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Barry McVay's FEDERAL CONTRACTS DISPATCH

DATE: November 15, 2000

FROM: Barry McVay, CPCM

SUBJECT: Department of Transportation; Threshold Requirements for Participation by Disadvantaged Business Enterprises in Transportation Financial Assistance Programs

SOURCE: Federal Register, November 15, 2000, Vol. 65, No. 221, page 68949

AGENCIES: Department of Transportation (DOT)

ACTION: Interim Final Rule

SYNOPSIS: DOT is revising its regulations to change threshold requirements for Federal Transit Administration (FTA) recipients and Federal Aviation Administration (FAA) recipients to establish DBE programs and submit overall goals, and to correct and clarify misleading language in the DBE regulations.

EDITOR'S NOTE: Guidance on the DBE program, including application procedures, is at http://osdbuweb.dot.gov/business/dbe/index.html.

DOT's DBE regulations are in Title 49 of the Code of Federal Regulations (CFR), Part 23, Participation by Disadvantaged Business Enterprise in Airport Concessions, and Part 26, Participation by Disadvantaged Business Enterprises in Department of Transportation Financial Assistance Programs. This interim final rule addresses 49 CFR Part 26.

DATES: This interim final rule is effective November 15, 2000. Comments on the interim final rule must be submitted no later than January 2, 2001.

ADDRESSES: Send comments (in triplicate) to the Docket Clerk, Attn: Docket No. OST-2000-7640, Department of Transportation, 400 7th Street, SW, Room PL-401, Washington DC, 20590. Comments may also be submitted to the docket electronically by logging onto the Dockets Management System website at http://dms.dot.gov and following the instructions there.

FOR MORE INFORMATION CONTACT: Laura Aguilar, Attorney, Office of General Counsel for Environmental, Civil Rights, and General Law, Department of Transportation, 400 Seventh Street, SW, Room 10102, Washington, DC 20590, 202-366-0365.

SUPPLEMENTAL INFORMATION: The DBE program was instituted in 1980, and it is intended to provide contracting opportunities for small disadvantaged concerns in DOT's highway, mass transit, and airport financial assistance programs.

On February 2, 1999, DOT amended the DBE regulations to reflect statutory and other changes that had taken place since 1980, particularly the June 1995 Supreme Court decision Adarand Constructors, Inc. v. Pena, in which the court determined that race-conscious affirmative action programs are subject to strict judicial scrutiny. This interim final rule is making changes to the DBE regulations which DOT believes are necessary to decrease the administrative burdens on various recipients of DOT funds, and to correct and clarify misleading language in the February 2, 1999, rule.

The following are the significant changes being made by this interim final rule:

• DBE Programs:
  
  
  • Paragraph (a)(2) of Section 26.21, Who must have a DBE program?, required Federal Transit Administration (FTA) recipients that receive $250,000 in a fiscal year in various forms of FTA assistance must have a DBE program, and paragraph (a)(3) required Federal Aviation Administration (FAA) recipients that receive grants of $250,000 or more in a fiscal year for airport planning and development to have a DBE program. To decrease the administrative burden on small airport and transit authorities, DOT is revising DBE program requirement to apply to FTA recipients that project awarding more than $250,000 in prime contracts (goods and services) in a fiscal year from FTA assistance, and to FAA recipients that project awarding more than $250,000 in prime contracts in a fiscal year from grants for airport planning and development. Many transit authorities and small airports receive more than $250,000 in FTA or FAA funds but only have a small amount of funding for actual contracting opportunities. For example, FAA grants funds for land acquisition projects, many of which exceed $250,000, but the value of contracting opportunities covered by the DBE program (such as real estate appraisal and survey) is frequently well below $250,000. However, this change affects new recipients or recipients who do not currently have a DBE program (see the discussion of changes to Section 26.45 below).
    
    
  • In conjunction with the changes to Section 26.21, Section 26.45, How do recipients set overall goals?, is changed to exempt FTA and FAA recipients with existing DBE programs from setting updated overall goals when they do not project awarding prime contracts exceeding $250,000 (excluding vehicle transit purchases). However, even though a FAA or FTA recipient that is currently administering a DBE program may be exempt from the goal setting requirement because it anticipates awarding $250,000 or less in prime contracts in a fiscal year, the recipient's existing DBE program must remain in effect. For example, the recipient would still perform certification functions, such as processing applications and obtaining no-change affidavits.
    
    
  • Also in Section 26.45, paragraph (d)(1) specifies information that must be considered when adjusting the base figure when setting overall goals, and paragraph (d)(2) lists additional information "you may also consider." This language has been interpreted as being permissive, but a narrowly tailored program requires that all relevant information be considered. Therefore, to clarify that the information must be considered if it is available, the wording is being changed to "if available, you must consider evidence from related fields that affect the opportunities for DBEs to form, grow and compete."
  
  
• Bidders Lists: Paragraph (c) of Section 26.11, What records do recipients keep and report?, requires recipients to create and maintain a bidders list containing information about DBE and non-DBE contractors and subcontractors that seek work on a recipient's federally-assisted contracts. DOT has received a number of questions regarding the appropriate method to collect the required information, particularly the annual gross receipts of the firm, which firms are reluctant to provide, especially non-DBEs and subcontractors that were unsuccessful in obtaining contracts.
  
  The February 2, 1999, rules did not impose any procedural requirements for how the data is collected because DOT believed, and still believes, that a recipient's data collection process should remain flexible so that recipients can choose the least burdensome and intrusive method. However, DOT is amending Section 26.11(c) to emphasize the purpose of the bidders list ("provide you 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 by providing examples of ways in which recipients may choose to collect the required data ("you can collect the data from all bidders, before or after the bid due date").
  
  With regard to a firm's annual gross receipts, Section 26.11(c) is revised to state that recipients are not required to collect the exact dollar figure from the bidders, but may ask a firm to indicate into what gross receipts bracket they fit (for example, less than $500,000; $500,000 - $1 million; $1 - 2 million; $2 - 5 million; etc.).
  
  
• Monitoring and Counting DBE Participation: Paragraph (b) of Section 26.37, What are a recipient's responsibilities for monitoring the performance of other program participants?, is reworded to state that a recipient's DBE program must include a monitoring and enforcement mechanism to insure that work committed to DBEs at contract award is actually performed by DBEs. In addition, a new paragraph (c) is added to clarify that a recipient's mechanism for providing a running tally of actual DBE attainments must include a means of comparing the attainments to commitments, and that both awards or commitments and attainments must be contained in a recipient's reports of DBE participation to DOT.

FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.

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