U.S. DOT established a minority and women’s business enterprise program for its highway, airport, and transit programs by regulation in 1980. The Surface Transportation Assistance Act of 1982 (STAA) contained the first statutory DBE provision authorizing a U.S. DOT DBE program. As amended, the provision requires that not less than 10 percent of the amounts made available by the act be expended through small businesses owned and controlled by socially and economically disadvantaged individuals—known as disadvantaged business enterprises or DBEs—unless the Secretary of Transportation determines otherwise. Following STAA, the DBE program continued to be reauthorized, and was last reauthorized in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). 49 C.F.R. § 26.45(g). goals.18, 19 Each contract goal on an individual U.S. DOT-assisted contract is expressed as the percentage of federal-aid highway funds th state DOT will expend on DBEs on the individual contract. When a state DOT sets DBE contract goals on individual U.S. DOT- assisted contracts, bidders on those contracts must make good faith efforts to meet those goals. The bidder can meet this requirement in one of two ways: (1) meet the goal on the individual U.S. DOT-assisted contract, or (2) document that it made adequate good faith efforts— meaning that the bidder took the necessary and reasonable steps to achieve the goal even though it did not succeed in obtaining enough DBE participation to do so. State DOTs are responsible for evaluating whether bidders made good faith efforts to meet their goals, and according to U.S. DOT officials, this evaluation is subject to FHWA review as appropriate. 49 C.F.R. § 26.51(d). State DOTs must meet as much of their DBE participation goal as possible using race-neutral methods—actions that assist all small businesses without consideration of DBE status. When a state cannot achieve its goal using race-neutral methods, it must use race-conscious methods—actions used to assist only DBEs—to meet the remaining portion of the goal. The primary race-conscious method is setting contract goals on individual U.S. DOT-assisted contracts. 49 C.F.R. § 26.51. See also 49 C.F.R. § 26.5. According to FHWA officials, most states use a combination of race-neutral and race-conscious methods to meet their state goals. FHWA approval of each contract goal is not necessarily required; however, FHWA may review and approve or disapprove any contract goal established. 49 C.F.R. § 26.51(e)(3). to FHWA two types of data on spending on DBEs: committed spending on DBEs and actual spending on DBEs. Committed spending on DBEs is the total amount of federal funds that state DOTs award or commit to DBEs in the fiscal year.23, Committed spending data on contracts awarded in the fiscal year include data on contracts that will be completed in the fiscal year as well as ongoing contracts. These data include completed and ongoing contracts because some highway contracts can be relatively short and can be awarded and completed within the same fiscal year, whereas other highway contracts can cover multiple years between award and completion. Actual spending on DBEs is the total amount of actual payments that state DOTs make to DBEs using federal funds on contracts that are completed in the fiscal year. Actual spending includes spending on contracts completed in the fiscal year and can include contracts that were awarded in previous years. State DOTs award contracts to prime contractors, which may be DBEs, and prime contractors award subcontracts to DBE subcontractors, or commit to provide funds to DBE subcontractors. For each reporting period, the DBE regulations require state DOTs to provide data on the total amount of federal funds that are awarded to DBEs on U.S. DOT- assisted prime contracts, and the total amount of federal funds that are awarded or committed to DBEs on U.S. DOT-assisted subcontracts. 49 C.F.R. part 26, appendix B. Although applicable regulations refer to this as “Awards/Commitments,” for purposes of this report, we refer to this as “committed spending” or “committed spending on DBEs.” For certification of DBEs, U.S. DOT requires DBEs to be certified in each state where they want to bid on or participate in U.S. DOT-assisted contracts. DBEs are certified according to U.S. DOT’s regulatory eligibility requirements and certification procedures. Specifically, DBEs must be small businesses that are at least 51 percent owned by one or more individuals who are socially and economically disadvantaged, and that are managed, operated, and controlled by these owners. (See app. II for more details on the eligibility requirements.) Organizations that certify DBEs must take many steps to ensure that a DBE firm meets certification requirements—this includes, among other things, reviewing firms’ applications for certification; conducting on-site visits and interviews; and reviewing licenses, stock ownership, equipment, work completed, resumes of principal owners, and the bonding and financial capacity of the firm. Furthermore, DBEs are certified only in the type or types of work, such as paving, that they can perform. According to U.S. DOT, in 2009, about 27,000 DBEs were certified under its program. Generally, organizations within each state that receive DOT funds decide which organizations within the state can certify DBEs. While some states have multiple organizations certifying DBEs, others have one certifying organization. For example, in the five states we focused on as part of this review, four states (Florida, Minnesota, Missouri, and Wisconsin) have multiple organizations within the state that certify DBEs, and the remaining state (Washington) has one organization that certifies DBEs for the entire state. Each state is required by DBE regulations to have a unified approach to certification so that the certification decisions of one organization are honored by all the organizations receiving U.S. DOT funds in the state. This essentially allows for a “one-stop shop” for DBE firms seeking certification, meaning that a DBE only needs to apply for certification with one organization in the state, rather than apply for certification from all the organizations in the state with which the DBE wants to conduct work. The organizations that certify DBEs may include the state DOT, local airport authorities, state and local transit agencies, and city and county governments. For example, Florida has 13 organizations that certify DBEs—including Florida DOT, the Greater Orlando Aviation Authority, and Miami-Dade County. See figure 1 for examples of organizations that certify DBEs. The type of work a DBE performs and the DBE’s geographic location can play a role in some states in determining which organization in the state reviews a firm’s application for certification and certifies the firm as a DBE. State DOTs primarily review applications and certify DBEs that work on highway projects, while local airport authorities and state and local transit agencies primarily review applications and certify DBEs that work on airport and transit projects, respectively. Nevertheless, the DBEs certified by organizations other than state DOTs (such as local airport authorities and state and local transit agencies) can also work on highway projects if the type of work they are certified to perform can be applied to both airport or transit and highway projects. For example, if a DBE is certified to do paving, this DBE may be able to do paving work on both highway and airport projects. Geographic location may also play a role in determining which organization reviews a firm’s application for certification and certifies DBEs. For example, a county government in Wisconsin certifies DBEs from six nearby counties in the state, regardless of whether the DBE is interested in working on federal highway, transit, or airport projects. Federal agencies should perform a number of oversight activities to safeguard against fraud and to ensure that federal programs meet their objectives and comply with federal regulations. FHWA oversees the DBE program as part of its oversight of state DOTs’ implementation of federal-aid highway programs. FHWA offices—including FHWA’s Office of Civil Rights, a program office located in the agency’s headquarters office, and FHWA’s 52 division offices, which are located in each state, the District of Columbia, and Puerto Rico—oversee the DBE program. FHWA’s Office of Civil Rights is responsible for a number of civil rights programs, including the DBE program, and the division offices perform primary oversight of state DOT activities. In general, these offices oversee the DBE program through risk assessments, day-to-day monitoring of state DOT activities, and program reviews. FHWA’s annual risk assessments identify and assess risks across all federal-aid highway programs, including the DBE program. FHWA uses the results of these risk assessments to help it determine how to focus its oversight. Both FHWA’s program offices and division offices conduct these assessments and use the results to take actions to address the risks they identify, which have recently included the DBE program. In addition, FHWA uses the results of the program office and division office risk assessments to identify agencywide risk. Program office risk assessments. In 2010 FHWA’s Office of Civil Rights identified the DBE program as a risk area because of the potential for, among other things, a significant increase in fraud and abuse, improper program implementation, and costly litigation.