Document ID: DOT-OST-2022-0051-0001
Agency: dot
Document Type: Proposed Rule
Title: Disadvantaged Business Enterprise and Airport Concession Disadvantaged Business Enterprise Program Implementation Modifications
Posted Date: 2022-07-21T04:00Z

[Federal Register Volume 87, Number 139 (Thursday, July 21, 2022)]
[Proposed Rules]
[Pages 43620-43685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14586]

[[Page 43619]]

Vol. 87

Thursday,

No. 139

July 21, 2022

Part II

Department of Transportation

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Office of the Secretary

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49 CFR Parts 23 and 26

Disadvantaged Business Enterprise and Airport Concession Disadvantaged 
Business Enterprise Program Implementation Modifications; Proposed Rule

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

[[Page 43620]]

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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).

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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/[email protected] or Joseph Nye, Office of the Secretary 
Desk Officer, Office of Management and Budget, at 
[email protected]. 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/[email protected]. 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/[email protected] 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/[email protected].

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 (Sec.  26.3)
    Definitions (Sec.  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 (Sec.  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 (Sec.  26.21)
    Unified Certification Program (UCP) DBE/ACDBE Directories 
(Sec. Sec.  26.31 and 26.81(g))
    Monitoring Requirements (Sec.  26.37)
Subpart C--Goals, Good Faith Efforts, and Counting
    Prompt Payment and Retainage (Sec.  26.29)
    Transit Vehicle Manufacturers (TVMs) (Sec.  26.49)
    Section Heading
    Terminology and Abbreviations
    Post-Award Reporting Requirements
    Awards to Transit Vehicle Dealerships

[[Page 43621]]

    TVM Goal Setting, Submission, and Review
    TVM Uniform Reports
    Good Faith Efforts Procedures for Contracts with DBE Goals 
(Sec.  26.53)
    DBE Performance Plan (DPP)
    Terminations
    DBE Supplier Credit (Sec.  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 (Sec.  26.63)
    Business Size (Sec. Sec.  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) 
(Sec. Sec.  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 (Sec.  26.69)
    Burden Reduction, simplification, and Consistency
    Reasonable Economic Sense
    Control (Sec.  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 (Sec.  26.81)
    Virtual On-site Visits (Sec.  26.83(c)(1) and (h)(1))
    Timely Processing of In-State Certification Applications (Sec.  
26.83(k))
    Curative Measures (Sec.  26.83(m))
    Interstate Certification (Sec.  26.85)
    Issues With the Current Rule
    Post-Interstate Certification Procedures
    Denials of In-State Certification Applications (Sec.  26.86)
    Decertification Procedures (Sec.  26.87)
    Strict Compliance
    Failure to Submit Declaration of Eligibility (DOE)
    Decertification Grounds
    Virtual Informal Hearings
    Informal Hearing Participation
    Counting DBE Participation After Decertification (Sec.  
26.87(j))
    Summary Suspension (Sec.  26.88)
    Appeals to DOCR (Sec.  26.89)
    Updates to Appendices F and G

49 CFR Part 23

Subpart A--General
    Aligning Part 23 With Part 26 Objectives (Sec.  23.1)
    Definitions (Sec.  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 (Sec.  23.25)
    Fostering ACDBE Small Business Participation (Sec.  23.26)
    Retaining and Reporting Information About ACDBE Program 
Implementation (Sec.  23.27)
Subpart C--Certification and Eligibility of ACDBEs
    Size Standards (Sec.  23.33)
    Certifying Firms That Do Not Perform Work Relevant to an 
Airport's Concessions (Sec.  23.39)
Subpart D--Goals, Good Faith Efforts, and Counting
    Removing Consultation Requirement When No New Concession 
Opportunities Exist (Sec.  23.43)
    Non-car Rental Concession Goal Base (Sec.  23.47)
    Counting ACDBE Participation After Decertification (Sec.  23.55)
    Shortfall Analysis Submission Date (Sec.  23.57)
Subpart E--Other Provisions
    Long-tErm Exclusive Agreements (Sec.  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 (Sec.  23.79)
    Appendix A to Part 23: Uniform Report of ACDBE Participation
    Technical Corrections
    Obsolete Dates in Sec.  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 post-
pandemic environment. The Department seeks to update several core

[[Page 43622]]

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) (Sec.  26.3)

    The Department is amending Sec.  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 (Sec.  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 transportation-related industries. We propose adding that 
language to the definition of Disadvantaged Business Enterprises.
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    \1\ See ``USDOT Official Guidance--DBE and ACDBE Certification 
for Non-Transportation Industry Businesses'' at https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/dbe-and-acdbe-certification-non-transportation.
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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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  26.11(a).

Transit Vehicle Dealership

    The Department proposes to add a definition of ``transit vehicle 
dealership'' to Sec.  26.5. This change, in combination with the 
proposed edits to Sec.  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 Sec.  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 FTA-
funded 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

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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 Sec.  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., Sec. Sec.  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:
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    \2\ See ``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.
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    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 (Sec.  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

[[Page 43624]]

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 Sec.  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.'' Sec.  
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.
---------------------------------------------------------------------------

    \3\ See ``New DBE Uniform Report'' at https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/new-dbe-uniform-report.
---------------------------------------------------------------------------

    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 Sec.  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\
---------------------------------------------------------------------------

    \4\ See ``Guidance on Completing Ongoing Payments'' at https://www.transportation.gov/sites/dot.gov/files/2020-01/docr-20180425-001part26qa.pdf.
---------------------------------------------------------------------------

    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 non-DBE 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 goal-setting. 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.

[[Page 43625]]

These suggestions were incorporated into Sec.  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 Sec.  26.45(c)(1) or 
use data from a disparity study as described in Sec.  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 Sec.  26.1(b) and (g). A centralized 
database, searchable by recipients, could also improve the viability of 
the bidders list method described in Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 
Sec.  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 non-minority); (2) 
the number of DBE

[[Page 43626]]

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 Sec.  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 (Sec.  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 Sec.  26.11, reporting and record keeping; Sec.  26.13, contract 
assurances; Sec.  26.23, a policy statement; Sec.  26.39, fostering 
small business participation; and Sec.  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

[[Page 43627]]

requirements, nondiscrimination contract assurances, strategies for 
expanding contracts with small businesses, and transit vehicle 
manufacturing requirements.

5. Unified Certification Program (UCP) DBE/ACDBE Directories 
(Sec. Sec.  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.
---------------------------------------------------------------------------

    \5\ The UCP directory provisions in Sec. Sec.  26.31 and 
26.81(g) are applicable to the ACDBE program per Sec.  23.23(a).
---------------------------------------------------------------------------

    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 sub-
concessionaires. Further, the Department also proposes eliminating the 
paper requirement for the directory in Sec.  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-and-resource 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, open-ended 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 (Sec.  26.37)

    Since 1999, Sec.  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

[[Page 43628]]

goals only when payments are actually made to DBEs.
    The Department has learned that certain language in Sec.  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 Sec.  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 Sec.  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 race-conscious contract goal.
    We also seek to combine the requirements under this section with 
the commercially useful function (CUF) requirements in Sec.  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 Sec.  26.37 requirement for the 
written verification or performed in a subsequent monitoring. Our 
official guidance on this section also makes this clear.\6\
---------------------------------------------------------------------------

    \6\ See ``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.
---------------------------------------------------------------------------

    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 race-
neutral DBE participation) and make adjustments, if necessary, as set 
forth in Sec.  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\
---------------------------------------------------------------------------

    \7\ See ``Recipient Responsibilities for Oversight and 
Monitoring of DBE Participation'' at https://www.transportation.gov/sites/dot.gov/files/docs/mission/civil-rights/disadvantaged-business-enterprise/318146/oversight-and-monitoring-dbe-participation.pdf.
---------------------------------------------------------------------------

    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 (Sec.  26.29)

    In the 1999 preamble to the final rule, we stated that prompt 
payment mechanisms are an important race-neutral 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 Sec.  26.29. 
Similarly, the Department's Office of Inspector General recommended the 
Department improve oversight of this issue.\8\
---------------------------------------------------------------------------

    \8\ See ``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.
---------------------------------------------------------------------------

    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 Sec.  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

[[Page 43629]]

insufficient. The guidance provides, in relevant part, as follows:
---------------------------------------------------------------------------

    \9\ See ``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.

    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 Sec.  26.29.

8. Transit Vehicle Manufacturers (TVMs) (Sec.  26.49)

Section Heading

    The current heading of Sec.  26.49 is ``How are overall goals 
established for transit vehicle manufacturers?'' The heading of Sec.  
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 Sec.  26.49 so that the term's 
usage is uniform throughout part 26. The Department proposes to revise 
Sec.  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 Sec.  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 FTA-assisted 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, Sec.  
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, Sec.  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 
Sec.  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 Sec.  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 Sec.  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.

[[Page 43630]]

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 direct-from-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 Sec.  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 Sec.  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 Sec.  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, Sec.  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 Sec.  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, Sec.  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, Sec.  
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 Sec.  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, Sec.  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 
FTA-assisted 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 (Sec.  
26.53)

    Considerations for administering the DBE Program in the context of 
a design-build contract were introduced by the Department in 1999, in 
Sec.  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 Sec.  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, Sec.  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

[[Page 43631]]

Sec.  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 Sec.  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 Sec.  26.53(b)(3)(ii) to 
address negotiated procurements outside of the context of design-build 
procurements.

Terminations

    Since 1999, Sec.  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, Sec.  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 Sec.  26.53(f) and (g) were made applicable by Sec.  
23.25(e)(1)(iv) to concession specific goals. The Department expanded 
Sec.  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 sub-concessionaire (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 Sec.  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 (Sec.  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 Sec.  23.47(e) to Sec.  
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 Sec.  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

[[Page 43632]]

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\
---------------------------------------------------------------------------

    \10\ See 45 FR 21172, 21181 (Mar. 31, 1980) available at https://www.transportation.gov/sites/dot.gov/files/2020-06/1980%20Final%20Rule%2045%20Fed.%20Reg.%2020771%2C%2021172%28Mar.%2031%2C%201980%29.pdf.
    \11\ See 52 FR 39225 (Oct. 21, 1987) available at https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/1987-final-rule).
---------------------------------------------------------------------------

    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 Sec.  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 x 0.2 = 
$200,000 (total amount to meet goal)) ($200,000 x 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 x 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 Sec.  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 Sec.  
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

[[Page 43633]]

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 Sec.  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 Sec.  
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 Sec.  
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\
---------------------------------------------------------------------------

    \12\ Official FAQs on DBE Program Regulations--Commercially 
Useful Function https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/dbe-guidance/official-faqs-dbe-program-regulations-49-cfr-26#Commercially.

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[[Page 43634]]

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 
Sec.  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 Sec.  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 pre-award 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 (Sec.  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, Sec.  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 Sec.  26.73 to Sec.  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 Sec.  26.63(b) pertains to 
firm's owned and controlled by a parent or holding company. The current 
Sec.  26.73(e) states that a DBE must be owned by individuals and not 
another firm. However, Sec.  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.'' Sec.  26.73(e)(1).
    Because the text of current Sec.  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 Sec.  26.73(e) unduly excludes the disadvantaged owner from 
indirectly owning a firm through another entity--a flexibility that is 
available to non-DBEs. 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 Sec.  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 (Sec. Sec.  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 Sec.  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 Sec.  
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

[[Page 43635]]

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 
Sec.  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 Sec.  26.65(b) and (c) does 
not apply for purposes of determining a firm's eligibility for FAA-
assisted work.\13\
---------------------------------------------------------------------------

    \13\ See 85 FR 80646 (Dec. 14, 2020) available at https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/december-14-2020-final-rule-gross-receipts.
---------------------------------------------------------------------------

    Size limits are similarly placed on ACDBEs and firms applying for 
ACDBE certification, but under Sec.  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.
---------------------------------------------------------------------------

    \14\ See 84 FR 66561 (Dec. 5, 2019) available at https://www.federalregister.gov/documents/2019/12/05/2019-26041/small-business-size-standards-calculation-of-annual-average-receipts.
---------------------------------------------------------------------------

    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 Sec.  26.65(a), and after that date, the 5-year 
averaging period would become mandatory.\15\
---------------------------------------------------------------------------

    \15\ See ``DBE/ACDBE Size Standards'' at https://www.transportation.gov/DBEsizestandards.
---------------------------------------------------------------------------

    The Department proposes to incorporate the 5-year calculation 
changes in Sec.  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 Sec.  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 Sec.  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 Sec.  23.33. Like Sec.  26.65(c), the proposed 
Sec.  23.33(c) language states that the Departmental Office of Civil 
Rights will publish the annually adjusted number on its web page.\16\
---------------------------------------------------------------------------

    \16\ See https://www.transportation.gov/DBEsizestandards.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  121.103(h)(3) of 
the SBA regulations, respectively. The Department will add a new 
paragraph (d) to Sec.  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

[[Page 43636]]

women, Black Americans, Hispanic Americans, Native Americans, Asian-
Pacific 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.
---------------------------------------------------------------------------

    \17\ The $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-policy-and-guidance.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \18\ Fed. Aviation Admin., ``49 CFR Part 23 Review Virtual 
Virtual Listening Session Subpart C'' (Apr. 4, 2019).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \19\ As 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.
    \20\ The 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.
---------------------------------------------------------------------------

    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, Non-Hispanic 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.
---------------------------------------------------------------------------

    \21\ Codebook for 2019 Survey of Consumer Finances, Board of 
Governors of the Federal Reserve System, assessed at https://www.federalreserve.gov/econres/files/codebk2019.txt.

[[Page 43637]]

                   Table 1--Total Net Worth of the Household by Race and Ethnic Group in 2019
                                                 [2019 Dollars]
----------------------------------------------------------------------------------------------------------------
                                                   Total number                                        90th
                Race & ethnicity                   of households       Mean           Median        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.
---------------------------------------------------------------------------

    \22\ The 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.
[GRAPHIC] [TIFF OMITTED] TP21JY22.000

[[Page 43638]]

    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, Self-Employed, Business Owners, as Calculated Under
                              the Proposal
                             [2019 Dollars]
------------------------------------------------------------------------
                                                       PNW as calculated
                      Percentile                         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
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, Non-Hispanic, 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.
---------------------------------------------------------------------------

    \23\ See 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-income-concentration-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-rapidly-among-asians/.
---------------------------------------------------------------------------

    Data from the 2019 SCF suggests that between 88.7 and 90.8 percent 
of self-employed 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.
---------------------------------------------------------------------------

    \24\ The 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.

                               Table 3--Comparison of Current and Proposed Methods
----------------------------------------------------------------------------------------------------------------
                    Label                                        Description                       Cap amount
----------------------------------------------------------------------------------------------------------------
Current Method...............................  Applicants must calculate current value of         $1.32 million.
                                                retirement accounts by determining any early
                                                withdrawal penalties and applicable taxes.
Proposed Method..............................  Full current retirement account balance            $1.60 million.
                                                excluded from PNW calculation.
----------------------------------------------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \25\ Federal 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/.
---------------------------------------------------------------------------

    Table 4 compares the nominal growth rates inferred by the CPI, the 
Federal

[[Page 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, self-employed 
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]
----------------------------------------------------------------------------------------------------------------
                                                                                                 Personal  net
                                                                             Federal Reserve      worth  90th
                          Year                                  CPI          total household    percentile  from
                                                                                net worth             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 broad-based 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 Sec.  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

[[Page 43640]]

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 (Sec. Sec.  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 Sec.  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 
Sec.  26.67(a). Applicants do, however, have the obligation to provide 
certifiers with information concerning their economic disadvantage. See 
Sec.  26.67.
    Section 26.63(a)(1) provides that if, after reviewing the signed, 
notarized affidavit of membership in a Sec.  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 Sec. Sec.  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 Sec.  26.5 group, the individual may 
elect to apply for certification by demonstrating social and economic 
disadvantage on an individualized basis.
    Current Sec.  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, Asian-Pacific 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 Sec.  26.5, the provisions governing group 
membership determinations, in Sec.  26.63 and the rebuttal of social 
and economic disadvantage provisions in Sec.  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 Sec.  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 Sec.  26.63 into Sec.  
26.67 for clarification and simplicity. Under Sec.  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 Sec.  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

[[Page 43641]]

additional evidence as a matter of course. Additional evidence may only 
be requested if the certifier has a well-founded reason to question the 
individual's claim of group membership. When group membership is in 
question, Sec.  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 Sec.  
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, Sec.  26.67(b)(3) 
states that the certifier bears the burden of proof. We point out that 
current Sec.  26.67(b)(2) states that a certifier may (not must), at 
any time start a proceeding under Sec.  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 
Sec.  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 Sec.  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 Sec.  
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.
---------------------------------------------------------------------------

    \26\ See ``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-business-enterprise/55851/official-questions-and-answers-disadvantaged-business-enterprise-program-regulation-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-faqs-dbe-program-49-cfr-23.
---------------------------------------------------------------------------

    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 
Sec.  26.67(d) (Sec.  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

[[Page 43642]]

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 (Sec.  26.69)

    The Department proposes considerable revisions to Sec.  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 Sec.  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 Sec.  26.69.
    The Department has come to believe that current Sec.  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 Sec.  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 Sec.  26.69(b), streamlined and restated as the general 
rule, would become the new Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  26.69(c) would also streamline the rule 
and make it more equitable. The proposed Sec.  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 Sec.  26.69(i) and extend the renunciation and 
transfer remedy to all joint owners. We would remove as unnecessary the 
complex machinery of current Sec.  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 Sec. Sec.  26.67 and 
26.71. Revised Sec.  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 Sec.  26.69(d) explains how the rules for purchases 
differ from those for capital contributions, and they provide simple 
but significant

[[Page 43643]]

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 Sec.  26.69(c) through 
(f).
    The proposed revisions to Sec.  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 (Sec.  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 non-disadvantaged 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 Sec.  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 Sec.  26.71 by removing redundancy, 
and in some instances, excessively burdensome requirements.
    The Department proposes to add general rules to Sec.  26.71(a). 
Proposed Sec.  26.71(a)(1) would state that disadvantaged owners who 
own at least 51 percent of the firm must also control it. Proposed 
Sec.  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 Sec.  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 Sec.  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 Sec.  26.71(c)(4), other participants at the firm must faithfully 
carry out every decision that the SEDO makes.

Governance

    Proposed rule Sec.  26.71(c) combines the requirements of the 
current Sec.  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 Sec.  26.71(c) into one general 
rule that precludes provisions that require non-SEDO concurrence or 
consent for the SEDO to act. The proposed rule would simplify the 
introductory language of current Sec.  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-
to-day 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 Sec.  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\
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    \27\ See, 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.
    \28\ See, 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 Sec.  26.71(d) to support denial but did 
not dispute SEDO's ability to control board of directors; decision 
reversed).
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    The Department intends the proposed rule to reflect what is 
described in the current Sec.  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 Sec.  
26.71(c) based on a disadvantaged owner's power as a

[[Page 43644]]

majority shareholder to later change the composition of the board of 
directors. See Sec.  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 Sec.  26.71(c) is for 
extraordinary actions detailed within proposed Sec.  26.71(c)(4). The 
Department believes that non-SEDOs 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 Sec.  26.71(d), to incorporate 
a portion of the current Sec.  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 Sec.  26.71(e) incorporates a portion of the current 
Sec.  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 Sec.  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-of-command exists within the 
company, which is recognized by all employees and associates of the 
business.
    Finally, the proposed paragraphs describe what delegated actions by 
non-disadvantaged individuals are permissible under Sec.  26.71.

Independent Business

    The Department proposes to make minor amendments to current Sec.  
26.71(b) and redesignate the provision as Sec.  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 ``pass-through'' 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 Sec.  
26.71(o), which is commonly referred to as the franchise rule, to Sec.  
26.71(h).

NAICS Codes

    The Department proposes redesignating the current provision Sec.  
26.71(n), which is commonly referred to as NAICS rule, to Sec.  26.73 
with minor technical corrections.

Removed Provisions (Sec.  26.71 (i), (j), (k), (l), (m), (p), and (q))

    The current language of Sec.  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 non-disadvantaged 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 non-disadvantaged 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 Sec.  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

[[Page 43645]]

members the same as other non-disadvantaged 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 Sec.  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 
non-disadvantaged or disadvantaged individuals and relatives.
    The Department recommends removing current Sec.  26.71(h), commonly 
referred to as the ``license rule,'' to eliminate redundancy with 
proposed rules Sec.  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 Sec.  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 Sec.  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 Sec.  
26.71(d) and (e) better describe the proper control inquiry than the 
current ``one factor'' rule, making Sec.  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\
---------------------------------------------------------------------------

    \29\ See 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).
    \30\ See 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).
---------------------------------------------------------------------------

Subpart E--Certification Procedures

17. Technical Corrections to UCP Requirements (Sec.  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 (Sec.  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 r[eacute]sum[eacute]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 Sec.  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.
---------------------------------------------------------------------------

    \31\ See COVID-19 Guidance (June 29, 2021) (extending virtual 
on-site flexibilities announced in March 2020) available at https://www.transportation.gov/mission/civil-rights/covid-19-guidance.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 on-site visit is equally effective as an in-person 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

[[Page 43646]]

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 Sec. Sec.  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 on-site 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 
r[eacute]sum[eacute]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 (Sec.  
26.83(k))

    The Department proposes amending the current Sec.  26.83(k) 
(redesignated to Sec.  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 in-state 
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\
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    \33\ See ``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/dbe-guidance-timely-processing-dbe-certification-applications.pdf.
---------------------------------------------------------------------------

    After the certifier receives all the information required under the 
rule, the certifier must make a certification decision within 90 days. 
Current Sec.  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 Sec.  26.83(l) period is a constructive denial of 
the firm's application, and that certifier may become subject to 
penalties for noncompliance under Sec. Sec.  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

[[Page 43647]]

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.
---------------------------------------------------------------------------

    \34\ See ``Curative Measures During DBE/ACDBE Certification 
Application Process'' available at https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/curative-measures-during-dbeacdbe-certification.
---------------------------------------------------------------------------

    Proposed rule Sec.  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 Sec.  
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 (Sec.  26.85)

    The Department proposes changes to the current Sec.  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\
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    \35\ See ``Interstate Certification 49 CFR Sec.  26.85 
Guidance'' available at https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise/interstate-certification-49-cfr-2685.
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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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec. Sec.  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

[[Page 43648]]

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 Sec. Sec.  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 (Sec.  26.86)

    Under existing paragraph (c) of Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \36\ Email from Departmental Office of Civil Rights to 
Recipients.
---------------------------------------------------------------------------

    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

[[Page 43649]]

in the majority of cases is done by email.

23. Decertification Procedures (Sec.  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 Sec.  
26.87. Our goal is to make the procedures easier to understand so that 
they may be more easily followed. Although the substance of Sec.  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 
Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  26.83(j) and/or Sec.  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 (Sec.  
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 Sec.  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 Sec.  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.
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    \37\ See ``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.
---------------------------------------------------------------------------

    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

[[Page 43650]]

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 non-SEDO 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 Sec.  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 (Sec.  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 Sec.  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 (Sec.  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 ill-founded or mistaken information.'' Id.
    The Department would like to add language in Sec.  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

[[Page 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 Sec.  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 Sec.  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 Sec.  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 
Sec.  26.87 proceeding and immediately activates all Sec.  26.87 
procedures. The Department does not believe it does. Otherwise, there 
would be no distinction between Sec. Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 43652]]

believe that giving every noncompliant firm a full Sec.  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 Sec.  
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 Sec.  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 Sec.  26.88(c)(1) specifies what the paragraph (a) notice 
must contain. The new language clarifies how Sec. Sec.  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 
Sec.  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 Sec.  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 (Sec.  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 Sec.  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 
non-indexed 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 Sec.  
26.109(c).
    The Department would like to reinsert the language from Sec.  
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 Sec.  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 Sec.  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

[[Page 43653]]

Sec.  26.89(g) to definitively state that the Department does not issue 
advisory opinions.
    We also wish to remove the references to SBA from Sec.  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.
---------------------------------------------------------------------------

    \38\ See www.transportation.gov/civil-rights/disadvantaged-business-enterprise/ready-apply.
---------------------------------------------------------------------------

    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 (Sec.  23.1)

    The program objectives for the DBE Program currently identified in 
Sec.  26.1 are inconsistent with the program objectives for the ACDBE 
Program currently identified in Sec.  23.1. Although the objectives are 
largely identical, a 2014 revision to Sec.  26.1 added the following 
two objectives that are not included in Sec.  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 Sec.  26.1 of the DBE 
Program to Sec.  23.1 for the ACDBE Program. Importantly, the concepts 
found in the DBE Program Sec.  26.1 objectives 1 and 2 are already 
included in the ACDBE Program at Sec.  23.25(c) and (d)(7).

29. Definitions (Sec.  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 Sec.  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 Sec.  23.3.

Airport Concession Disadvantaged Business Enterprise (ACDBE)

    Based on the definitions of ``Airport Concession Disadvantaged 
Business Enterprise'' and ``concession'' under Sec.  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 Sec.  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 Sec.  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

[[Page 43654]]

owner or lessee of a terminal, if other than the recipient.'' See Sec.  
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 Sec.  
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 Sec.  23.3.
    Instead of removing the above exemption and other proposed changes 
to Sec.  26.67(a)(2)(i), the Department proposes to simplify the 
definition of ``personal net worth'' in Sec.  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 Sec.  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 
Sec.  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 Sec.  23.3 has not been updated 
to mirror its counterpart definition of ``Native Americans'' in Sec.  
26.5. The proposed rule amends the term ``Native Americans'' included 
under the definition of ``socially and economically disadvantaged 
individual'' in Sec.  23.3 to conform to the wording of the term 
``Native Americans'' included under the definition of ``socially and 
economically disadvantaged individual'' in Sec.  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 (Sec.  23.55 and the Uniform Report) and 
subcontract (Sec. Sec.  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 
industry-driven, applied research program that develops near-term, 
practical solutions to airport challenges'' published a Resource Manual 
for Airport In-Terminal 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

[[Page 43655]]

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\
---------------------------------------------------------------------------

    \39\ The 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.
---------------------------------------------------------------------------

    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 Sec.  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 
(Sec.  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 Sec.  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 Sec.  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, Sec.  
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, Sec.  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 Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \40\ See ``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-20160329-001carrentalcompaniesgoodfaitheffortsguidance.pdf.
---------------------------------------------------------------------------

    The proposed rule would amend Sec.  23.25(e) and (f) to clarify 
direct ownership goal setting and good faith efforts requirements.

31. Fostering ACDBE Small Business Participation (Sec.  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 Sec.  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 (Sec.  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

[[Page 43656]]

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 Sec.  
23.51(c)(2).
    Similar to Sec.  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 non-ACDBEs who 
seek concession opportunities for use in helping recipients set overall 
goals for car rentals and concessions other than car rental. See Sec.  
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 Sec.  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 Sec.  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 Sec.  26.11(c)(2). In 
conjunction with the Department's proposal to add a similar MAP-21 
reporting requirement to Sec.  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 Sec.  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 Sec.  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 (Sec.  23.33)

    See discussion on Sec.  26.65 above.

34. Certifying Firms That Do Not Perform Work Relevant to the Airport's 
Concessions (Sec.  23.39)

    The regulatory definition of ``concession'' under Sec.  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, Sec.  23.55(k) prohibits 
recipients from counting toward ACDBE goals the costs incurred in 
connection with the ``build-out'' 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 Sec.  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 construction-
related 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 Sec.  23.37(b). 
Therefore, the proposed rule would add a paragraph to Sec.  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 (Sec.  23.43)

    The current Sec.  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 Sec.  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 Sec.  23.43(b). Meaningful consultation with

[[Page 43657]]

stakeholders is an important, cost-effective 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 Sec.  
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, self-employment, training or union apprenticeship programs; 
and/or data on firm formation.'' \41\
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    \41\ See ``Tips for Goal Setting in the Disadvantaged Business 
Enterprise (DBE) Program'' available at https://www.transportation.gov/osdbu/disadvantaged-business-enterprise/tips-goal-setting-disadvantaged-business-enterprise.
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    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 (Sec.  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, Sec.  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 Sec.  
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 Sec.  
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 Sec.  23.47(a) to provide for the 
goal setting requirements set forth in Sec.  23.25.

37. Counting ACDBE Participation After Decertification (Sec.  23.55)

    Both Sec. Sec.  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, Sec.  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 Sec.  26.83(i) and (j), made applicable to part 23 by Sec.  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 Sec.  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 Sec.  23.55(j) to require those firms to continue 
to report changes by submitting declarations similar to those 
affidavits required of DBEs by Sec.  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

[[Page 43658]]

of no changes or notification of changes similar to those required by 
Sec.  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 non-ACDBE, its participation would cease to be 
counted as of the date of the sale based on Sec.  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 Sec.  
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 Sec.  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 Sec.  26.83(i) and (j) as 
required, prior to acquiring the firm or a controlling interest 
therein.
    The Department proposes to delete Sec.  23.39(e), and redesignate 
paragraphs (f) and (g) as paragraphs (e), (f), and (g) under Sec.  
23.39. Both Sec. Sec.  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 (Sec.  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 Sec.  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 Sec.  23.57(b)(3)(i). In contrast, 
Sec.  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 Sec.  26.47(c)(3)(i).
    The proposed rule would extend the due date of the part 23 
Shortfall Analysis by amending Sec.  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 (Sec.  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\
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    \42\ See ``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.
---------------------------------------------------------------------------

    Stakeholders suggest that the five-year term in the definition 
contained in Sec.  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 Sec.  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 long-
term 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 Sec.  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 short-term 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

[[Page 43659]]

the same manner as long-term exclusive agreements requiring approval by 
the FAA per Sec.  23.75.
    The Department seeks public comment on how to address holdovers 
that would result in short-term exclusive agreements becoming long-term 
without FAA oversight, leading to the possible circumvention of Sec.  
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\
---------------------------------------------------------------------------

    \43\ Id.

    The intent of Sec.  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 Sec.  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 Sec.  23.75(c):
     Amend the introductory text in Sec.  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 Sec.  23.75(c)(2)(i) as there may not be 
opportunities for direct ownership.
     Delete Sec.  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 
Sec.  23.75(c)(2)(iii), as the termination provision language is 
inconsistent with the requirements of Sec.  26.53 and the provisions of 
Sec.  26.53(f). These termination provisions apply to part 23 by 
reference and address replacement or substitution of ACDBEs.
     Replace the current provision in Sec.  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 Sec.  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 Sec.  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 Sec.  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 (Sec.  23.79)

    This NPRM provision proposes to revise Sec.  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 Sec.  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.

[[Page 43660]]

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 
Sec.  23.3 list of definitions. The Department proposes adding the 
definition to Sec.  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 Sec.  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 Sec.  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, Sec.  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, Sec.  26.83(h) through (j), made 
applicable by Sec.  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, Sec.  23.31(c) is unnecessary and the Department 
recommends deleting it.

Uniform Certification Application (UCA) Inconsistencies

    The current Sec.  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 Sec.  
23.39(g) is inconsistent with Sec.  26.83(c)(2), made applicable to 
part 23 by Sec.  23.31. In addition, Sec.  23.39(g) is inconsistent 
with the revised UCA that the Department published in 2019. The 
proposed rule would therefore delete Sec.  23.39(g)(1) through (3) and 
revise Sec.  23.39 to be consistent with Sec.  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 Sec.  23.39 lists by 
reference several provisions in Sec.  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 Sec.  23.31(a).
    Notwithstanding slight differences between part 23 and part 26 
certification, all of the requirements of Sec.  26.83(c)(1)(i) through 
(viii) generally apply to part 23 certification, but various 
modifications to the cross-references make Sec.  23.39 difficult to 
follow as written. To address this, the Department proposes to simplify 
the rule by excluding all of the provisions of Sec.  26.83(c)(1)(i) 
through (viii) and stating each of those requirements in Sec.  23.39(a) 
in a manner that is consistent with the ACDBE Program.

[[Page 43661]]

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\
---------------------------------------------------------------------------

    \44\ See ``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.
---------------------------------------------------------------------------

    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

[[Page 43662]]

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).
---------------------------------------------------------------------------

    \45\ A ``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.''
    \46\ The 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \47\ For part 23 recipient wage rates, the Department calculated 
the total annual cost burden by multiplying the total annual burden 
hours (56 hours x 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).
---------------------------------------------------------------------------

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 non-
ACDBEs.
    Frequency: once each year.
    Number of responses: 396 primary airports; 3,945 ACDBE and non-
ACDBEs.
    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 
non-hub 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 (Sec.  
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 (Sec.  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.

[[Page 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 [email protected] or to 
Joseph Nye, Office of the Secretary Desk Officer, Office of Management 
and Budget, at [email protected]. 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

0
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.

0
2. In part 23, remove ``a ACDBE'' wherever the term appears and add in 
its place ``an ACDBE''.
0
3. Amend Sec.  23.1 by:
0
a. In paragraph (e), removing the word ``and'' at the end of the 
paragraph.
0
b. Redesignating paragraph (f) as paragraph (h).
0
c. Adding new paragraph (f) and paragraph (g).
    The additions read as follows:

Sec.  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

[[Page 43664]]

marketplace outside the ACDBE program; and
* * * * *
0
4. Amend Sec.  23.3 by:
0
a. Removing ``13 CFR 121.103(f)'' in the definition of Affiliation and 
adding in its place ``13 CFR 121.103(h).''
0
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.''
0
c. Adding the definitions of Alaska Native and Assets in alphabetical 
order.
0
d. In the definition of Concession:
0
i. In the introductory text, adding the phrase ``that serve the 
traveling public'' after ``the types of for-profit businesses.''
0
ii. Adding the phrase ``traveling'' after ``sale of consumer goods or 
services to the'' in paragraph (1).
0
e. Adding the definitions of Contingent liability and Days in 
alphabetical order.
0
f. Removing the definition Department (DOT) and adding the definition 
Department or DOT in its place.
0
g. Adding the definition of Home State in alphabetical order.
0
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.''
0
i. Adding the definitions of Liabilities and Operating Administration 
or OA in alphabetical order.
0
j. Revising the definitions of Part 26 and Personal net worth.
0
k. Removing the definition of Primary recipient.
0
l. Moving the definition of Recipient into alphabetical order and 
revising the definition.
0
m. Revising the introductory text and paragraphs (1) and (2)(iii) and 
(iv) in the definition of Socially and economically disadvantaged 
individual.
0
n. Adding the definitions of Subconcession or subcontractor and 
Sublease in alphabetical order.
    The revisions and additions read as follows:

Sec.  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 one-fourth 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.
* * * * *

[[Page 43665]]

Sec.  23.13   [Amended]

0
5. Amend Sec.  23.13 by:
0
a. In paragraph (b), removing ``of'' that appears after the word 
``interpretations.''
0
b. In paragraph (d) introductory text, removing the phrase ``are for 
the purpose of authorizing'' and adding in its place the word 
``authorize.''

Sec.  23.21   [Amended]

0
6. Amend Sec.  23.21 by:
0
a. In paragraph (a) introductory text, removing the word ``revisesd'' 
and add in its place the word ``revised.''
0
b. In paragraph (b), removing the term ``a DBE concessions'' and add in 
its place ``an ACDBE''.
0
c. In the second sentence of paragraph (c), removing the phrase ``If 
you do so,'' and add in its place the word ``However,''.
0
7. Amend Sec.  23.25 by:
0
a. In paragraph (d)(3), removing the words ``so as'' after the word 
``activities'' and adding a semicolon at the end of the sentence.
0
b. Revising paragraphs (e) and (f).
    The revisions read as follows:

Sec.  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 race-conscious 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 
concession-specific 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 concession-specific 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 concession-specific 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, Sec. Sec.  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 non-car rental ACDBE goals at the airport to make good faith 
efforts to meet goals when set pursuant to paragraph (e) of this 
section.
* * * * *
0
8. Add Sec.  23.26 to read as follows:

Sec.  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 
Sec.  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.
0
9. Amend Sec.  23.27 by revising paragraph (b) and adding paragraphs 
(c) and (d) to read as follows:

Sec.  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

[[Page 43666]]

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 non-ACDBEs 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 Sec.  
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 non-ACDBE;
    (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.

Sec.  23.31  [Amended]

0
10. Amend Sec.  23.31 by removing paragraph (c).
0
11. Revise Sec.  23.33 to read as follows:

Sec.  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).
0
12. Revise Sec.  23.35 to read as follows:

Sec.  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.

Sec.  23.37  [Amended]

0
13. Amend Sec.  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.
0
14. Revise Sec.  23.39 to read as follows:

Sec.  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 r[eacute]sum[eacute]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 r[eacute]sum[eacute]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

[[Page 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 Sec.  
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 
Sec.  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.
0
15. Revise Sec.  23.41 to read as follows:

Sec.  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.
0
16. Amend Sec.  23.43 by adding paragraph (c) as to read follows:

Sec.  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.
0
17. Amend Sec.  23.45 by:
0
a. Revising the second sentence of paragraph (a) introductory text.
0
b. Removing paragraphs (a)(1) through (3).
0
c. Removing the word ``new'' in paragraph (b).
0
d. Removing the words ``on you'' in paragraph (h) in the last sentence.
    The revision reads as follows:

Sec.  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.
* * * * *
0
18. Amend Sec.  23.47 by revising paragraph (a) to read as follows:

Sec.  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 Sec.  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.
* * * * *

Sec.  23.51   [Amended]

0
19. Amend Sec.  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.''
0
20. Amend Sec.  23.55 by:
0
a. In paragraphs (e) and (h)(1) and (2), removing the phrase ``the 
entire amount'' and adding ``100 percent'' in its place.
0
b. Revising paragraph (j).
    The revision reads as follows:

Sec.  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

[[Page 43668]]

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.
* * * * *
0
21. Amend Sec.  23.57 by revising the first sentence of paragraph 
(b)(3)(i) to read as follows:

Sec.  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. * * *
* * * * *

Sec.  23.59   [Amended]

0
22. Amend Sec.  23.59 in paragraph (b) by removing the word ``DBEs' '' 
and adding ``ACDBEs' '' in its place.

Sec.  23.71   [Amended]

0
23. Amend Sec.  23.71 by removing the first sentence.
0
24. Revise Sec.  23.75 to read as follows:

Sec.  23.75   Can recipients enter into long-term, 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.

Sec.  23.77   [Amended]

0
25. Amend Sec.  23.77 in paragraph (b) by removing the term 
``disadvantaged business enterprise'' and adding in its place 
``Disadvantaged Business Enterprise''.
0
26. Revise Sec.  23.79 to read as follows:

Sec.  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]

0
27. Remove appendix A to part 23.

PART 26--PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN 
DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS

0
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).

0
29. In part 26, remove the word ``actually'' wherever it appears.

Sec.  26.1   [Amended]

0
30. Amend Sec.  26.1 in paragraph (f) by removing ``federally-
assisted'' and add in its place ``federally assisted''.
0
31. Revise Sec.  26.3 to read as follows:

Sec.  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

[[Page 43669]]

not participate, this part does not apply to the contract.
0
32. Amend Sec.  26.5 by:
0
a. Revising the definitions of Alaska Native and Department or DOT.
0
b. Removing the definition Disadvantaged business enterprise or DBE and 
adding the definition Disadvantaged Business Enterprise or DBE in its 
place.
0
c. Removing the definition Indian tribe and adding the definition 
Indian tribe or Native American tribe in its place.
0
d. Removing the definition Personal net worth and adding the definition 
Personal net worth or PNW in its place.
0
e. Revising the definitions of Primary industry classification, 
Principal place of business, Recipient, and Secretary.
0
f. In the definition of Socially and economically disadvantaged 
individual:
0
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''.
0
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.
0
iii. In paragraph (2)(v), removing the location ``the Maldives 
Islands'' and adding in its place the location ``Maldives''.
0
f. Adding the definitions of Transit vehicle and Transit vehicle 
dealership in alphabetical order.
0
g. Removing the definition of Transit vehicle manufacturer and adding 
in its place the definition Transit vehicle manufacturer (TVM).
0
h. Adding the definition of Unsworn declaration in alphabetical order.
    The revisions and additions read as follows:

Sec.  26.5   Definitions

* * * * *
    Alaska Native means a citizen of the United States who is a person 
of one-fourth 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 transportation-related 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 Sec.  
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.
* * * * *
0
33. Revise Sec.  26.11 to read as follows:

Sec.  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 Sec.  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 non-DBE;
    (iv) Race and gender information for the firm's majority owner;

[[Page 43670]]

    (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 Sec.  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 Sec.  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 in-state 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-of-state firms decertified and/
or 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.
0
34. Revise the heading for subpart B to read as follows:

Subpart B--Administrative Requirements for DBE Programs for 
Federally Assisted Contracting

0
35. Revise Sec.  26.21 to read as follows:

Sec.  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 Sec.  26.11; contract 
assurances under Sec.  26.13; policy statement under Sec.  26.23; 
fostering small business participation under Sec.  26.39; and transit 
vehicle manufacturers under Sec.  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 DOT-assisted 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.
0
36. Amend Sec.  26.29 by:
0
a. Revising paragraph (d).
0
b. Redesignating paragraph (e) as paragraph (g).
0
c. Adding new paragraph (e) and paragraph (f).
    The revision and additions read as follows:

Sec.  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.
* * * * *
0
37. Revise Sec.  26.31 to read as follows:

Sec.  26.31   What information must a UCP include in its DBE/ACDBE 
directory?

    (a) In the directory required under Sec.  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.

[[Page 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 Sec.  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.
0
38. Amend Sec.  26.35 by revising paragraph (b)(2) introductory text to 
read as follows:

Sec.  26.35   What role do business development and mentor-
prot[eacute]g[eacute] programs have in the DBE program?

* * * * *
    (b) * * *
    (2) In the mentor-prot[eacute]g[eacute] relationship, you must:
* * * * *
0
39. Revise Sec.  26.37 to read as follows:

Sec.  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 Sec.  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 Sec.  
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 Sec.  26.53(g).

Sec.  26.39   [Amended]

0
40. Amend Sec.  26.39 in paragraph (b) introductory text by removing 
the phrase ``by February 28, 2012''.
0
41. Amend Sec.  26.45 by:
0
a. Revising paragraph (a).
0
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.''
0
c. Removing in paragraph (f)(1)(i) the words ``website'' and adding in 
their place the word ``Web site''.
0
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 ``Sec.  26.51(c)'', 
respectively.
    The revision reads as follows:

Sec.  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.
* * * * *

Sec.  26.47   [Amended]

0
42. Amend Sec.  26.47 in paragraph (c)(3)(i) by removing the words 
``Operational Evolution Partnership Plan'' and adding in their place 
the term ``CORE 30''.
0
43. Revise Sec.  26.49 to read as follows:

Sec.  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 FTA-assisted 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.

[[Page 43672]]

    (1) In setting your overall goal, you should be guided, to the 
extent applicable, by the principles underlying Sec.  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 non-DBEs.
    (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 Sec.  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 Sec.  
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.

Sec.  26.51   [Amended]

0
44. Amend Sec.  26.51 in paragraph (f)(4) by removing the words 
``through the use of'' and adding in their place the word ``using.''
0
45. Amend Sec.  26.53 by revising paragraphs (b)(3)(ii), (e), and (f) 
to read as follows:

Sec.  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 self-perform 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

[[Page 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.
* * * * *
0
46. Amend Sec.  26.55 by:
0
a. In paragraph (c)(2), removing the words ``in order''.
0
b. In paragraph (c)(3), removing the words ``on the basis of'' and 
adding in their place the word ``within''.
0
c. Revising paragraph (e).
0
d. In paragraph (f), removing the cross-reference ``Sec.  26.87(i)'' 
and adding in its place the cross-reference ``Sec.  26.87(j)''.
0
e. Revising paragraph (h).
    The revisions read as follows:

Sec.  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

[[Page 43674]]

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-by-contract 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-by-contract 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.
0
47. Revise Sec.  26.61 to read as follows:

Sec.  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 
Sec.  26.67(c).
0
48. Revise Sec.  26.63 to read as follows:

Sec.  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 x .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 ANC-related 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.
0
49. Revise Sec.  26.65 to read as follows:

Sec.  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

[[Page 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.
0
50. Revise Sec.  26.67 to read as follows:

Sec.  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 well-founded 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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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

[[Page 43676]]

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 Sec.  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 Sec.  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 Sec.  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.
0
51. Add Sec.  26.68 to read as follows:

Sec.  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 Sec.  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.

[[Page 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 non-recurring 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:
    [GRAPHIC] [TIFF OMITTED] TP21JY22.001
    
    (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 
Sec.  26.89 or to any other state to which the individual's firm has 
applied for certification under Sec.  26.85.
0
52. Revise Sec.  26.69 to read as follows:

Sec.  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 non-disadvantaged 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.

[[Page 43678]]

    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.
0
53. Revise Sec.  26.71 to read as follows:

Sec.  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 
non-SEDO consent for extraordinary actions generally do not contravene 
the rules in paragraph (c) of this section. Non-exclusive 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

[[Page 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.
0
54. Revise Sec.  26.73 to read as follows:

Sec.  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]
0
55. Amend Sec.  26.81 by:
0
a. Revising paragraphs (a)(1) and 5.
0
b. In paragraph (e), removing the word ``the'' from the first sentence.
0
c. Revising paragraph (g).
    The revisions read as follows:

Sec.  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 Sec.  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.
* * * * *
0
56. Amend Sec.  26.83 by:
0
a. Revising the section heading and paragraph (c)(1)(i), (c)(3), (h), 
(i)(3), (j), (k), (l), and (m).
0
b. Adding paragraph (n).
    The revisions and addition read as follows:

Sec.  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 r[eacute]sum[eacute]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 on-site 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 Sec.  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 Sec.  
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 on-site 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 
Sec.  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

[[Page 43680]]

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 Sec.  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 Sec.  26.89. You may also be subject 
to noncompliance penalties described in Sec. Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  
26.86(c) to a firm that has established a pattern of frequently 
withdrawing applications before you make a decision.
0
57. Revise Sec.  26.85 to read as follows:

Sec.  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 Sec.  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 non-compliance 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 Sec. Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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);

[[Page 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 
Sec. Sec.  26.83(j) (Declaration of Eligibility) and 26.87(e)(6) 
(failure to cooperate).
    (ii) [Reserved]
0
58. Revise Sec.  26.86 to read as follows:

Sec.  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 [email protected] 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 non-compliant 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 
Sec.  26.89 does not extend this period. You must include this 
information, including the waiting period for reapplication, in your 
denial letter.
0
59. Revise Sec.  26.87 to read as follows:

Sec.  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 Sec.  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 Sec.  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 Sec.  
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

[[Page 43682]]

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 Sec.  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 Sec.  
26.83(j) and/or Sec.  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 non-SEDO 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 Sec.  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 Sec.  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.

[[Page 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.
0
60. Revise Sec.  26.88 to read as follows:

Sec.  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 Sec.  
26.83(j) requires.
    (3) Flexibilities. In most cases, an information request or notice 
of intent under Sec.  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 Sec.  
26.87(g). Such an NOD is deemed to be a final decision under Sec.  
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 Sec.  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

[[Page 43684]]

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.
0
61. Revise Sec.  26.89 to read as follows:

Sec.  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 Sec.  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 [email protected] 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 Sec.  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 
Sec.  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 Sec.  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

[[Page 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.

Sec.  26.91  [Amended]

0
62. Amend Sec.  26.91 by:
0
a. Removing the words ``recipients'' and ``recipient'' wherever they 
appear and adding in their places the words ``certifiers'' and 
``certifier'', respectively.
0
b. In paragraph (b)(1), removing the cross-reference ``Sec.  26.87(i)'' 
and adding in its place the cross-reference ``Sec.  26.87(j)''.

Sec.  26.103   [Amended]

0
63. Amend Sec.  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]

0
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]

0
65. Remove and reserve appendix B to part 26.

Appendices E through G to Part 26 [Removed]

0
66. Remove appendices E through G to part 26.

[FR Doc. 2022-14586 Filed 7-20-22; 8:45 am]
BILLING CODE P