Section 3: Commercially Useful Function (CUF) ReviewsAnchor: #i1001013
For federally funded contracts with an assigned DBE goal, prime contractors may only count toward the assigned goal expenditures to DBEs that perform a CUF in the work or purchase order. A DBE must do the following in order to perform a CUF:
- execute the subcontracted work
- perform, manage and supervise the subcontracted work
- take responsibility for the materials and supplies
used in the subcontracted work, including:
- negotiating price
- determining quality and quantity
- ordering the material
- installing material (where applicable)
- paying for the material.
Allowances for Prime Contractor Assistance to Retain CUF Standing
In all cases, the subcontract between the prime contractor and DBE must indicate the work responsibilities of the DBE. The DBE subcontract must also state if equipment will be provided by the prime contractor to the DBE for certain portions of the work.
The following discussion is provided to better clarify the assistance that a prime contractor may provide under the contract DBE requirements. These examples are intended to provide general guidance regarding the performance of a CUF; however, these examples are not all inclusive. While the DBE may be determined to perform a CUF, it is important to remember that a DBE must be an independent business and any relationship with or assistance provided by non-DBE firms, in such areas as personnel, facilities, equipment, financial or bonding assistance, and other resources must be scrutinized to verify DBE credit can be received and whether the DBE remains eligible for the program. Any assistance provided by the prime or a non-DBE subcontractor will not receive DBE payment credit.
Steel Tying Examples
Existence of subcontractors performing work outside the DBE program carries significant weight in determining whether the work is a CUF. An example is the current steel tying industry. Prime contractors currently use several non-DBE firms as steel tying subcontractors, both graduated DBEs and non-DBE firms. The department has found that steel tying has been an avenue for the development of DBEs; two former DBEs are now prime contractors for the department.
In the case of steel tying firms, standard industry practice is for the prime contractor to provide hoisting services (including those firms that are not DBEs). While the hoisting service provided by the prime contractor is not creditable toward DBE payments, it does not automatically violate the CUF requirements. The department will require the cost of the hoisting services be addressed in the subcontractor agreement and the DBE actually pays for the service to the prime contractor (or other subcontractor).
Further, when joint checks are used, credit for material (steel) may be allowed if the DBE has documented evidence that it solicited quotes from material suppliers. In accordance with contract requirements, the prime contractor may provide quotes to the DBE that it receives from the supplier when the conditions are met as outlined below.
- Emergency Assistance
A prime contractor may provide assistance in cases of emergencies or for immediate safety needs. Such cases would address the need to protect the traveling public and would be of a short duration. Assistance would be allowed in the same manner as with a non-DBE subcontractor.
- Labor Only CUF
Labor only CUF is subject to rigorous scrutiny because it brings into question a DBE subcontractor’s dependence upon a prime contractor. In most cases, equipment is needed to perform work and the importance of knowledge of equipment needs, operations, and cost is a critical aspect to a legitimate business. Credit will only be given when the DBE meets all conditions for a CUF as stated in the contract. Because DBE payment credit for materials is not a component of the DBE credit for labor only work, requirements for negotiating material prices, determining quality and quantity of materials, ordering the material, and paying for the material do not apply. Credit for work will be in accordance with the responsibilities outlined in the contract.
An example of labor only as a CUF can be found in curb and gutter and sidewalk work. There are examples of curb and gutter and sidewalk contractors outside the DBE program. Its work is generally considered independent, even when the prime contractor, using its equipment and operators, performs rough grading service for the curb and gutter. In this case, the DBE or non-DBE curb and gutter subcontractor usually provides only minor equipment and pickups.
- Affirmative CUF Findings for Negotiating Prices
The prime contractor may share quotes received from suppliers with DBE subcontractors. DBE goal credit for the subject materials will be allowed as long as the following conditions are satisfied:
- The DBE subcontractor solicits quotes from suppliers and provides supporting documentation.
- The DBE negotiates the material agreement with the supplier.
- The DBE subcontractor is responsible for ordering and scheduling delivery of the materials, processing invoices, and making payments.
Where the prime contractor provides equipment to supplement a DBE’s work, consider the following:
- Does the work or part of the work require equipment?
- Is the work provided by the DBE independent of assistance provided by the prime contractor?
- Is this an industry practice outside the DBE program?
In all cases, prime or other subcontractor assistance will not be credited toward the DBE goal and the assistance (non-emergency) is clearly delineated in the subcontract.
For all contracts with an assigned DBE goal, conduct CUF reviews on all non-supplier DBE subcontractors. BOP will conduct CUF reviews on DBE suppliers. If needed to verify a CUF, obtain a copy of the subcontract agreement for clarification regarding the DBE’s contractual responsibilities. To conduct these CUF reviews, use the following procedure:
- Complete Form 2182 Commercially Useful Function (CUF) Project Site Review, as soon as possible after the start of the DBE’s work. (Form available through the TxDOT Intranet only.)
- Monitor the DBE’s performance and conduct additional reviews using the checklist when the DBE’s work performance brings into questions whether the DBE meets CUF requirements.
- If the information obtained indicates possible noncompliance with CUF requirements, contact BOP for a final determination.
In order to provide consistent interpretations statewide, BOP will make final negative CUF determinations. Contact BOP for guidance and assistance related to DBE CUF issues.