Chapter 6: Commercially Useful FunctionAnchor: #i1000056
Section 1: Overview
A DBE firm performs a commercially useful function (CUF) when it is responsible for execution of the contract and is carrying out its responsibilities by performing, managing, and supervising the work involved. The regulations provide that with regard to materials and supplies, the DBE must be responsible for negotiating price, determining quality, quantity, ordering the material, installing (where applicable), and paying for the material itself.
In summary, the DBE should:
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- Possess the required experience. Anchor: #WHXKLPSP
- Be financially independent. Anchor: #LGSIVPAE
- Employ its own laborers. Anchor: #PPBHHQJO
- Own or rent its own equipment. Anchor: #BEXFJNAW
- Handle its own payroll, invoicing, and negotiations.
To count toward the DBE goal, a DBE firm’s work must serve a CUF. This means that the DBE firm has a necessary and useful role in the project. For example, the DBE firm supplies the material and performs, manages and supervises the work.
Prime contractors are responsible for determining that the subcontractors they are using to claim DBE credit meet this requirement. It is incumbent on prime contractors who work on projects with DBE participation requirements to hire independent, certified DBE firms to perform a CUF. Prime contractors should adopt a DBE compliance program to closely monitor its DBE subcontractor relationships.
A DBE firm’s appearance on TUCP does not confirm that it is ready or capable of performing a CUF on a project. The prime contractor should ask potential DBE firms these questions to confirm that the DBE is ready and able to perform a CUF.
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- How long has your company been in business? Anchor: #GMSEVJQL
- Will the DBE manage and supervise the work with its own managers and superintendents? Anchor: #BPAKFHYT
- Will the DBE perform the work with its own forces? Anchor: #GTBNOJSD
- Will the DBE be responsible, with respect to materials and supplies used on the contract, for negotiating price, determining quality and quantity, installing (where applicable) and paying for the material itself? Anchor: #NSJYCJQN
- What work, if any, does the DBE intend to subcontract and is that amount consistent with industry practice?
The regulations make clear that a DBE firm does not perform a CUF if its role is limited to that of an extra participant in a transaction, contract, or project through which funds are passed in order to obtain the appearance of DBE participation. If the DBE firm serves only to provide the appearance of DBE participation, the work cannot count toward the DBE goal. CUF violations may indicate possible fraud and abuse of public funds.
“ FHWA Tips on Evaluating a Commercially Useful Function” is an excellent resource for evaluating a CUF.