Document ID: EPA-HQ-OA-2002-0001-0098
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2008-03-31T04:00Z

ENVIRONMENTAL PROTECTION AGENCY

Participation by Disadvantaged Business Enterprises in Procurement under
Environmental Protection Agency (EPA) Financial Assistance Agreements,
Final Rule

Response to Public Comments

Section-by-Section Analysis

A. 	Subpart A--General Provisions

B. 	Subpart B--Certification

 	C. 	Subpart C--Good Faith Efforts 

D. 	Subpart D--Fair Share Objectives

E. 	Subpart E--Recordkeeping and Reporting 

Section-by-Section Analysis

Subpart A - General Provisions

Section 33.101 What are the objectives of this Part?

There were very few comments on this section of the Notice of Proposed
Rule Making (“NPRM”).  The few comments received were in general
support of the objectives of the program.  The language in this section
of the NPRM remains unchanged in the final rule.  

Section 33.102 When do the requirements of this Part apply?

There was one comment received concerning the application of this rule
to SRF loan recipients and their contractors.  This particular section
of the rule has not been revised to provide the clarity the commenter
requested.  However, this comment as well as another similar comment is
addressed in Section 33.103 through the revision of the definition of
“recipient” to specifically include all loan recipients.  The effect
of this change clarifies the applicability of this rule to all loan
recipients and their prime contractors.  

Section 33.103 What do the terms in this Part mean?

There were few comments on the definitions in the NPRM.  One commenter
wanted the name of the program to remain the “MBE/WBE Program”. 
While still meaningful, and used in the context and operation of this
rule, given the focus on “socially and economically disadvantaged”
status, the term “MBE/WBE” does not fully reflect the nature of the
program.  Moreover, the term “DBE Program” is now widely used and
accepted to describe similar 

programs at the Federal and State levels.  We believe it is important
maintain consistency in this regard. 

Comments were also received regarding the use and definitions of the
terms DBE, MBE, and WBE throughout the rule.  Commenters asserted that
it was unclear whether the terms were interchangable or exclusive terms.
 Other commenters asked whether the terms “MBE” and “WBE” are
still to be used.  MBEs and WBEs are a part of the broader universe of
DBEs.  Also, it is important to clarify that the definition of “MBE”
was designed to include those who meet the definition of a “DBE” on
the basis of their social and economic disadvantage, and not necessarily
based on the rebuttable presumption of social and economic disadvantage
as members of a group, or as women, a Small Business Enterprise, a Labor
Surplus Area Firm, or a Small Business in Rural Areas.   Other comments
concerning the use of the terms DBE, MBE and WBE are addressed in other
portions of the rule where appropriate.   

There were two comments concerning the definition of “recipients” in
regard to the SRF loan program.  Both commenters stated that the
language in the definition was unclear concerning whether or not SRF
loan recipients are included in the definition.  The definition has been
revised to clearly include all loan recipients.

There was one comment concerning the definition of “joint venture”. 
The commenter requested clarification on whether or not all of the
parties in a joint venture needed to be DBEs, or if not, what percentage
of the joint venture must the DBE party control in order to qualify as a
DBE joint venture.  The definition of “joint venture” in this
section of the NPRM is a general definition of the term.  A more
specific definition of “joint venture” is found in section 33.203
(g) of the rule, which describes how a joint venture may qualify as a
DBE under EPA’s 10% statute.  All parties to a joint venture do not
have to be DBEs in order for the joint venture to qualify as a DBE under
this rule.  There must be at least one DBE as a party to the joint
venture, and the DBE party must own 51% of the joint venture.       

Section 33.104 May a recipient apply for a waiver from the requirements
of this Part?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule.  

Section 33.105 What are the compliance and enforcement provisions of
this Part?

There were several comments concerning enforcement of the rule. 
Commenters stated that there are no “teeth” in the program and that
more policing of the program was needed to insure compliance with the
requirements of the rule.  While the text of the rule mentions that EPA
can take remedial action for non-compliance, it does not clearly state
what those actions are.  In an effort to show more “teeth,” this
section has been revised to include some of the remedial measures EPA
can take if a recipient fails to comply with the requirements of the
rule.  

Another commenter suggested that EPA develop a formal complaint process
that can be used if a recipient does not comply with the good faith
efforts.  EPA does not agree with the need for an official complaint
process as a means of strengthening compliance with the DBE program. 
Currently the public can report suspected non-compliance with the
program to the Agency without limitation.  Formalizing this process may
have a chilling effect on the public’s willingness to report suspected
non-compliance.

Section 33.106 What assurances must EPA financial assistance recipients
obtain from their contractors?

 One comment was received regarding this section of the rule.  The
commenter stated that it was unclear whether the term and condition must
also be included in pass-thru agreements, or sub-agreements.  The
commenter further suggested that the language in this section clearly
place the responsibility on the loan recipient, not the initial
recipient, to ensure that the term and condition is included in all
sub-level procurement activities.  This particular section of the rule
refers strictly to assurances that EPA financial assistance recipients
must obtain from their contractors.  By amending the definition of
“recipient” to more clearly and specifically include loan recipients
and sub-recipients, it clarifies the fact that initial recipients,
sub-recipients and loan recipients have the responsibilities stated in
this section of the rule.  As such, it is the responsibility of each
type of recipient to ensure that the contract term and condition in the
Appendix to this Rule is included in procurement contracts it awards
under EPA financial assistance agreements.  This includes contracts
under identified loans pursuant to EPA financial assistance agreements
capitalizing revolving loan fund programs.  This term and condition
ensures that a recipient applies pertinent provisions of this rule to
its prime contractor.

Section 33.107 What are the rules governing availability of records,
cooperation, and intimidation and retaliation?

	There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.  

Subpart B-Certification

Section 33.201 What does this Subpart require?

Several comments were received regarding this section of the rule. 
Section 33.201(a) states, “In order to participate as an MBE or WBE
prime or subcontractor for EPA recipients under EPA’s DBE Program, an
entity must be properly certified.”  One commenter suggested that we
clarify what is meant by “participation” in this context.  Another
commenter suggested that we include the language “as defined by this
Subpart” at the end of this sentence for further clarification.  In
response to these comments Section 33.201(a) has been revised to state
the following:  “In order to qualify and participate as an MBE or WBE
prime or subcontractor for 

EPA recipients under EPA’s DBE Program, an entity must be properly
certified as required by this Subpart.”   

One comment was received questioning who will bear the burden of
creating and maintaining a certification program.  No language in this
rule imposes an obligation on any recipient to create or maintain a
certification program.  EPA will create and maintain the certification
program created by this rule.  

Section 33.202 How does an entity qualify as an MBE or WBE under
EPA’s 8% statute?

Two comments were received requesting that EPA not allow the
certification of entities that are “owned or controlled” by socially
and economically disadvantaged individuals.  EPA’s 8% and 10% statutes
may be distinguished by their provisions regarding ownership and
control.  EPA’s 8% statute references entities owned or controlled by
socially and economically disadvantaged individuals while EPA’s 10%
statute references entities owned and controlled by socially and
economically disadvantaged individuals.  While EPA agrees that requiring
ownership and control is the generally accepted standard for most
certification programs, we are required to follow the language governing
this program.  EPA’s 8% statute clearly references entities owned or
controlled by socially and economically disadvantaged individuals. 
Therefore, we are required to certify entities meeting that standard.  

A relatively equal number of comments were received in support of, and
against the $750,000 net worth limitation.  The language in the rule
remains unchanged.  An individual claiming disadvantaged status must
have an initial and continued personal net worth of less than 

$750,000.  This limitation is in line with SBA’s net worth requirement
for continued eligibility, and DOT’s requirements for both initial and
continued eligibility.  

Section 33.203 How does an entity qualify as an MBE or WBE under EPA’s
10% statute?

Section 33.203(e) states, “Nothing in this section shall prohibit any
member of a racial or ethnic group that is not designated as socially
and economically disadvantaged under paragraph (d) of this section from
establishing that they have been impeded in developing a business
concern as a result of racial or ethnic discrimination.”  One comment
was received asking how an individual who is not in a member of a
designated group establishes their social and economic disadvantage, and
that they have been impeded in developing a business concern as a result
of racial or ethnic discrimination.  Section 33.205(a) provides the
application requirements for certification.  One of the requirements is
that the applicant provide certifications or narratives regarding their
disadvantage status.  This would include certifications or narratives
regarding impediments to business development due to racial or ethnic
discrimination as mentioned in Section 33.203(e).

One comment was received suggesting that we clarify the language in
Section 33.203(g)(2) regarding joint ventures.  The language in section
33.203(g)(2) of the NPRM states, “A person who is not an economically
disadvantaged individual or an entity owned and controlled by a socially
and economically disadvantaged individual, as a party to a joint
venture, may not be a party to more than two awarded contracts in a
fiscal year solely by reason of paragraph (g)(1) of this section.” 
EPA agrees that the language in this section is unclear.  The language
has been revised as follows:  “As a party to a joint venture, a person
who is not an economically disadvantaged individual, or an entity that
is not owned and controlled by a socially and economically disadvantaged
individual, may not be a party to more that two awarded contracts in a
fiscal year solely by joint venture with a socially and economically
disadvantaged individual or entity.”

Section 33.204 Where does an entity become certified under EPA’s 8%
and 10% statute?In the NPRM EPA specifically requested public comment
on requiring U.S. citizenship to be eligible for certification under our
DBE program.  Five comments were received regarding this issue.  Two
comments suggested that we include lawfully admitted permanent US
residents as eligible for certification; one comment asked why we chose
to require US citizenship when the Department of Transportation does
not; one comment asserted that the requirement for US citizenship
amounted to discrimination; and one comment suggested that we not make a
database of certified business available to the public because non-US
citizen owned business would be excluded from such a database.  

EPA will continue to require U.S. citizenship to be eligible for
certification under its DBE Program.  All language in the final rule
regarding citizenship will remain as it is written in the NPRM.  EPA has
considered this issue from many perspectives.  Comments asserted that
requiring U.S. citizenship would exclude a large number of businesses
with which our grant recipients currently conduct business.  Commenters
also raised issues concerning continuity with DOT’s DBE program.  

It is important to note that the requirement for U.S. citizenship is not
new.  EPA’s current regulatory definition of MBE requires U.S.
citizenship for a minority group member.  Moreover, EPA’s guidance for
the MBE/WBE program has required U.S. citizenship since its May 22, 1986
issuance, and continued that policy in its 1997 guidance.  Therefore,
the businesses that would be excluded for not meeting the U.S.
citizenship requirement under the final rule are businesses that do not
meet our current requirements. 

EPA’s certification requirements practically mirror those of DOT, with
the exception of the requirement for U.S. citizenship.  EPA’s
certification program is designed to accept the DOT certifications of
businesses where our citizenship requirement is met.  Considering all of
the eligibility requirements for certification, EPA believes there is
sufficient continuity between the two programs.  Moreover, EPA’s
requirement for U.S citizenship is consistent with SBA’s 8(a) Business
Development Program regulations (13 CFR 124.101) and its Small
Disadvantaged Business Program regulations (13 CFR 124.1002(d)), whose
certifications would also be accepted under EPA’s certification
program.  The Agency believes that given its close association with SBA
requirements, it is appropriate for U.S. citizenship to be a requirement
for certification by EPA as well.  The number of additional entities EPA
would have to certify if the Agency were to change its longstanding
policy on this issue and the possible resource implications of such a
policy change are unknown.  However, the Agency believes that changing
its policy on this issue could result in a substantial increase to the
number of entities EPA would have to certify, thus potentially placing a
significant strain on Agency resources devoted to processing
certifications.Requiring U.S. Citizenship for eligibility for
certification under EPA’s DBE program does not require the financial
assistance recipient to discriminate on the basis of national origin. 
EPA’s DBE program does not require financial assistance recipients or
their prime contractors to solely contract with certified DBE’s. 
Recipients and their prime contractors are free to do business with
non-certified entities.  However, if the recipient or prime wants the
procurement dollars they spend under EPA financial assistance agreements
to count towards the achievement of their fair share objectives, then
the entities with which they procure must be certified.  

As a part of EPA’s certification program the Agency intends to create
a database of EPA certified businesses.  One of the comments received
requested that this database not be made public if the Agency decides to
require U.S. citizenship because it would persuade EPA financial
assistance recipients to only use certified business in the database,
and would exclude the use of business owned by non-U.S. citizens.  EPA
believes that the creation, maintenance, and availability of a database
of EPA certified MBEs and WBEs is critical to the success of the
certification program.  Our financial assistance recipients need to know
the certification status of the entities with which they choose to do
business.  Having a database of certified MBEs and WBEs available to
them fulfills that need.  EPA does not believe that the existence of
such a database will lead to the exclusion of businesses owned by
non-U.S. citizens.  

Section 33.205 How does an entity become certified by EPA?

No comments were received regarding this section.  The language in this
section of the NPRM remains unchanged in the final rule.  

Section 33.206 Is there a list of certified MBEs and WBEs?

	There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.  

Section 33.207 Can an entity reapply to EPA for MBE or WBE
certification?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule.  

Section 33.208 How long does an MBE or WBE certification from EPA last?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule.  

Section 33.209 Can EPA re-evaluate the MBE or WBE status of an entity
after EPA certifies it to be an MBE or WBE?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule. 

Section 33.210 Does an entity certified as an MBE or WBE by EPA need to
keep EPA informed of any changes which may affect the entity’s
certification?

This provision requires an annual affidavit from EPA certified MBEs or
WBEs affirming that no changes in circumstance have occurred that affect
the entity’s status as an MBE or WBE.  In addition to this annual
affidavit, MBEs and WBEs certified by EPA are under a constant
requirement throughout the year to keep EPA informed of any changes in
circumstance that might affect that entity’s status as an MBE or WBE. 
One comment was received concerning whether changes in net worth are
included in the provisions of this section.  Indeed a change in net
worth that would place an entity beyond the $750,000 limitation is a
change that directly affects the entity’s disadvantage status.  The
entity is therefore required to notify EPA of that change, pursuant to
the requirements of Section 33.210(a) and (b).    

Section 33.211 What is an EPA Private Certifier?

	There were no comments received regarding this section of the NPRM. 
This section of the NPRM has been removed in the final rule.  Further
examination of the Private Certifier provisions yielded a determination
that they are not necessary for inclusion in this regulation, since
EPA’s use of Private Certifiers is uncertain, and the potential cost
or burden on entities seeking certification is unknown.  

Section 33.212 Can an EPA Private Certifier charge a fee to an entity to
process the entity’s application for MBE or WBE certification?

	There were no comments received regarding this section of the NPRM. 
This section of the NPRM has been removed in the final rule.  Further
examination of the Private Certifier provisions yielded a determination
that they are not necessary for inclusion in this regulation, since
EPA’s use of Private Certifiers is uncertain, and the potential cost
or burden on entities seeking certification is unknown. 

Section 33.213 How does an organization or business concern become an
EPA Private Certifier?

There were no comments received regarding this section of the NPRM. 
This section of the NPRM has been removed in the final rule.  Further
examination of the Private Certifier provisions yielded a determination
that they are not necessary for inclusion in this regulation, since
EPA’s use of Private Certifiers is uncertain, and the potential cost
or burden on entities seeking certification is unknown.

Section 33.214 How long may an organization or business concern be an
EPA Private Certifier?

There were no comments received regarding this section of the NPRM. 
This section of the NPRM has been removed in the final rule.  Further
examination of the Private Certifier provisions yielded a determination
that they are not necessary for inclusion in this regulation, since
EPA’s use of Private Certifiers is uncertain, and the potential cost
or burden on entities seeking certification is unknown.  

Section 33.215 Is there a list of EPA Private Certifiers?

There were no comments received regarding this section of the NPRM. 
This section of the NPRM has been removed in the final rule.  Further
examination of the Private Certifier provisions yielded a determination
that they are not necessary for inclusion in this regulation, since
EPA’s use of Private Certifiers is uncertain, and the potential cost
or burden on entities seeking certification is unknown.  

Section 33.216 What is the process for appealing or challenging an EPA
MBE or WBE certification determination?

	There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.  

Section 33.217 What conduct is prohibited by this Subpart?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule.  

Subpart C-Good Faith Efforts

Section 33.301 What does this Subpart require?

The good faith efforts required by this section are activities by a
recipient or its prime contractor to increase DBE awareness of
procurement opportunities through race/gender neutral efforts. 
Race/gender neutral efforts are ones which increase awareness of
contracting opportunities in general, including outreach, recruitment
and technical assistance.  The good faith efforts must be made by a
recipient and its prime contractor toward all DBEs, including SBEs,
LSAFs and SBRAs and not just MBEs and WBEs, even if the fair share
objective requirements of Subpart D have been met.   

For purposes of simplification, EPA has combined the six positive
efforts of 40 CFR 30.44(b) applicable to institutions of higher
education, hospitals and other non-profit organizations with the six
affirmative steps of 40 CFR 31.36(e) applicable to Tribal, State, and
Local Government recipients and renamed them the six “good faith
efforts.”  It is not the intention of the Agency to change the
substance of the positive efforts or the affirmative steps.

Two comments were received in reference to the requirements of Section
33.301 of the NPRM.  One commenter stated that Section 33.301(b) imposes
a minimum advertising period prior to bid opening which is in conflict
with SRF regulations which allow a recipient to follow 

state procurement laws when advertising SRF projects for bids.  The
commenter further suggested that the last sentence of Section 33.301(b)
be deleted.  

Section 33.301(b) states, “Make information on forthcoming
opportunities available to DBEs and arrange time frames for contracts
and establish delivery schedules, where the requirements permit, in a
way that encourages and facilitates participation by DBEs in the
competitive process.  This includes, whenever possible, posting
solicitations for bids or proposals for a minimum of 30 calendar days
before the bid or proposal closing date.”  This language does not
impose a mandatory, minimum advertising period prior to bid opening. 
The last sentence, which the commenter suggests should be deleted,
states that “whenever possible” solicitations will be posted for a
minimum of 30 days.  This leaves room for the instances where a 30 day
advertising period is not possible for a number of reasons, including
potential conflicts with state procurement laws. 

The second comment received in reference to this section concerns the
requirements of Section 33.301(d).  Section 33.301(d) states,
“Encourage contracting with a consortium of DBEs when a contract is
too large for one of these firms to handle individually.”  The
commenter asserted that recipients do not have the expertise or manpower
necessary to work with small DBEs to pool their resources to bid on
projects as a prime.  It is important to understand that the requirement
of this section is to “encourage” the formation of consortiums or
joint ventures for larger contracts, not to structure, create, or
facilitate the formation of them.  Encouraging DBEs to form consortiums
or joint ventures can perhaps be done by simply suggesting it in the
solicitation.  It is the responsibility of the DBEs to come together and
form consortiums or joint ventures to compete for larger contracts. 
Section 33.301 of the NPRM remains unchanged in the final rule.     

Section 33.302 Are there any additional contract administration
requirements?

The first provision of this section is intended to ensure that
subcontractors receive prompt payment from prime contractors.  The other
provisions of this section are intended to prevent any “bait and
switch” tactics at the subcontract level by prime contractors that may
circumvent the spirit of the DBE Program.  

Several comments were received regarding the prompt payment requirement
of Section 33.302(a).  Most of the comments were in favor of this
requirement.  Several commenters requested that EPA specify the number
of days within which a prime must pay it’s subcontractor for
satisfactory performance, after the prime has received payment from the
recipient.  The comments ranged from requiring from as few as 5 days to
as many as 60 days.  EPA agrees with the comments emphasizing the need
to identify a specific number of days for prompt payment.  

Section 33.302(a) of the NPRM directly places a responsibility on the
recipient to require its prime contractors to pay its subcontractors in
a specified period of time.  EPA is not imposing this requirement
directly on the prime contractor itself.  EPA recognizes that there is
no privity between it and the recipient’s prime contractors.  However,
EPA is well within its authority to impose requirements on its financial
assistance recipients to implement the provisions of the EPA DBE
Program.  The Good Faith Efforts in Section 33.301 and the Contract
Administration Requirements in Section 33.302 are designed to level the
competitive playing filed for DBEs through enhancing the recipient’s
established procurement practices, creating a more inclusive environment
for DBEs and greater sensitivity to issues such as prompt payment and
“bait and switch” tactics that can have a major effect on DBEs.  

To that end, EPA believes that identifying a specific number of days
within which the recipient’s prime contractor must pay its
subcontractors is very much in line with the goals and objectives of the
DBE program.  Section 33.302(a) has been revised as follows: “A
recipient must require its prime contractor to pay its subcontractor for
satisfactory performance no more than 30 days from the prime
contractor’s receipt of payment from the recipient.”

	Section 33.302(b) states, “A recipient must be notified in writing by
its prime contractor prior to any termination of a DBE subcontractor for
convenience by the prime contractor.”  One comment was received
regarding this provision.  The commenter suggested deleting the language
“for convenience by the prime contractor,” suggesting that the
recipient needs to be notified any time a DBE is terminated, regardless
of the reason for the termination.  EPA disagrees with this suggestion. 
The purpose of Section 33.302(b) is to prevent “bait and switch”
tactics that often occur in DBE subcontracting.  Terminating a
subcontractor for convenience requires no justification, and there is
often little recourse for the terminated subcontractor.  It is not a
rare occurrence for prime contractors to contract with DBEs for the
purpose of obtaining the contract, and then terminate the DBE for
convenience after the contract is awarded.  Retaining the language as
written in the NPRM is a safeguard to deterring the termination of DBE
subcontractors for convenience.

	There were several comments concerning Section 33.302(c).  Section
33.302(c) states, “If a DBE subcontractor fails to complete work under
the subcontract for any reason, the recipient must require the prime
contractor to employ the Six Good Faith Efforts described in Section
33.301if soliciting a replacement subcontractor.”  Most of the
comments voiced the opinion that requiring the prime contractor to
employ the Good Faith Efforts in this situation could result in
significant delays that could be detrimental to the prime contractor,
and to the project itself.  Several comments also suggested that if a
prime contractor employed the Good Faith Efforts in securing the initial
DBE subcontractor, then the prime contractor should be allowed to use
the list of DBEs that was generated from those efforts, instead of
initiating the entire process again.  

	EPA appreciates the potential effect of time delays in the contracting
arena.  However, if a prime contractor has to solicit a replacement
subcontractor anyway, regardless of DBE status and the Good Faith
Efforts, significant time delays are possible.  Employing the Good Faith
Efforts as a part of a process that already needs to be undertaken due
to the failure of a subcontractor to complete work, should not
significantly increase the time needed to secure a replacement
subcontractor...especially if the prime contractor employed the Good
Faith Efforts in securing the initial subcontractor.   EPA agrees with
comments concerning the use of the results of the initial Good Faith
Efforts.  Nothing in Section 33.302(c) precludes a prime contractor from
using those results as a potential starting place for its Good Faith
Efforts to secure a replacement subcontractor.  Section 33.302(c) of the
NPRM remains unchanged in the final rule.

	A number of comments were received concerning Section 33.302(d) stating
disagreement with the requirement for recipients to require its prime
contractors to continue to employ the Good Faith Efforts even if the
fair share objectives have been met.  It is imperative to understand
that the attainment of the fair share objective is not the sole force
behind the Good Faith Efforts’ requirements.  EPA’s DBE Program does
not impose quotas for DBE participation.  Therefore, making efforts to
be inclusive of DBEs in the recipient’s or prime contractor’s
procurement process should continue beyond the attainment of the fair
share objective.  The language in this section of the NPRM remains
unchanged in the final rule.

Section 33.303 Are there special rules for loans under EPA financial
assistance agreements?

There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.  

Section 33.304 Must a Native American (either as an individual,
organization, Tribe or Tribal Government) recipient or prime contractor
follow the six good faith efforts?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule.  

Subpart D-Fair Share Objectives

Section 33.401 What does this Subpart require?

There were several comments requesting clarification on whether or not
fair share objectives need to be negotiated for all DBEs, or for just
MBEs and WBEs.  Comments were also received asking why the fair share
objectives are limited to MBEs and WBEs exclusively.  The requirement to
negotiate fair share objectives for only MBEs and WBEs reflects the
requirements of EPA’s 8% and 10% statutes and is consistent with
Executive Order 12138 (May 18, 1979).  EPA’s previous fair share
policy required fair share objectives for MBEs and WBEs be negotiated
with EPA financial assistance recipients, but did not require that fair
share objectives be established for other types of DBEs.  While good
faith efforts are required with respect to all DBEs, including MBEs,
WBEs, LSAFs, SBEs and SBRAs, numerical fair share objectives need only
be negotiated for MBEs and WBEs in accordance with EPA’s 8% and 10%
statutes.  The final rule continues this policy.

Section 33.402 Are there special rules for loans under EPA financial
assistance agreements?

	There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.

Section 33.403 What is a fair share objective?

Comments were received requesting clarification on whether or not fair
share objectives are determined using certified or uncertified MBEs and
WBEs.  Language in the Section 33.403 has been revised to include the
word “certified” in its definition of a fair share objective. 
Section 33.403 of the final rule states, in pertinent part, “A fair
share objective is a percentage based on the capacity and availability
of qualified, certified MBEs, and WBEs in the relevant geographic market
for the procurement categories of construction, equipment, services and
supplies…” All other references to MBEs and WBEs in this Subpart
refer to certified MBEs and WBEs.   

Section 33.404 When must a recipient negotiate fair share objectives
with EPA?

Under this Section a recipient is required to submit its proposed fair
share objectives and supporting documentation to the Agency within 90
days after its acceptance of a financial assistance agreement for more
than $250,000.  In situations where a recipient receives several EPA
financial assistance agreements that total $250,000 or more in one
fiscal year, the recipient must submit its proposed fair share
objectives and supporting documentation to the Agency within 90 days
after its acceptance of a financial assistance agreement that takes the
recipient over the $250,000 threshold (see Section 33.411).  A recipient
may not spend any of its financial assistance award for procurements
until the fair share objective negotiation process has been completed. 
In the final rule, this section has been changed to extend the time
frame for the submission of fair share objectives from 90-days to
120-days.

One comment was received asking what would happen to a recipient if it
did not submit proposed fair share objectives within the required time
frame where the assistance agreement only included funds for salaries. 
In this situation, the failure to negotiate a goal within the required
period and the subsequent withholding of procurement dollars would have
no immediate, appreciable effect on the recipient.  Goals are not
negotiated for salaries.  Goals are only negotiated for equipment,
construction, services, and supplies.  However, if during the course of
the grant the recipient requests to reallocate any of the dollars in the
grant for procurement purposes, and the grant does not meet any of the
requirements for exemption from the negotiation of fair share
objectives, the recipient would not be able to spend any procurement
dollars until fair share objectives have been negotiated.

Section 33.405 How does a recipient determine its fair share objectives?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule. Section
33.406 May a recipient designate a lead agency for fair share objective
negotiation purposes?

	There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.

Section 33.407 How long do MBE and WBE fair share objectives remain in
effect?

  Once approved, a recipient’s MBE and WBE fair share objectives will
remain in effect for three fiscal years.  However, if significant
changes have occurred rendering the data relied upon in establishing the
fair share objectives obsolete, the fair share objectives may need to be
renegotiated before the end of the three fiscal year period.  One
comment was received asking why fair share objective had to be
negotiated every three years, as opposed to five or ten.  Under the
current guidance for the MBE/WBE program, goals are to be negotiated
every year.  EPA believes conducting yearly negotiations is burdensome
and unnecessary given the likelihood that significant changes in the
market probably would not occur on a yearly basis.  However, EPA also
wants to ensure that the fair share objectives are based on relevant and
current data.  Negotiating fair share objectives every three years
reduces the burden of the negotiations process, and ensures that the
data upon which the objectives are derived is relevant and current. 

Section 33.408 May a recipient use race and/or gender conscious measures
as part of this program? 

	There were no comments received regarding this section.  However, EPA
believes it is important to clarify that it requires recipients to use
race/gender-neutral measures to ensure DBEs have meaningful
opportunities to bid on recipient-sponsored procurements funded by EPA
financial assistance agreements.  Race/gender-conscious measures are not
required.  The language in this section of the NPRM has been changed to
remove the requirement that the recipient notify EPA of its intent to
use race/gender-conscious efforts.  If a recipient elects to use
race/gender-conscious measures, the recipient should satisfy itself that
the measure meets all applicable legal requirements, including those
established in Adarand.

Section 33.409 May a recipient use quotas as part of this program?

There were no comments received regarding this section.  The language in
this section of the NPRM remains unchanged in the final rule.   

Section 33.410 May a recipient be penalized for failing to meet its fair
share objectives?

	There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.

Section 33.411 Who may be exempted from this Subpart?

Five comments were received in favor of the exemptions contained in this
Subpart.  However, those same comments requested that the threshold for
exemptions be raised to $500,000 to as high as $1,000,000, and that the
exemptions be extended to the good faith efforts and reporting
requirements of the rule.  In the NPRM EPA proposed to exempt recipients
of financial assistance agreements (including loan recipients under the
Clean Water State Revolving Fund (CWSRF), Drinking Water State Revolving
Fund (DWSRF), and Brownfields Cleanup Revolving Loan Fund (BCRLF)
Programs) with a combined total of $250,000 or less in EPA funds for any
particular EPA financial assistance project in any one fiscal year from
the fair share objective requirements.  These recipients would not be
exempted from the six good faith efforts requirements of Subpart C or
the recordkeeping and reporting requirements of Subpart E.  

Financial assistance agreements of $250,000 or less account for about
82% of new EPA financial assistance awards each fiscal year, but less
than 12% of the total EPA financial assistance funds awarded.  EPA
believes keeping the $250,000 threshold for exemption from the fair
share objective requirements is appropriate and can potentially reduce
the burden on recipients.

Extending the exemptions to the reporting and six good faith efforts
requirements would be detrimental to the DBE program.  The requirement
to perform the six good faith efforts, and to report on the outcome of
those efforts are inextricably linked to the purpose of the program. 
The six good faith efforts are designed to compliment a recipient’s
pre-established process for competitive contracting.  Regardless of the
amount of the expenditure, or the amount of the grant, if a recipient
engages in a competitive process for its contracting needs, the six
affirmative steps simply insure that disadvantaged business are a part
of that competitive process.  A grant for less than $250,000, with
contract dollars of only $50,000 may seem small, but to a disadvantaged
business, a $50,000 contract is valuable, and they should be afforded
the opportunity to compete.  Eliminating the requirement to perform the
six good faith efforts, and reporting on the outcome of those efforts,
could have the effect of decreasing opportunities for disadvantaged
businesses.  This is contrary to the purpose of the DBE program.

Moreover, the reporting frequency under this rule has been reduced in an
effort to decrease the burden on recipients.  Recipients who currently
report on a quarterly basis will not report semi-annually.  This change,
coupled with the $250,000, exemption from the negotiation requirements,
provides significant relief for recipients.  

Few comments were received regarding exemptions for Tribal recipients
from negotiating fair share objectives.  One comment requested a blanket
exemption for Tribes from all of the requirements of the entire rule. 
Another comment suggested that the $250,000 exemption, as applied to
tribes, be limited to procurement dollars only.  EPA disagrees with
these comments.  The general $250,000 exemption for all recipients,
along with the exemption of all Technical Assistance Grants to all
recipients, and the exemption of eligible Performance Partnership Grants
to Tribal recipients, greatly reduces the number of Tribal recipients
that would be required to negotiate fair share objectives.  EPA believes
this will, in turn, greatly reduce the burden on Tribal recipients. The
language in the NPRM remains unchanged in the final rule.

Section 33.412 Is there a special rule for an Insular Area or Indian
Tribal Government recipient?

There were no comments received regarding this section.  The language
in this section of the NPRM remains unchanged in the final rule.

Subpart E-Recordkeeping and Reporting

Section 33.501 What are the recordkeeping requirements of this Part?A
recipient is required to maintain the records documenting its compliance
with the requirements of this Part, including documentation of its and
its prime contractor’s good faith efforts and data relied upon in
formulating its fair share objectives.  A recipient must also comply
with the applicable retention and access requirements for its financial
assistance agreement.  We received numerous comments regarding these
requirements.  The comments requested further guidance on the purpose
bidders list; questioning the necessity of the bidders list; the form
and content of such a list; and the duration of time the list is to be
kept and retained for document retentions standards.

	The purpose of the Bidders List is to provide the recipient and
entities receiving identified loans who conduct competitive bidding with
a more accurate database of the universe of MBE/WBE and non-MBE/WBE
prime and subcontractors.  The bidders list is intended to be a list of
all firms that are participating, or attempting to participate, on EPA
assisted contracts.  The list must include all firms that bid on prime
contracts, or bid or quote on subcontracts under EPA assisted projects,
including both MBE/WBEs and non-MBE/WBEs.  The bidders list is designed
to also aid recipients in their efforts to comply with the “six good
faith efforts,” by creating a source of MBEs and WBEs that can be
relied upon to increase the inclusion of MBEs and WBEs in the
recipient’s procurement practices.

	In response to comments questioning the necessity of the bidders list,
and comments suggesting that the bidders list is an increased burden,
particularly for smaller grantees, the language in the NPRM has been
changed to include and exemption from the bidders list requirement for
recipients receiving grants or loans of $250,000 or less for any single
assistance agreement or loan, or of more than one financial assistance
agreement or loan with a combined total of $250,000 or less in EPA funds
in any one year.

The Bidders List should contain the name of the bidding or quoting
entity; contact information including point of contact, mailing address,
telephone number, and email address; the procurement on which the entity
bid and when; and the entity’s status as an MBE/WBE or non-MBE/WBE. 
The language in the final rule has been revised accordingly.

As stated in the NPRM, the bidders list is to be maintained until the
project period has expired and the recipient is no longer receiving EPA
funding under the grant, or identified loan fund where the loan
recipient practices competitive bidding. The requirement to maintain a
bidders list is not retroactive.  We do not expect loan recipients to
create historical bidders lists, as some comments revealed.  Once the
project period expires, the retention of the bidders list as a part of
the official file for the loan is to be maintained according to the
records retention requirements of the individual recipient.

Section 33.502 What are the reporting requirements of this Part?

One comment was received suggesting that EPA have exemptions from
reporting that are based on dollar thresholds, as they are with respect
to the fair share objective requirements.  EPA disagrees with this
suggestion.  The effectiveness of EPA’s DBE Program may be measured
through its reporting requirements.  These reports measure EPA’s
progress in achieving the national objectives established by EPA’s 8%
and 10% statutes.  It is imperative that the reporting of recipients’
accomplishments under the program be complete, and as accurate as
possible.  Exempting recipients from reporting is counterproductive to
that goal.   

Currently, all financial assistance agreement recipients must report on
a quarterly basis except for recipients of continuing environmental
program grants, and institutions of higher education, hospitals and
other non-profit organizations receiving financial assistance awards
under 40 CFR Part 30, who report on an annual basis.  Several internal
and public comments were received requesting that the frequency of
reporting for recipients who must report on a quarterly basis be reduced
in an effort to decrease the burden associated with quarterly reporting.
 In response to these comments the final rule has been revised to
require recipients who currently report on a quarterly basis to report
semiannually.  Recipients who report on an annual basis will continue to
do so.

Section 33.503 How does a recipient calculate MBE and WBE participation
for reporting purposes?

Few comments were received in reference to this section of the NPRM. 
One comment drew attention to the fact that the title of this section
does not mention DBEs, and whether or not this was intentional. 
Reporting under EPA’s DBE Program is intentionally limited to
capturing the participation of MBEs and WBEs.  The fair share objectives
under the program are negotiated only for MBE and WBE participation, per
EPA’s 8%and 10% statutes.  Therefore, reporting a recipient’s
accomplishments with those objectives is limited to MBE and WBE
participation as well.   

One comment was received requesting clarification as to whether or not
only certified MBEs and WBEs can be counted towards MBE/WBE
participation.  Section 33.503(a) has been revised to include language
making it clear that only certified MBEs and WBEs count towards
participation.  

One comment suggested that the definition of “central purchasing or
procurement” in Section 33.503(d) was incomplete because it did not
specify the level of the centralized purchasing or procurement.  EPA
disagrees with this comment.  The definition of “centralized
purchasing or procurement,” as written, is intended to encompass all
instances where a recipient utilizes centralized purchasing or
procurement.  Section 33.503(d) of the NPRM remains unchanged in the
final rule.  

Finally, one comment was received regarding Section 33.503(e) concerning
brokers.  The commenter disagreed with the presumption that if a MBE or
WBE prime contractor subcontracts 50% or more of their contract to a
non-DBE, then the MBE or WBE is acting as a broker, and none of the
contract can be counted as MBE or WBE participation.  The commenter
suggested that whatever portion of the contract the MBE or WBE performs
should be counted.  EPA disagrees with this comment.  The practice of
brokering is designed to circumvent the purpose of EPA’s DBE Program. 
The provisions of Section 33.503(e) are designed to prevent such abuse. 
Section 33.503(e) not only contains the presumption about brokering, it
also contains a rebuttal to that presumption in Section 33.503(e)(2). 
EPA believes that providing a rebuttal to the brokering presumption
makes the provision fair to MBEs and WBEs, and protects the program at
the same time.  

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