the latter of the regular due date (e.g., 

April 15) for the return or the date of the 

PNW Statement. If the SEDO reports 

and documents such a tax liability, the 

SEDO must also provide the SEDO’s 

request for deferred payment and, if 

applicable, the IRS’s acquiescence. 

(6) A natural person’s signatory (not 

guarantor) status on any debt instrument 

determines ownership of the liability. A 

business entity’s debt is not the SEDO’s 

liability at all unless: 

(i) The SEDO cosigns and is liable for 

100% of the debt in the event of default; 

and 

(ii) The creditor is a traditional 

financial institution or an entity that 

sells and finances sales of equipment in 

the ordinary course of its business, 

provided that the DBE or applicant 

actually uses the equipment other than 

incidentally in its business and the 

equipment secures the debt. 

Example 3 to paragraph (a)(6). When 

the SEDO and two other natural persons 

are jointly and severally liable to repay 

the debt, the SEDO may claim to be 

liable for only one third of principal and 

interest presently owing. 

(7) Include assets transferred to 

relatives or related entities within the 

two years preceding an application for 

certification or one year preceding the 

due date for a § 26.83(j) declaration, 

when the assets so transferred during 

the period have an aggregate value of 

more than $20,000. Relatives include 

the owner’s spouse or domestic partner, 

children (whether biological, adopted or 

stepchildren), siblings (including 

stepsiblings and those of the spouse or 

domestic partner), and parents 

(including stepparents and those of the 

spouse or domestic partner). Related 

entities include for-profit privately held 

companies of which any relative is an 

owner, officer, director, or equivalent; 

and family or other trusts of which any 

relative is grantor, trustee, or 

beneficiary, except when the transfer is 

irrevocable. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43677 

(8) Exclude the SEDO’s direct 

payments, on behalf of immediate 

family members or their children, to 

unrelated providers of healthcare, 

education, or legal services. 

(9) Exclude the SEDO’s direct 

payments to providers of goods and 

services directly related to a celebration 

of an immediate family member or her 

children’s significant, normally nonrecurring life event such as a 

christening, munj, bat mitzvah, 

graduation, wedding, retirement, 

memorial, or culturally analogous 

similar commemoration. 

(10) Exclude all assets of the SEDO 

that are held in vested pension plans, 

Individual Retirement Accounts, 401(k) 

accounts, or other retirement savings or 

retirement investment programs. 

(b) Regulatory adjustments. The PNW 

cap will be adjusted by January 1, 2024, 

or within [DATE 180 DAYS AFTER 

DATE OF PUBLICATION OF FINAL 

RULE]. It will be adjusted by 

multiplying $1,600,000 by the growth in 

total household net worth since 2019 as 

described by ‘‘Financial Accounts of the 

United States: Balance Sheet of 

Households and Nonprofit 

Organizations’’ produced by the Board 

of Governors of the Federal Reserve 

(https://www.federalreserve.gov/ 

releases/z1/). Subsequent PNW 

adjustments will be made every 5 years 

on the anniversary of the initial 

adjustment. The Department will post 

future PNW limit adjustments on the 

Departmental Office of Civil Rights’ web 

page. 

(1) The PNW adjustment will be based 

on the following formula: 

(2) The PNW cap will not be adjusted 

if the future year PNW cap determined 

under paragraph (b)(1) of this section is 

less than the previous amount. The cap 

will increase each year after the Federal 

Reserve releases its annual data, so long 

as the amount determined under 

paragraph (b)(1) is greater than the 

previous PNW cap. 

(c) Confidentiality. Notwithstanding 

any provision of Federal or state law, 

you must not release an individual’s 

Personal Net Worth Statement nor any 

documents pertaining to 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 or to any other state to which the 

individual’s firm has applied for 

certification under § 26.85. 

■ 52. Revise § 26.69 to read as follows: 

§ 26.69 What rules govern determinations 

of ownership? 

(a) General rule. A firm’s SEDO(s) 

must own at least 51% of every class of 

ownership. Each SEDO whose 

ownership is necessary to the firm’s 

eligibility must demonstrate that his or 

her ownership satisfies the requirements 

of this section. If not, the firm is 

ineligible. 

(b) Ownership acquisition and 

maintenance. The SEDO’s acquisition 

and maintenance of his or her 

ownership interest makes reasonable 

economic sense (RES) under the 

circumstances. 

(1) Acquisition. RES depends in part 

on the SEDO having acquired 

ownership at fair value. 

(2) Continuation. The SEDO’s 

continued ownership makes RES if he 

or she does not derive undue benefit 

relative to other owners. 

(3) Proportionality. RES requires that 

neither SEDOs nor non-SEDOs derive 

benefits or bear burdens that are clearly 

disproportionate to their ownership 

shares. 

(c) Investments. The SEDO may 

acquire ownership by purchase, capital 

contribution, or gift. Subject to the other 

requirements of this section, each is 

considered an ‘‘investment’’ in the firm, 

as are additional purchases, 

contributions, and gifts. All investments 

relied upon for eligibility must make 

RES. 

(1) Irrevocability. Investments must be 

unconditional, irrevocable, and at full 

risk of loss. 

(2) Title. Title generally determines 

ownership of investments. The rule in 

this paragraph (c)(2) operates 

independently of state or local 

community property, equitable 

distribution, or similar provisions. 

Thus, the person who has title to the 

investment owns it in proportion to his 

or her share of title. 

(3) Joint ownership. When the SEDO 

jointly owns an investment of cash or 

property, the SEDO may claim at least 

a 51% ownership interest only if the 

other joint owner formally transfers to 

the SEDO enough of his or her 

ownership in the investment to bring 

the SEDO’s investment to at least 51% 

of all investments in the firm. Such 

transfers may be gifts if they meet the 

requirements of paragraph (c)(4) of this 

section. 

(4) Gifts, including by bequest or 

inheritance. A gift of an ownership 

interest to the SEDO is an investment 

that makes RES when it satisfies the 

following criteria: 

(i) The transferor is or immediately 

becomes uninvolved with the applicant 

or DBE in any capacity and in any other 

business that performs similar work or 

contracts with the firm other than as a 

lessor or provider of standard support 

services; 

(ii) The transferor does not derive 

undue benefit; and 

(iii) A writing (e.g., a cancelled check 

when there is no better evidence) 

documents the gift. 

(d) Purchases and capital 

contributions. (1) Purchases of 

ownership interests are investments 

when the consideration is entirely 

monetary and not a trade of property or 

services. 

(2) Contributed capital may be cash, 

tangible property, realty, or a 

combination. 

(3) Contributions of expertise or 

intangible property are investments 

when they are extraordinary, uniquely 

suited to the firm’s main business, and 

of reasonably and credibly ascertained 

value documented at the time of the 

company’s application. In addition, and 

in all cases, the SEDO must have a 

substantial financial investment at the 

time the firm applies for certification 

and thereafter. 

(4) Contributions of time, labor, 

services, and the like are not 

investments. 

(5) Loans to or from the firm or a nondisadvantaged owner, guarantees, the 

firm’s own purchases and redemptions, 

and capital contributed by others are not 

the SEDO’s investments. 

(e) Debt-financed investments—(1) 

General rule. Subject to the other 

provisions of this section, including the 

RES requirement, the SEDO may borrow 

money to finance his/her/their 

investment entirely or partially if the 

SEDO has paid, on a net basis, at least 

15% of the total value of the investment 

by the time the firm applies for 

certification. The net payment must be 

from the SEDO’s own, not borrowed, 

money. Money that the SEDO receives 

as a gift or transfer described in 

paragraph (c)(3) or (4) of this section is 

the SEDO’s own. 


lotter on DSK11XQN23PROD with PROPOSALS2EP21JY22.001</GPH>

[ Ql - Q4AverageHouseholdNetWorthofFutureyear ] 

Future Year PNW cap = [$1,600,000] * Ql _ Q4Average Household Net Worth of2019 ($114,189,981 million)] 
43678 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

Example 1 to paragraph (e)(1). A 

SEDO who borrows $9,000 of her 

$10,000 investment in Applicant, Inc., 

must have repaid, from her own funds, 

at least $500 of the loan’s principal by 

the time of application. 

Example 2 to paragraph (e)(1). A 

SEDO who finances $8,000 of a $10,000 

investment in Applicant, Inc., may 

apply for certification at any time. 

(2) The SEDO must have a significant 

amount of the SEDO’s own money 

invested and at full risk of loss. 

(3) The loan must be real, enforceable, 

not in default, and not offset by another 

agreement. 

(4) The SEDO must be the debtor. 

(5) The firm may not be party to the 

loan in any capacity, nor can its 

property serve as collateral. The SEDO 

may not rely on the company’s credit to 

finance his or her investment. 

(6) When the creditor forgives the 

debt or the SEDO defaults, the firm is no 

longer eligible. 

(7) The overall investment must make 

RES. 

(f) Curative measures. The rules of 

this section do not preclude transactions 

that further the objectives of, and 

compliance with, the provisions of this 

part. The SEDO or firm may enter into 

legitimate transactions, alter the terms 

of ownership, make additional 

investments, or bolster underlying 

documentation in a good faith effort to 

correct impediments to eligibility, as 

long as the actions are consistent with 

this part and make RES. The certifier 

should not hinder the SEDO or firm 

when it attempts to become compliant 

with certification requirements of this 

part. 

(g) Anti-abuse rules. (1) Transactions 

lacking RES or apparent business 

purpose may be disregarded. 

(2) Multiple transactions occurring 

within any 2-year period may be 

considered one transaction that leads 

from beginning circumstances to end 

result. 

(3) Transactions that have evasive 

effect are null and void. 

■ 53. Revise § 26.71 to read as follows: 

§ 26.71 What rules govern determinations 

concerning control? 

(a) General rules. (1) SEDOs of at least 

51% of the company must control it. 

(2) Control determinations must 

consider all pertinent facts, viewed 

together and in context. 

(3) A firm must have operations in the 

business for which it seeks certification 

at the time it applies. Certifiers do not 

certify plans or intentions or issue 

contingent or conditional certifications. 

(b) SEDO as final decision maker. The 

SEDO must be the ultimate decision 

maker in fact, regardless of operational, 

policy, or delegation arrangements. 

(c) Governance. Governance 

provisions may not require that the 

SEDO obtain concurrence or consent 

from a non-SEDO or other participant to 

transact business on behalf of the firm. 

(1) Highest officer position. A 

disadvantaged owner must hold the 

highest officer position in the company 

(e.g., chief executive officer or 

president). 

(2) Board of directors. Except as 

detailed in paragraph (c)(4) of this 

section, the SEDO must have present 

control of the firm’s board of directors, 

or other governing body, through the 

number of eligible votes. 

(i) Quorum requirements. Provisions 

for the establishment of a quorum must 

not block the SEDO from calling a 

meeting to vote and transact business on 

behalf of the firm. 

(ii) Shareholder actions. SEDO(s) 

authority to change the firm’s 

composition via shareholder action does 

not prove control within the meaning of 

paragraph (c) of this section. 

(3) Partnerships. In a partnership, one 

or more disadvantaged owners must 

serve as general partners, with control 

over all partnership decisions. 

(4) Exception. Bylaws or other 

governing provisions that require nonSEDO consent for extraordinary actions 

generally do not contravene the rules in 

paragraph (c) of this section. Nonexclusive examples are a sale of the 

company or substantially all of its 

assets, mergers, and a sudden, 

wholesale change of type of business. 

(d) Expertise. The SEDO must have an 

overall understanding of the business 

and its essential operations sufficient to 

make sound managerial decisions not 

primarily of an administrative nature. 

The requirements of this paragraph (d) 

vary with type of business, degree of 

technological intensity, and scale. In 

some cases, managerial competence 

suffices. 

(e) SEDO decisions. The firm must 

show that the SEDO critically analyzes 

operational information provided to the 

owner by other participants in the firm’s 

activities and has made reasonable 

business decisions based on the SEDO’s 

independent analysis. 

(f) Delegation. The SEDO may 

delegate administrative activities or 

operational oversight to others if the 

SEDO retains unilateral power to 

terminate the delegate(s) and the chain 

of command is evident to all 

participants in the company and 

persons associated which the firm does 

business. 

(1) No non-SED participant may have 

power equal to or greater than that of 

the SEDO, considering all the 

circumstances. Aggregate magnitude 

and significance govern; a numerical 

tally does not. 

(2) Non-SED participants may not 

make non-routine purchases or 

disbursements, enter into substantial 

contracts, or make decisions that affect 

company viability without the SEDO’s 

consent. 

(3) Written provisions or policies that 

specify the terms under which non-SED 

participants may sign or act on the 

SEDO’s behalf with respect to recurring 

matters generally do not violate 

paragraph (f) of this section, as long as 

they are consistent with the SEDO 

having exclusive and ultimate 

responsibility for the action. 

(g) Independent business. When the 

firm receives from or shares personnel, 

facilities, equipment, financial support, 

or other essential resources, with 

another business or individual on other 

than commercially reasonable terms, the 

firm must prove that it would be viable 

as a going concern without the 

arrangement. 

(h) Franchise and license agreements. 

(1) A business operating under a 

franchise or license agreement may be 

certified if it meets the standards in this 

subpart and the franchiser or licenser is 

not affiliated with the franchisee or 

licensee. In determining whether 

affiliation exists, you should generally 

not consider the restraints relating to 

standardized quality, advertising, 

accounting format, and other provisions 

imposed on the franchisee or licensee 

by the franchise agreement or license, if 

the franchisee or licensee has the right 

to profit from its efforts and bears the 

risk of loss commensurate with 

ownership. Alternatively, even though a 

franchisee or licensee may not be 

controlled by virtue of such provisions 

in the franchise agreement or license, 

affiliation could arise through other 

means, such as common management or 

excessive restrictions on the sale or 

transfer of the franchise interest or 

license. 

(2) A DBE must not regularly use 

another firm’s business-critical vehicles, 

equipment, machinery, or facilities to 

provide a product or service under 

contract to the same firm or one in a 

substantially similar business. 

(i) Exception 1. This paragraph (h)(2) 

does not preclude the firm from 

providing services to a single customer 

or to a small number of them, provided 

that the firm is not merely a conduit, 

captive, or unnecessary third party 

acting on behalf of another firm or 

individual. Similarly, providing a 

volume discount to such a customer 

does not impair viability unless the firm 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43679 

repeatedly provides the service at a 

significant and unsustainable loss. 

(ii) Exception 2. A DBE may share 

essential resources and deal exclusively 

with another firm that the SEDO 51% 

owns and controls. 

■ 54. Revise § 26.73 to read as follows: 

§ 26.73 What rules govern the assignment 

of NAICS codes? 

(a) You must grant certification to a 

firm only for specific types of work in 

which the SEDOs control. To become 

certified in an additional type of work, 

the firm must demonstrate to you only 

that its SEDOs control the firm with 

respect to that type of work. You must 

not require that the firm be recertified 

or submit a new application for 

certification, but you must verify the 

disadvantaged owner’s control of the 

firm in the additional type of work. 

(1) The types of work a firm performs 

(whether on initial certification or when 

a new type of work is added) must be 

described in terms of the most specific 

available NAICS code for that type of 

work. If you choose, you may also, in 

addition to applying the appropriate 

NAICS code, apply a descriptor from a 

classification scheme of equivalent 

detail and specificity. A correct NAICS 

code is one that describes, as 

specifically as possible, the principal 

goods or services which the firm would 

provide to DOT recipients. Multiple 

NAICS codes may be assigned where 

appropriate. Program participants must 

rely on, and not depart from, the plain 

meaning of NAICS code descriptions in 

determining the scope of a firm’s 

certification. 

(2) Firms and certifiers must check 

carefully to make sure that the NAICS 

codes cited in a certification are kept 

up-to-date and accurately reflect work 

which the UCP has determined the 

firm’s owners can control. The firm 

bears the burden of providing detailed 

company information the certifying 

agency needs to make an appropriate 

NAICS code designation. 

(3) If a firm believes that there is not 

a NAICS code that fully or clearly 

describes the type(s) of work in which 

it is seeking to be certified as a DBE, the 

firm may request that the certifying 

agency, in its certification 

documentation, supplement the 

assigned NAICS code(s) with a clear, 

specific, and detailed narrative 

description of the type of work in which 

the firm is certified. A vague, general, or 

confusing description is not sufficient 

for this purpose, and recipients should 

not rely on such a description in 

determining whether a firm’s 

participation can be counted toward 

DBE goals. 

(4) A certifier is not precluded from 

changing a certification classification or 

description if there is a factual basis in 

the record. However, certifiers must not 

make after-the-fact statements about the 

scope of a certification, not supported 

by evidence in the record of the 

certification action. 

(b) [Reserved] 

■ 55. Amend § 26.81 by: 

■ a. Revising paragraphs (a)(1) and 5. 

■ b. In paragraph (e), removing the word 

‘‘the’’ from the first sentence. 

■ c. Revising paragraph (g). 

The revisions read as follows: 

§ 26.81 What are the requirements for 

Unified Certification Programs? 

(a) * * * 

(1) You and the other recipients in 

your state must sign an agreement 

establishing the UCP for that state and 

submit the agreement to the Secretary 

for approval. 

* * * * * 

(5) If you and the other recipients in 

your state fail to meet the deadlines set 

forth in paragraph (a) of this section, 

you will have the opportunity to make 

an explanation to the Secretary why a 

deadline could not be met and why 

meeting the deadline was beyond your 

control. If you fail to make such an 

explanation, or the explanation does not 

justify the failure to meet the deadline, 

the Secretary will direct you to 

complete the required action by a 

certain date. If you and the other 

recipients fail to carry out this direction 

in a timely manner, you are collectively 

in noncompliance with this part. 

* * * * * 

(g) Each UCP must maintain a unified 

DBE directory containing, for all firms 

certified by the UCP (including those 

from other states certified under the 

provisions of this part), the information 

required by § 26.31. The UCP must 

make the directory available to the 

public electronically, on the internet. 

The UCP must update the electronic 

version of the directory by including 

additions, deletions, and other changes 

as soon as they are made. 

* * * * * 

■ 56. Amend § 26.83 by: 

■ a. Revising the section heading and 

paragraph (c)(1)(i), (c)(3), (h), (i)(3), (j), 

(k), (l), and (m). 

■ b. Adding paragraph (n). 

The revisions and addition read as 

follows: 

§ 26.83 What procedures do certifiers 

follow in making certification decisions? 

* * * * * 

(c)(1) * * * 

(i) Perform an on-site visit, virtually 

or in person, to the firm’s principal 

place of business. You must interview 

the principal owners and officers and 

review their re ́sume ́s and/or work 

histories. You may interview key 

personnel of the firm if necessary. You 

may make an audio recording of the 

interview. You must also perform an onsite visit, either virtually or in-person, to 

job sites if there are sites on which the 

firm is working at the time of the 

eligibility investigation in your 

jurisdiction or local area; 

* * * * * 

(3) You must make sure that the 

applicant attests to the accuracy and 

truthfulness of the information on the 

application form. This must be done in 

the form of an unsworn Declaration of 

Eligibility executed under penalty of 

perjury of the laws of the United States. 

* * * * * 

(h)(1) Once you have certified a DBE, 

it must remain certified until and unless 

you have removed its certification, in 

whole or in part (i.e, NAICS Code 

removal), through the procedures of 

§ 26.87. 

(2) You may not require a DBE to 

reapply for certification or undergo a 

recertification process. However, you 

may conduct a certification review of a 

DBE firm, including a new on-site 

review (virtually or in person), if 

appropriate in light of changed 

circumstances (e.g., of the kind 

requiring notice under paragraph (i) of 

this section or relating to suspension of 

certification under § 26.88), a complaint, 

or other information concerning the 

firm’s eligibility. If information comes to 

your attention that leads you to question 

the firm’s eligibility, you may conduct 

an on-site review (virtually or in person) 

on an unannounced basis, at the firm’s 

offices and job sites. You may also rely 

upon the site visit report of any other 

certifier with respect to a firm applying 

for certification, if it falls within the onsite review timeframe specified in your 

UCP agreement. 

(i) * * * 

(3) The notice must take the form of 

an unsworn Declaration of Eligibility 

executed under penalty of perjury of the 

laws of the United States. You must 

provide the written notification within 

30 days of the occurrence of the change. 

If you fail to make timely notification of 

such a change, you will be deemed to 

have failed to cooperate under 

§ 26.109(c). 

(j) If you are a DBE, you must provide 

to the recipient, every year on the 

anniversary of the date of your 

certification, an unsworn Declaration of 

Eligibility executed under penalty of 

perjury of the laws of the United States. 

This declaration must affirm that there 


lotter on DSK11XQN23PROD with PROPOSALS2
43680 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

have been no changes in the firm’s 

circumstances affecting its ability to 

meet size, disadvantaged status, 

ownership, or control requirements of 

this part or any material changes in the 

information provided in its application 

form, except for changes about which 

you have notified the recipient under 

paragraph (i) of this section. The 

declaration must specifically affirm that 

your firm continues to meet SBA 

business size criteria and the overall 

gross receipts cap of this part, 

documenting this affirmation with 

supporting documentation of your 

firm’s size and gross receipts (e.g., 

submission of Federal tax returns). If 

you fail to provide this declaration in a 

timely manner, you will be deemed to 

have failed to cooperate under 

§ 26.109(c). 

(k) You must advise each applicant 

within 30 days from your receipt of the 

application whether the application is 

complete and suitable for evaluation 

and, if not, what additional information 

or action is required. 

(l) If you are a certifier, you must 

issue decisions on applications for 

certification within 90 days of receipt of 

all information required from the 

applicant under this part. You may 

extend this time period once, for no 

more than an additional 30 days, upon 

written notice to the firm, explaining 

fully and specifically the reasons for the 

extension. On a case-by-case basis, the 

concerned OA may allow you to further 

extend the deadline one time if it 

receives from you a written explanation 

of why you need more time. Your 

failure to issue a decision by the 

applicable deadline under this 

paragraph is deemed a constructive 

denial of the application, on the basis of 

which the firm may appeal to DOT 

under § 26.89. You may also be subject 

to noncompliance penalties described in 

§§ 26.103 and 26.105. 

(m)(1) You may notify the applicant 

about ineligibility concerns that you 

may have and allow the firm to rectify 

deficiencies within the period for 

making a decision in paragraph (l) of 

this section. 

(2) If a firm takes curative measure 

before your decision, you must consider 

any evidence it submits to you of having 

taken such measures. A curative 

measure does not automatically equate 

to a firm’s attempt to circumvent the 

rules of this part. 

Example 1 to paragraph (m)(2). The 

firm may obtain proof of a financial 

contribution meeting the ownership 

requirements in § 26.69. 

Example 2 to paragraph (m)(2). The 

firm might revise a disqualifying 

operating agreement or bylaw provision 

to meet the control requirements in 

§ 26.71. 

(n) Except as otherwise provided in 

this paragraph (n), if an applicant for 

DBE certification withdraws its 

application before you have issued a 

decision on the application, the 

applicant can resubmit the application 

at any time. As a recipient or UCP, you 

may not apply the waiting period 

provided under § 26.86(c) before 

allowing the applicant to resubmit its 

application. However, you may place 

the reapplication at the ‘‘end of the 

line,’’ behind other applications that 

have been made since the firm’s 

previous application was withdrawn. 

You may also apply the waiting period 

provided under § 26.86(c) to a firm that 

has established a pattern of frequently 

withdrawing applications before you 

make a decision. 

■ 57. Revise § 26.85 to read as follows: 

§ 26.85 Interstate certification. 

(a) Applicability. This section applies 

to a DBE certified in any state (‘‘State 

A’’). 

(b) General rule. When a DBE certified 

in State A applies to another state 

(‘‘State B’’) for DBE certification, State B 

must accept State A’s certification of the 

DBE. 

(c) Application procedure. To obtain 

certification in State B, the DBE must 

provide: 

(1) A cover letter with its application 

that specifies that it is applying for 

interstate certification; 

(2) A copy of the certificate from State 

A or an electronic image of the UCP 

directory of State A that shows the DBE 

certification; and 

(3) A DOE signed under penalty of 

perjury. This is the same declaration 

described in § 26.83(j). 

(d) Verification of eligibility. Within 

10 business days of receiving the 

documents required under paragraph (c) 

of this section, State B must verify the 

certification of the DBE by reference to 

the online UCP directory of State A. 

(e) Certification. If the DBE fulfils the 

requirements of paragraph (c) of this 

section and State B affirmatively verifies 

the State A certification, State B must 

certify the DBE without undergoing 

further procedures and provide the DBE 

with a letter documenting its 

certification in State B. 

(f) Noncompliance. Failure of State B 

to comply with paragraphs (d) and (e) of 

this section would be considered noncompliance with this part. 

(g) Post-interstate certification 

proceedings—(1) Requests for records. 

After State B certifies the DBE, the UCP 

may request a fully unredacted copy of 

all, or a portion of, the DBE’s 

certification file from any other UCP in 

which the DBE is certified. 

(2) Availability of records. A UCP 

must provide a complete unredacted 

copy of the DBE’s certification material 

to State B within 10 business days of 

receiving the request. Confidentiality 

requirements of §§ 26.83(d) and 

26.109(b) do not apply. 

(3) Oversight and compliance 

activities related to an out-of-state DBE. 

Once State B certifies a DBE through the 

interstate certification process, it 

becomes a DBE in State B and must be 

treated like any other DBE in its 

directory of certified firms. 

(i) The DBE must provide an annual 

Declaration of Eligibility with 

documentation of gross receipts, under 

§ 26.83(j), to State B on the anniversary 

date of the DBE’s State A certification. 

(ii) State B may conduct its own 

certification review of a DBE under 

§ 26.83(h), or as specified in its UCP 

plan. 

(iii) State B must conduct its own 

investigation of third-party complaints, 

State A, or any other UCP where the 

firm holds certification, must cooperate 

to the extent required by paragraph (h) 

of this section and § 26.109(c). 

(iv) Except as described in paragraph 

(j) of this section, State B must initiate 

its own decertification proceedings to 

remove a DBE’s eligibility if it finds 

reasonable cause to believe that the DBE 

is ineligible. 

(v) If State B decertifies a DBE for any 

reason, State B must email a copy of its 

decision to State A and make the 

decision available to any UCP upon 

request within 10 business days. 

(4) Joint decertification proceedings. 

Any UCP may join a decertification 

proceeding initiated by another state, 

pursuant to § 26.87, on the same 

grounds and facts specified in the notice 

proposing to remove eligibility. 

(i) The UCP joining the decertification 

proceeding may present evidence at the 

hearing, but it cannot add additional 

grounds for decertification not specified 

in the initiating state’s notice proposing 

removal. 

(ii) After a UCP(s) joins another state’s 

decertification proceedings, the final 

notice of decision applies to all states 

that are a party to the action. The final 

notice must include the appeal 

instructions in § 26.86(a). 

(5) Ineligibility database. (i) When a 

UCP decertifies a firm, in whole or in 

part (i.e., NAICS code removal), it must 

make an entry in the Departmental 

Office of Civil Rights’ (DOCR) online 

ineligibility database. The UCP must 

enter the following information: 

(A) The name of the firm; 

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


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43681 

(C) The type and date of the action; 

and 

(D) The reason for the action. 

(ii) A UCP must check DOCR’s online 

ineligibility database at least once every 

month to determine whether any DBE 

your UCP certified or is applying to 

your UCP is in the database. 

(iii) For any such firm in paragraph 

(k)(2) of this section that is on the list, 

a UCP must promptly request a copy of 

the adverse decision from the UCP that 

made the decision. If the UCP receives 

such a request, it must provide a copy 

of the decision to the requesting UCP 

within 5 business days of receiving the 

request. The UCP receiving the decision 

must then consider the information in 

the decision in determining what, if 

any, action to take with respect to the 

DBE firm or applicant. 

(6) Effect of DOT’s appeal decisions. 

If a DBE appeals a decertification 

decision, and the Department upholds 

the decision, the firm will lose its DBE 

eligibility in every UCP in which it is 

certified. 

(i) Exception. The rules of this section 

do not apply when the Department 

upholds a decertification decision that 

is based on grounds specific to a DBE’s 

actions pertaining to a specific UCP 

under §§ 26.83(j) (Declaration of 

Eligibility) and 26.87(e)(6) (failure to 

cooperate). 

(ii) [Reserved] 

■ 58. Revise § 26.86 to read as follows: 

§ 26.86 What rules govern certifiers’ 

denials of in-state certification 

applications? 

(a) When you deny a request by a firm 

an application for certification, you 

must provide the applicant firm a 

written explanation of the reasons for 

the denial, specifically referencing the 

evidence in the record that supports 

each reason. You must also include, 

verbatim, the following instructions for 

filing an appeal with DOT: 

You may appeal this decision to the U.S. 

Department of Transportation. If you want to 

file an appeal, you must email the 

Department at DBEAppeals@dot.gov within 

45 days of the date of this decision, setting 

forth a full and specific statement as to why 

you believe this decision is erroneous, what 

significant facts that you believe we did not 

consider, or what provisions of the DBE 

program regulation you believe we 

misapplied. You have the right to request 

copies of all documents and other 

information on which this decision is based. 

USDOT does not accept notices of intent to 

appeal, partial appeals, or otherwise noncompliant submissions. Please include a 

copy of this letter and your contact 

information when you file your appeal. 

(b) You must promptly provide the 

applicant copies of all documents and 

other information on which you based 

the denial if the applicant requests 

them. 

(c) You must establish waiting period 

of no more than twelve months. After 

the waiting period expires, the denied 

firm may reapply to any member of the 

UCP that denied the application. The 

time period for reapplication begins to 

run on the date you send the denial 

letter. An applicant’s appeal of your 

decision to the Department pursuant to 

§ 26.89 does not extend this period. You 

must include this information, 

including the waiting period for 

reapplication, in your denial letter. 

■ 59. Revise § 26.87 to read as follows: 

§ 26.87 What procedures does a certifier 

use to remove a DBE’s certification? 

(a) Burden of proof. If you seek to 

decertify a DBE under the circumstances 

described in paragraph (b), (c), or (d) of 

this section, you bear the burden of 

proving, by a preponderance of the 

evidence, that the firm does not meet 

the certification standards of this part. 

(b) Ineligibility complaint. (1) Any 

person may file with you a written 

complaint explaining why you should 

decertify a certified firm. You are not 

required to accept a general allegation 

that a firm is ineligible or an anonymous 

complaint. The complaint may include 

any information or arguments 

supporting the complainant’s assertion 

that the firm is ineligible and should not 

continue to be certified. Confidentiality 

of complainants’ identities must be 

protected as provided in § 26.109(b). 

(2) You must review your records 

concerning the firm, any material 

provided by the firm and the 

complainant, and other available 

information. You may request 

additional information from the firm or 

conduct any other investigation that you 

deem necessary. 

(3) If you determine, based on this 

review, that there is reasonable cause to 

believe that the firm is no longer eligible 

for DBE certification, you must provide 

the firm written notice of your intent to 

decertify it, setting forth the reasons for 

the proposed determination. The 

written notice must offer the firm an 

opportunity for an informal hearing or 

to submit written arguments or evidence 

demonstrating its continued eligibility. 

If you determine that reasonable cause 

for decertifying the firm does not exist, 

you must notify the complainant and 

the firm in writing of this determination 

and the reasons for it. All statements of 

reasons for findings on the issue of 

reasonable cause must specifically 

reference the evidence in the record on 

which each reason is based. 

(c) DOT directive. (1) If an OA 

determines that there is reasonable 

cause to believe that a firm you or 

another member of your UCP certified 

does not meet the eligibility criteria of 

this part, the OA may direct you to 

initiate a proceeding to remove the 

firm’s certification. 

(2) The OA must provide you and the 

firm written notice setting forth the 

reasons for the directive, including any 

relevant documentation or other 

information. 

(3) You must immediately commence 

a proceeding to remove eligibility as 

provided by paragraph (d) of this 

section. 

(d) Certifier-initiated proceeding. If 

you determine that you have reasonable 

cause to decertify a firm, you must 

provide the firm written notice of your 

intent (NOI) to decertify it. The NOI 

must state clearly and succinctly each of 

the reasons for the proposed action and 

must specifically identify all the 

information on which you base each 

reason. 

(e) Grounds for decertification. Your 

notices of intent and final 

decertification decisions must 

specifically identify which of the 

following ground(s) you rely on: 

(1) Changes in the firm’s 

circumstances since the certification of 

the firm by you or another member of 

your UCP that render the firm unable to 

meet the eligibility standards of this 

part; 

(2) The firm fails to timely submit an 

annual Declaration of Eligibility per 

§ 26.83(j); 

(3) Information or evidence regarding 

the firm’s eligibility that was not 

available to you at the time the firm was 

certified; 

(4) Information relevant to eligibility 

that the firm concealed or 

misrepresented; 

(5) A change in DOT’s certification 

standards or requirements after the firm 

was certified. In this instance, you must 

offer the firm, in writing, an opportunity 

to cure any defects within 30 days. If the 

firm does not do so, you may proceed 

with sending the firm a notice of intent 

to decertify; 

(6) Your decision to certify the firm 

was clearly erroneous; 

(7) The firm has failed to cooperate 

with you under § 26.109(c); 

(8) The firm has exhibited a pattern of 

conduct indicating its involvement in 

attempts to subvert the intent or 

requirements of the DBE program; or 

(9) The firm has been suspended or 

debarred for conduct related to the DBE 

program. The notice required by 

paragraph (h) of this section must 

include a copy of the suspension or 


lotter on DSK11XQN23PROD with PROPOSALS2
43682 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

debarment action. A decision to remove 

a firm for this reason will not be subject 

to the hearing procedures in paragraph 

(d) of this section. 

(f) Hearing. When you notify a DBE 

that you have reasonable cause to 

decertify it, as provided in paragraph 

(b), (c), or (d) of this section, you must 

give the firm written notification of an 

opportunity for an informal hearing. 

The hearing must be conducted either in 

person or virtually using an interactive 

video conference. The firm may accept 

the hearing offer via properly addressed 

email sent by 4:30 p.m. in the certifier’s 

time zone by the 7th day following the 

date of the NOI; failure of the firm to do 

so will result in the firm’s forfeiture of 

the hearing opportunity. You and the 

firm must schedule and conduct the 

hearing not more than 45 business days 

(unless otherwise authorized by the 

appropriate OA) after you notify the 

firm of the opportunity to have a 

hearing. The firm may elect to submit 

written arguments or other information 

in lieu of a hearing. In either situation, 

you bear the same burden of proving, by 

a preponderance of the evidence, that 

the firm is no longer eligible for 

participation in the DBE program. The 

firm must submit the written arguments 

or other information no later than 7 days 

prior to the hearing date. 

(1) At the hearing the SEDO may 

respond to the reasons for the proposal 

to remove the firm’s certification and 

provide information and arguments 

concerning why it should remain 

certified. However, the firm is not 

entitled to a hearing if the ground for 

decertification is the firm’s failure to 

timely submit a § 26.83(j) annual 

declaration. If the firm does not provide 

the annual declaration within 15 days of 

your NOI, you may issue a final notice 

of decertification based on § 26.83(j) 

and/or § 26.109(c). 

(2) Questions related to the SEDO’s 

control of the firm must be answered by 

the SEDO. The SEDO’s attorney, a nonSEDO or other individuals involved 

with the firm are permitted to attend the 

hearing and answer questions related to 

their own experience or more generally 

about the firm’s ownership, structure, 

and operations. No part of this 

paragraph (f)(2) precludes the SEDO 

from having attorney representation at 

the hearing. 

(3) You must maintain a complete and 

verbatim record of the hearing, either in 

writing or audio (or both). If the firm 

appeals to DOT under § 26.89, you must 

provide a transcript of the hearing to 

DOT and, on request, to the firm. You 

must retain the original record of the 

hearing. 

(g) Separation of functions. You must 

ensure that the decision in a proceeding 

to decertify a firm is made by an office 

and personnel that did not take part in 

actions leading to or seeking to 

implement the proposal to decertify the 

firm and are not subject, with respect to 

the matter, to direction from the office 

or personnel who did take part in these 

actions. 

(1) Your method of implementing this 

requirement must be made part of your 

DBE program and approved by the 

appropriate OA. 

(2) The decisionmaker must be an 

individual who is knowledgeable about 

the certification requirements of this 

part. 

(h) Notice of decision. You must send 

the firm a final written decision no later 

than 30 days of the informal hearing 

and/or receiving written arguments/ 

evidence from the firm in response to 

your NOI. If you decide to decertify the 

firm, you must provide the firm a 

written notice of decertification (NOD). 

(1) The NOD must describe with 

particularity the reason(s) for your 

decision, including specific references 

to the evidence in the record that 

supports each reason. The NOD must 

also inform the firm of the consequences 

of your decision under paragraph (j) of 

this section and of its appeal rights 

under § 26.89. 

(2) You must send copies of the NOD 

to the complainant in an ineligibility 

complaint or to the OA that directed 

you to initiate the proceeding. 

(3) When sending a copy of an NOD 

to a complainant other than an OA, you 

must not include information 

reasonably construed as confidential 

business information, unless you have 

the written consent of the firm that 

submitted the information. 

(4) You must make an entry in 

DOCR’s online ineligibility 

determination database. You must enter 

the name of the firm, names(s) of the 

firm’s owner(s), date of your decision, 

and the reason(s) for your action. 

(i) Status of firm during proceeding. 

(1) A firm remains an eligible DBE 

during the pendency of your proceeding 

to remove its eligibility. 

(2) The firm does not become 

ineligible until the issuance of the 

notice provided for in paragraph (h) of 

this section. 

(j) Effects of removal of eligibility. 

When you remove a firm’s eligibility, 

you must take the following actions: 

(1) When a prime contractor has made 

a commitment to using the ineligible 

firm, but a subcontract has not been 

executed before you issue the 

decertification notice provided for in 

paragraph (g) of this section, the 

ineligible firm does not count toward 

the contract goal. You must direct the 

prime contractor to meet the contract 

goal with an eligible DBE firm or 

demonstrate to you that it has made 

good faith efforts to do so. 

(2) When you have made a 

commitment to using a DBE prime 

contractor, but a contract has not been 

executed before you issue the 

decertification notice provided for in 

paragraph (g) of this section, the 

ineligible firm does not count toward 

your overall DBE goal. 

(3) If a prime contractor has executed 

a subcontract with the firm before you 

have notified the firm of its ineligibility, 

the prime contractor may continue to 

use the firm and may continue to 

receive credit toward the DBE goal for 

the firm’s work. In this case, however, 

the prime contractor may not extend or 

add work to the contract after the firm 

was notified of its ineligibility without 

prior written concurrence from 

recipient. 

(4) If a prime contractor has executed 

a subcontract with the firm before you 

have notified the firm of its ineligibility, 

the prime contractor may continue to 

use the firm as set forth in paragraph 

(j)(3) of this section; however, the 

portion of the ineligible firm’s 

continued performance of the contract 

must not count toward your overall 

goal. 

(5) If you have executed a prime 

contract with a DBE that was later ruled 

ineligible, the portion of the ineligible 

firm’s performance of the contract 

remaining after you issued the notice of 

its ineligibility must not count toward 

your overall goal, but the DBE’s 

performance of the contract may 

continue to count toward satisfying the 

contract goal. 

(6) The following exceptions apply to 

paragraph (j) of this section. 

(i) If the DBE’s ineligibility is caused 

solely by its having exceeded the size 

standard during the performance of the 

contract, you may continue to count the 

portion of the ineligible firm’s 

performance of the contract remaining 

after you issued the notice of its 

ineligibility toward your overall goal as 

well as toward the contract goals. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43683 

(ii) If the DBE’s ineligibility results 

from its acquisition by a non-DBE, you 

may not continue to count the portion 

of the ineligible firm’s performance on 

the contract remaining after you issued 

the notice of its ineligibility toward 

either the contract goal or your overall 

goal, even if a prime contractor has 

executed a subcontract with the firm or 

you have executed a prime contract 

with the DBE that was later ruled 

ineligible. In this case, if eliminating the 

credit of the ineligible firm will affect 

the prime contractor’s ability to meet 

the contract goal, you must direct the 

prime contractor to subcontract to an 

eligible DBE firm to the extent needed 

to meet the contract goal, or 

demonstrate to you that it has made 

good faith efforts to do so. 

■ 60. Revise § 26.88 to read as follows: 

§ 26.88 Summary suspension of 

certification. 

(a) Definition, operation, and effect. 

Summary suspension is an 

extraordinary remedy for lapses in 

compliance that cannot reasonably or 

adequately be resolved by other means. 

A certifier may summarily suspend a 

DBE’s certification in the circumstances 

and according to the procedures 

described in this section. 

(1) A firm’s certification is suspended 

under this part as soon as the certifier 

transmits electronic notice to its owner 

at the last known email address. 

(2) During the suspension period, the 

DBE may not be considered to meet a 

contract or participation goal on 

contracts executed during the 

suspension period. 

(b) Mandatory and elective 

suspensions—(1) Mandatory. The 

certifier must summarily suspend a 

DBE’s certification when: 

(i) The certifier has clear and credible 

evidence of the DBE’s or its SEDO’s 

involvement in fraud or other serious 

criminal activity. 

(ii) The OA with oversight so directs. 

(2) Elective. The certifier has 

discretion to suspend summarily when: 

(i) It has clear and credible evidence 

that the DBE’s continued certification 

poses a substantial threat to program 

integrity; or 

(ii) An owner upon whom the firm 

relies for eligibility does not timely file 

the declaration and gross receipts 

documentation that § 26.83(j) requires. 

(3) Flexibilities. In most cases, an 

information request or notice of intent 

under § 26.87 to decertify is a sufficient 

response to events described in 

paragraphs (b)(1) and (2) of this section. 

The certifier should consider the burden 

to the DBE and to itself in determining 

whether summary suspension is a more 

prudent and proportionate, effective 

response. The certifier may elect to 

suspend the same DBE just once in any 

12-month period. 

(c) Procedures—(1) Notice. The 

certifier must notify the firm, by email, 

of its summary suspension on a 

business day during regular business 

hours. The notice must explain the 

action, the reason for it, the 

consequences, and the evidence on 

which the certifier relies. 

(i) Elective summary suspensions 

must only provide a single reason for 

the action. 

(ii) Mandatory summary suspensions 

may provide multiple reasons. 

(iii) In either scenario, i.e., elective or 

mandatory, the notice must demand that 

the DBE show cause why it should 

remain certified and provide the time 

and date of a virtual show-cause hearing 

at which the firm may present 

information and arguments concerning 

why the certifier should lift the 

suspension. 

(2) Other requirements. As used in 

this section, ‘‘days’’ refers to calendar 

days unless otherwise stated. The 

hearing date must be on a business day 

that is at least 15 but not more than 25 

days after the date of the notice. The 

DBE may respond in writing in lieu of 

or in addition to attending the hearing; 

however, it will have waived its right to 

a hearing if it does not confirm its 

attendance within 10 days of the notice 

and will have forfeited its certification 

if it does not acknowledge the notice 

within 15 days. The show-cause hearing 

must be conducted as a video 

conference on a standard commercial 

platform that the DBE may readily 

access at no cost. 

(3) DBE response. The DBE may 

provide information and arguments 

concerning its continuing eligibility 

until the 15th day following the 

suspension notice or the day of the 

hearing, if any, whichever is later. The 

DBE may email or fax its written 

response or send it via common carrier 

or courier. Email submissions correctly 

addressed are effective when sent; faxes 

are effective when and to the extent 

confirmed; and physical deliveries are 

effective when the carrier confirms 

delivery. While there is no requirement 

that the DBE appear at the scheduled 

hearing, as noted in paragraph (c)(2) of 

this section, it must opt in, 

acknowledge, and/or respond within the 

time frames noted. The certifier may 

permit additional submissions after the 

hearing, as long as the extension is on 

a business day that is not more than 30 

days after the notice. 

(4) Failure to cancel or appear. If the 

DBE confirms its attendance at the 

hearing, does not cancel its 

confirmation at least 5 days before the 

hearing, and does not appear, it forfeits 

its certification. If the certifier does not 

hold a hearing that the DBE has 

accepted, it forfeits the suspension. The 

parties, however, may negotiate in good 

faith to reschedule to another time or 

business day that is no later than 29 

days from the notice of suspension. 

(5) Scope and burdens. (i) Suspension 

proceedings are limited to the 

suspension ground specified in the 

notice. 

(ii) The certifier may not amend its 

reason for summarily suspending 

certification, nor may it electively 

suspend the firm again during the 12- 

month period following the notice. 

(iii) The DBE has the burden of 

producing information and/or making 

arguments concerning its continued 

eligibility, but it need only contest the 

reason cited. No other evidence is 

required. 

(iv) The certifier has the burden of 

proving its case by a preponderance of 

the evidence. It must send the 

suspended firm a notice of 

decertification (NOD) within 30 days of 

the suspension notice or lift the 

suspension. Any NOD must rely only on 

the reason given in the summary 

suspension notice, and it must meet 

requirements in § 26.87(g). Such an 

NOD is deemed to be a final decision 

under § 26.87(g) to remove certification. 

(v) The DBE’s failure to provide 

information contesting the suspension 

does not impair the certifier’s ability to 

prove its case. That is, the uncontested 

evidence upon which the certifier relies 

in its notice will constitute a 

preponderance of the evidence for 

purposes of the NOD, and the 

decertification will become final, 

provided that the certifier complies with 

applicable rules in this part. 

(6) Duration. The DBE remains 

suspended during the proceedings 

described in this section but in no case 

for more than 30 days. If the certifier has 

not lifted the suspension or provided a 

rule-compliant NOD by 4 p.m. in the 

certifier’s time zone on the 45th day, 

then it must lift the suspension and 

amend DBE lists and databases as 

necessary, by 12 p.m. in the certifier’s 

time zone the following business day. 

(d) Remedies—(1) Appeal. The DBE 

may appeal a final decision under 

paragraph (c)(5)(iv) of this section, as 

provided in § 26.89(c), but may not 

appeal the suspension itself, unless 

paragraph (d)(2) of this section applies. 

(2) Injunctive relief. A new, elective 

suspension occurring within 12 months 

of an earlier elective suspension is null 

and void. The DBE subject to such a 


lotter on DSK11XQN23PROD with PROPOSALS2
43684 Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 

suspension may immediately petition 

the Department to enjoin its 

enforcement. Similarly, a suspended 

DBE may request injunctive relief when 

the certifier fails to act within the time 

specified in paragraph (c)(6) of this 

section. In either case, the DBE must: 

(i) Email the request under the subject 

line, ‘‘Request for Injunctive Relief’’; 

(ii) Limit the request to a one-page 

explanation that includes the certifier’s 

name and the suspension dates; contact 

information for the certifier, the DBE, 

and the DBE’s SEDO(s); and the general 

nature and date of the firm’s response, 

if any, to the second suspension notice; 

and 

(iii) Attach both suspension notices. 

(3) Withdrawal. A DBE may withdraw 

from the program at any time before the 

certifier’s final decision to remove 

certification. 

■ 61. Revise § 26.89 to read as follows: 

§ 26.89 Appeals to the Department. 

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

certification or whose certification is 

removed by a certifier, you may appeal 

to the Department. 

(2) If you are a complainant in an 

ineligibility complaint to a certifier (or 

the concerned Operating Administration 

in the circumstances provided in 

§ 26.87(c)), you may appeal to the 

Department if the certifier does not find 

reasonable cause to propose removing 

the firm’s certification or, following a 

removal of eligibility proceeding, 

determines that the firm is eligible. 

(3) If you want to file an appeal, you 

must send a letter to the Department 

within 45 days of the date of the 

certifier’s final decision, including 

information and setting forth a full and 

specific statement as to why you believe 

the decision is erroneous, what 

significant fact(s) the certifier failed to 

consider, or what provisions of this part 

you believe the certifier did not 

properly apply. The Department may 

accept an appeal filed later than 45 days 

after the date of the decision if the 

Department determines that there was 

good cause for the late filing of the 

appeal or in the interest of justice. 

(4) You may email your appeal to 

DBEAppeals@dot.gov or mail or deliver 

it to U.S. Department of Transportation, 

Departmental Office of Civil Rights, 

W78–101, 1200 New Jersey Avenue SE, 

Washington, DC 20590–0001. 

(b) Pending the Department’s 

decision, the certifier’s decision remains 

in effect. The Department does not stay 

the effect of the decision while it is 

considering an appeal. 

(c) When it receives an appeal, the 

Department requests a copy of the 

certifier’s complete administrative 

record in the matter. The certifier must 

provide the administrative record, 

including a hearing transcript, within 20 

days of the Department’s request. The 

Department may extend this time period 

on the basis of a certifier’s showing of 

good cause. 

(1) If you are an appellant who is a 

firm which has been denied 

certification, whose certification has 

been removed, whose owner is 

determined not to be a member of a 

designated disadvantaged group, or 

whose owner the presumption of 

disadvantage has been rebutted, your 

letter must state the name and address 

of any other recipient which currently 

certifies the firm, which has rejected an 

application for certification from the 

firm or removed the firm’s eligibility 

within one year prior to the date of the 

appeal, or before which an application 

for certification or a removal of 

eligibility is pending. Failure to provide 

this information may be deemed a 

failure to cooperate under § 26.109(c). 

(2) If you are an appellant other than 

one described in paragraph (c)(1) of this 

section, the Department will request, 

and the firm whose certification has 

been questioned must promptly 

provide, the information called for in 

paragraph (c)(1) of this section. Failure 

to provide this information may be 

deemed a failure to cooperate under 

§ 26.109(c). 

(d)(1) You must ensure that the 

administrative record is well organized, 

indexed, and paginated. Records that do 

not comport with these requirements are 

not acceptable and will be returned to 

you for immediate correction. Failure to 

send a corrected record within seven 

days of the Department’s request will be 

deemed a failure to cooperate under 

§ 26.109(c). 

(2) If an appeal is brought concerning 

one certifier’s certification decision 

regarding a firm, and that certifier relied 

on the decision and/or administrative 

record of another certifier, this 

requirement applies to both certifiers 

involved. 

(e) The Department decides only the 

issue(s) presented on appeal. It does not 

reexamine overall eligibility, conduct a 

de novo review, or hold hearings. It 

considers the administrative record and 

any additional information it considers 

relevant. The Department resolves 

appeals on substantive and/or 

procedural grounds. 

(f)(1) The Department affirms your 

decision if it determines that your 

decision is supported by substantial 

evidence and is consistent with the 

provisions of this part concerning 

certification. 

(2) The Department reverses your 

decision if it determines that your 

decision is not supported by substantial 

evidence or is inconsistent with the 

provisions of this part concerning 

certification. The Department will direct 

you to certify the firm or remove its 

eligibility, as appropriate. You must 

take the action directed by the 

Department’s decision immediately 

upon receiving written notice of it. 

(3) The Department is not required to 

reverse your decision if the Department 

determines that a procedural error did 

not result in fundamental unfairness to 

the appellant or substantially prejudice 

the opportunity of the appellant to 

present its case. 

(4) If it appears that the record is 

incomplete or unclear with respect to 

matters likely to have a significant 

impact on the outcome of the case, the 

Department may remand the decision to 

you with instructions seeking 

clarification and/or augmentation of the 

record. The Department may also 

remand a case to you for further 

proceedings consistent with Department 

instructions concerning the proper 

application of the provisions of this 

part. 

(5) The Department does not uphold 

your decision based on grounds not 

specified in your decision. 

(6) The Department’s decision is 

based on the status and circumstances 

of the firm as of the date of the decision 

being appealed. 

(7) The Department may summarily 

dismiss an appeal. Reasons for doing so 

may include (but are not limited to) the 

Department’s own initiative, a 

withdrawal request from the appellant, 

non-compliance with paragraph (c) of 

this section, or a request by the certifier 

to reconsider its decision. 

(g) The Department does not issue 

advisory opinions. 

(h) 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 certifier whose 

administrative record or decision has 

been involved in the proceeding (see 

paragraph (d) of this section). 

(i) If practicable, the Department will 

issue a written decision within 180 

calendar days of receiving the complete 

administrative record. If the Department 

does not make its decision within this 

period, the Department will provide 

written notice to concerned parties, 

including a statement of the reason(s) 

for the delay and an approximate date 

by which it will render an appeal 

decision. 

(j) As a certifier, when you provide 

supplemental information to the 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 139 / Thursday, July 21, 2022 / Proposed Rules 43685 

Department, you must also make this 

information available to the firm and 

any third-party complainant involved, 

consistent with Federal or applicable 

state laws concerning freedom of 

information and privacy. The 

Department makes available, on request 

by the firm and any third-party 

complainant involved, any 

supplemental information it receives 

from any source. 

(k) All decisions under this section 

are administratively final and are not 

subject to petitions for reconsideration. 

(l) Final decisions are normally 

published without redactions on 

DOCR’s website. Decisions will likely 

contain confidential business and 

financial information and/or personally 

identifiable information. Therefore, 

DOCR, within its full discretion, may 

publish final decisions issued under 

this section with any necessary 

redactions. 

§ 26.91 [Amended] 

■ 62. Amend § 26.91 by: 

■ a. Removing the words ‘‘recipients’’ 

and ‘‘recipient’’ wherever they appear 

and adding in their places the words 

‘‘certifiers’’ and ‘‘certifier’’, respectively. 

■ b. In paragraph (b)(1), removing the 

cross-reference ‘‘§ 26.87(i)’’ and adding 

in its place the cross-reference 

‘‘§ 26.87(j)’’. 

§ 26.103 [Amended] 

■ 63. Amend § 26.103 in paragraph 

(d)(2) by removing the words ‘‘being in 

compliance’’ and adding in their place 

the word ‘‘complying’’. 

Appendix A to Part 26 [Amended] 

■ 64. Amend appendix A in paragraph 

IV.A.(1) by removing the word 

‘‘conducing’’ and adding in its place the 

word ‘‘conducting’’. 

Appendix B to Part 26 [Removed and 

Reserved] 

■ 65. Remove and reserve appendix B to 

part 26. 

Appendices E through G to Part 26 

[Removed] 

■ 66. Remove appendices E through G to 

part 26. 

[FR Doc. 2022–14586 Filed 7–20–22; 8:45 am] 

BILLING CODE P 


lotter on DSK11XQN23PROD with PROPOSALS2