The following information is from AGC of America:
On September 30th the U.S. Department of Transportation (DOT) released an Interim Final Rule (IFR) on the Disadvantaged Business Enterprise (DBE) Program which removes the race and sex-based assumptions from the program. Because of the ongoing and unsettled litigation over this program and the politics surrounding the federal government shut down, AGC is still evaluating the impact of the IFR and will provide more details as they are made available.
The timing of this IFR appears to be aligned with the Administration’s broader effort to apply political pressure during the shutdown, as its announcement coincided with DOT’s administrative review of two New York projects that explicitly referenced Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries as factors in the delay.
IFRs, especially on complex and politically charged topics, have not proven to be extremely durable when challenged in court. But this does provide a glimpse of what the administration might be looking for in the surface reauthorization next year.
AGC has stated all along, the DBE program is codified in law, so if the Trump administration wants to eliminate the DBE program, they will either need the courts to strike it down or for Congress to eliminate it. AGC is still reviewing how this intersects with the ongoing settlement talks in the MAMCO, Bagshaw Trucking Inc. vs. U.S. DOT et al. case. That being said, DOT could, and will likely, face lawsuits to block the implementation of this IFR.
AGC talked to DOT officials and has formally submitted questions to U.S. DOT asking for additional details and clarifications because many questions are not clearly addressed in the IFR. The IFR is set to take effect once it is published in the Federal Register. Before making any decisions, AGC recommends that you reach out to your project owner for guidance.
Some initial highlights of the IFR:
Removes Race or Sex-Based Presumptions – The IFR removes the race and sex-based presumptions and states that the owner of a DBE must do the following to be certified as a DBE:
- Demonstrate that the owner is socially and economically disadvantaged based on his or her own experiences and circumstances that occurred within American society, and without regard to race or sex;
- Submit to the certifier a personal narrative establishing the existence of disadvantage by a preponderance of the evidence based on individualized proof regarding specific instances of economic hardship, systemic barriers, and denied opportunities that impeded the owner’s progress or success in education, employment, or business, including obtaining financing on terms available to similarly situated, non-disadvantaged persons;
- State how and to what extent the impediments caused the owner economic harm, including a full description of type and magnitude, and establish the owner is economically disadvantaged in fact relative to similarly situated non-disadvantaged individuals; and
- Attach to the Personal Narrative a current personal net worth statement and any other financial information the owner considers relevant.
New Certification Standards for DBEs – Unified Certification Programs (UCP) must reevaluate the eligibility of existing DBEs to ensure that they meet the new certification standards and decertify any DBE that does not.
No DBE Contract Goals During the Transition – The IFR states that until a UCP completes the new reevaluation process, each recipient may not:
- Include DBE contract goals; or
- Count any participation toward overall DBE goals.
Race and Sex Removed from DBE Recordkeeping & Reporting – The IFR eliminates the requirements to provide bidders list information about the majority owner’s race and sex for all DBEs and non-DBEs who bid as prime contractors and subcontractors on each of a recipient’s federally assisted contracts.
These requirements will ensure that existing DBEs do not continue to receive any benefits as a result of their certification under the old standards. DBE participants who have previously qualified based in whole or in part on their race or sex will need to develop and provide the individualized narrative required by the IFR.
The Interim Final Rule provides that until a UCP completes the reevaluation process, no recipient covered by that UCP shall be subject to the compliance provisions of 49 CFR § 23.57 or 49 CFR § 26.47. Recipients will also not be required to update their overall goals during this process.
U.S. DOT Resources