Appendix B: FHWA Q&A

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Section 1: Federal Highway Administration Q & A for the DBE Program

Bidders List

Question: Does your DBE Program create and maintain a bidders list of all firms who bid and quote and captures the age and average gross receipts of the firms? (49 CFR 26.11(c))

Answer: You must create and maintain a bidders list that includes the following: Firm name; firm’s address; firm’s status as a DBE or non-DBE; Age of the firm; and annual gross receipts of the firm. The USDOT has given the flexibility to the State Department of Transportation to determine the most effective means in capturing this information. Most often the identity of bidders and quoters is captured through the handling of bidding documents and/or contract administration procedures. The other information, age and gross receipts may be captured through surveys and questionnaires at a later time from the firms once identified.

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Assurance Statement

Question: Do all prime and subcontracts have required DBE program assurance statements incorporated? (49 CFR 26.13(b))

Answer: Each contract a State Transportation Agency (STA) signs with a contractor and sub-recipient must have physically incorporated in it the standardized assurance statement prescribed under 26.13(b) which states that: 1) these parties will not discriminate based on race, color, national origin, or sex in the performance of any DOT-assisted contract; 2) The contractor shall carry out the requirements of 49 CFR 26 in the award and administration of DOT-assisted contracts; and 3) Failure by the contractor to carry out these requirements is a material breach of contract, which may result in contract termination or other remedy as deemed appropriate by the recipient.

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Local Agencies

Question: Does the STA’s DBE program apply to all sub-recipients? (49 CFR 26.21(a)(1))

Answer: The FHWA’s approval of STA’s program applies to all of STA’s DOT-assisted programs including those federal funds transferred to other state and local agencies (i.e., MPOs, City and County governments) and are expended on federally assisted contracts.

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Design-Build Projects

Question: If a goal has been established in a design-build project, does the recipient maintain oversight of the project goal and other requirements? (49 CFR 26.53(e))

Answer: Recipients must maintain oversight of the developer’s activities to ensure they are conducted consistent with the requirements of this part. This monitoring is especially important in the case of a design-build project because the developer can only provide a plan of action (DBE performance plan) it intends to take throughout the project since the exact contracting opportunities and timing of any subsequent awards is unknown at the start of a design-build.

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Contract Goals

Question: Does the STA establish contract goals based upon factors such as type of work, location, DBE and availability that cumulatively results in meeting only the portion of the overall goal that cannot be met through race-neutral means? (49 CFR 26.51(e)(2))

Answer: Contract goals can be based upon factors such as type of work, location, and DBE availability. The goal should essentially represent the percent of the dollar amount of contracting opportunities for DBEs that exist on that contract. Goals must be set so they will cumulatively result in meeting that portion of the overall goal not being met through race-neutral means.

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Race–Neutral Participation

Question: Does the STA count as race-neutral contracts won by DBE primes, DBE subcontracts when there is no contract goal, and primes that do not consider DBE status? (49 CFR 26.51(a))

Answer: Contracts won by DBE primes, DBE subcontracts when there is no contract goal, and DBE subcontracts where a prime did not consider the DBE status in awarding the subcontract are all methods of race-neutral DBE participation. The measurement of when a prime did not consider the firm’s DBE status in its selection, is to count all work going to a DBE above the contract goal figure as race-neutral.

Question: Does a DBE have to be certified with the proper NAICS code if it will be used by the prime contractor as race-neutral DBE participation?

Answer: DBEs must be certified in the work categories in which the Prime wants to count that participation towards the contract goal (race-conscious). However, any work done by a non-committed (race-neutral) DBE regardless of NAICS codes should be counted as race-neutral participation provided they are performing a CUF. Prime contractors may be allowing a DBE to expand its capabilities on projects, the work is legitimate and the DBE could then build its resume to expand its NAICS codes in the future.

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Commitments

Question: Are all bidders required to submit DBE information, i.e., name, description of work, and dollar amount before award of the contract? (49 CFR 26.53(b)(2) and (c))

Answer: Dependent on whether STA makes the receipt of the information as a matter of responsiveness or responsibility, you can receive information from all bidders or just the apparent low bidder. The receipt of this information in the form of a commitment, when in the presence of a contract goal, is a condition upon which the award of the contract is given by the STA. (As a matter of responsibility, TxDOT receives information from the apparent low bidder.)

Question: Does the STA require as a condition of award, the submission DBE information including the name, description of work, dollar amount, written documentation of commitment, and written confirmation from the DBE that it is participating in the contract (49 CFR 26.53(b)(2)(c))

Answer: The STA must make sure all DBE information is complete and adequately document the bidder’s good faith efforts as a condition of awarding the contract.

Question: A prime submitted a subcontractor request document. The District found that three (3) of the items on the subcontract agreement were less then what was originally committed. This reduced amount is $43,503.51. Even with this reduction, the prime contractor is still far over the DBE goal. Can TxDOT accept the prime contractor’s reduced subcontract amount in this situation?

Answer: Regulations prohibit the reduction of a submitted DBE commitment without the request and written approval of the STA. The District should investigate the matter and contact the DBE to discuss why the subcontract is less than the commitment (and if they were aware). Depending on the findings, TxDOT should take appropriate action. At the very least, if the DBE knew and was ok with the reduction in commitment, TxDOT should request the Prime contractor to submit something in writing showing the reduced commitment with reasoning for TxDOT approval. This will cover both the Prime and TxDOT.

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Good Faith Efforts – Prior to Contract Execution

Question: Does the evidence of good faith efforts provided by the bidder document those efforts to meet the goal, even though such efforts did not succeed in obtaining enough DBE participation to do so? (49 CFR 26.53(a)(2))

Answer: The STA must not deny award of the contract on the basis that the bidder simply failed to meet the goal if the bidder documents adequate good faith efforts. The adequate good faith efforts are those the bidder undertook prior to submitting its bid on the contract.

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Administrative Consideration

Question: Does the STA provide an opportunity for administrative consideration when it determines the apparent successful bidder failed to meet good faith efforts? (49 CFR 26.53(d))

Answer: The STA should have an administrative reconsideration process that affords a bidder the opportunity to seek a further ruling on the adequacy of its good faith efforts.

Question: Are reconsideration decisions made by an official who did not take part in the original good faith effort determinations? (49 CFR 26.53(d)(2))

Answer: An official who did not take part in the initial determinations by the STA of inadequate good faith efforts by the bidder must make reconsideration decisions.

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Determining Credit When a DBE Firm is Ineligible – Prior to Subcontract Execution

Question: When the prime contractor executes a subcontract prior to your notification that the DBE firm is ineligible, do you count the subcontract amount toward the prime contractor’s goal? (49 CFR 26.87(j)(2))

Answer: If a prime contractor has executed a subcontract with a DBE firm before you have notified the firm of its ineligibility, the prime contractor may continue to use the firm on the contract and my continue to receive credit toward its DBE goal for the firm’s work.

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Goal Credit – Materials and Supplies

Question: Does the STA count towards the contract goal the value of materials and supplies used on the contract work only if the DBE is responsible for paying for the material and supply? (Factor – joint checks) (49 CFR 26.55(c)(1))

Answer: The DBE must be responsible, with respect to materials and supplies used on the contract, for paying for the material. The use of joint checks has been allowed in the DBE program under certain conditions and/or circumstances. Even under this situation all payments need to be made by the DBE.

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Reporting DBE Participation on Contracts With and Without Goals

Question: Does the STA in its running tally capture DBE participation on all contracts with or without contract goals? (49 CFR 26.51(g))

Answer: The STA must report DBE participation in all contracts with and without contract goals awarded during the fiscal year in order to effectively adjust due to both race-neutral and race-conscious achievements to use of contract goals only as necessary to just meet the annual goal. One important consideration in being prepared to make such adjustments is to know the dollar amount that needs to be achieved based on the overall goal before the contract year begins for comparison purposes against the actual RC/RN achievements for making the key decision of when and how much to make any adjustment.

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Commercially Useful Function

Question: Does the STA count toward contract goals the value of work only if the DBE performs a Commercially Useful Function (CUF) when a DBE is responsible for a distinct element of the contract work and it carries out its responsibilities by actually performing, managing and supervising the work involved? (49 CFR 26.55(c)(1))

Answer: You count the total contract value of the work the DBE performs itself. The STA needs to have sufficient resources and procedures that effectively determine whether a DBE performs a CUF. In addition to this monitoring responsibility, the STA needs to have appropriate supporting documentation for counting this work as performed by a DBE.

Question: Does the STA count toward contract goals the value of work performed by the DBE’s own forces and does not count the DBE’s cost of equipment leased from the prime contractor and/or material purchased from the prime contractor? (49 CFR 26.55(a)(1))

Answer: DBE subcontractor’s purchases of supplies and equipment and leases from the prime contractor cannot be counted.

Question: Does the STA DBE program require the DBE to perform at least 30% of its work and does not allow DBEs to serve as an extra participant in the contract? (49 CFR 26.55(c)(2)(3))

Answer: A DBE is not performing a CUF when it is not performing the work itself and if the DBE under this rule subs out more than 70% of the work. There are additional instances when a DBE could be considered as serving as an extra participant in the contract or project such as being a pass through in the payment of materials and supplies.

Question: When a STA presumes a DBE is not performing a CUF, do they allow the DBE to present evident to rebut this presumption? (49 CFR 26.55(c)(4))

Answer: The DBE may present evidence to rebut the presumption of not performing a CUF when a STA has initially determined that a DBE is not performing a CUF. The STA must have a CUF reconsideration process established as part of its normal contract administration procedures.

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When a DBE Subcontracts its Work to a Non-DBE

Question: When a DBE subcontracts part of its work to a non-DBE, does the STA have a mechanism to deduct that amount from the overall contract goal? (49 CFR 26.55(a)(3))

Answer: Work that a DBE subcontracts to a non-DBE firm does not count toward DBE goals. The STA’s normal subcontracting approval procedure is an effective way to monitor such possible situations.

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Joint Venture

Question: In a joint venture does the STA count only the defined portion of work a DBE performs with its own forces? (49 CFR 26.55(b))

Answer: Count the dollar value of the contract equal to the defined portion of the work that the DBE performs with its own forces toward the DBE goals.

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Termination / Substitution

Question: Does the STA have a procedure that requires STA approval of the substitution and/or replacement of DBEs for good cause when replacing DBE subcontractors for any reason? (49 CFR 26.53(f)(1)&(2))

Answer: The STA must give written consent prior to a prime contractor terminating a DBE subcontractor (or an approved substitute DBE firm) when that DBE is either unable or unwilling to perform the work. There are procedures in some States that require the DBE to actually signoff on its termination. There are DBE program rules that effectively prohibit termination for convenience and then performing the work by the prime itself or use an affiliate.

Question: Does the STA require prime contractors to make good faith efforts when replacing DBE subcontractors for any reason? (49 CFR 26.53(f)(1)&(2)).

Answer: The STA must require the prime contractors to make good faith efforts to find another DBE subcontractor to substitute for the original DBE when the DBE is either unable or unwilling to perform.

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Counting Credit for Manufacturers, Regular Dealers, Packagers and Brokers

Question: Does the STA DBE program allow for appropriate counting for manufacturers, regular dealers and packagers and brokers? (49 CFR 26.55(e)(1)&(2)(ii)(c))

Answer:

If materials and supplies are obtained from a DBE manufacturer, count 100% of the cost of the materials or supplies.

If materials or supplies are purchased from a DBE regular dealer, count 60% of the cost of materials or supplies. To be a regular dealer, the firm must be an established, regular dealer that engages as its principal business and under its own name, in the purchase and sale or lease of the products in question.

Packagers, brokers, manufacturers’ representatives, or other persons who arrange or expedite transactions are not regular dealers. Often times the definition of what constitutes a manufacturer from a regular dealer and a regular dealer from a broker becomes a matter of circumstances of the particular situation and to be determined on a case-by-case basis.

For example, if the material is crushed aggregate, then in order to be a manufacturer the firm needs to have the prerequisite equipment to crush and screen the aggregate for sell pursuant to the STA’s gradation requirements. If no such process is being performed by the DBE, but has the necessary distribution equipment to pick up and drop off as a normal course of business the firm is considered to be a regular dealer.

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Trucking – Counting Credit

Question: Does the STA DBE program allow DBE truckers to count leased trucks from DBEs and non-DBE truckers toward the goal appropriately? (49 CFR 26.55(4)(5))

Answer:

The DBE that leases trucks from another DBE receives credit for the total value of the transportation services the lessee DBE provides on the contract.

If the STA adopted the revised trucking counting rule in the June 16, 2003 DBE Program Final Rule, the DBE who leases trucks from a non-DBE is entitled to credit for the total value of transportation services provided by non-DBE lessees not to exceed the value of transportation services provided by DBE-owned trucks on the contract.

Additional participation by non-DBE lessees receives credit only for the fee or commission it receives as a result of the lease agreement.

NOTE: The appropriate Department Operating Administration must approve this approach.

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Goal Credit – Final Compliance (Payment to DBEs)

Question: Does the STA have a process to ensure a contractor’s final compliance with DBE obligations based on payments to the DBEs? (49 CFR 26.55(h))

Answer: Until the amount being counted has been paid to the DBE, do not count the participation of a DBE subcontractor toward a contractor’s final compliance with its DBE obligations on a contract.

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Joint Checks

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Prompt Payment / Retainage

Question: Does your DBE program provide appropriate means to enforce prompt payment and return of retainage? (49 CFR 26.29(a)(1))

Answer: The STA must have the necessary mechanisms to monitor and enforce the prime contractor’s prompt and full payment of retainage. Again, with the flexibility USDOT built into the program, it was the STA to determine its approach towards meeting this and other requirements of the program. The USDOT did not present one prescribed way of meeting it, so there may be various methods employed by a recipient to meet this requirement. The most common enforcement practice is for the prime contractor to provide a payment certification that would certify that all payments have been made and would normally be submitted with a progress estimate for payment. The enforcement of this method is through non-payment of the progress payment, until proper evidence that all previous payments due are paid.

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Monitoring - Payments and CUF Reviews

Question: Does the STA conduct compliance reviews, audits and/or assessments of all program participants, (e.g., contractors, and other state and local governments/agencies? (49 CFR 26.37(a))

Answer: The STA must ensure that all program participants are in compliance with 49 CFR Part 26. TxDOT must have appropriate mechanisms for monitoring and enforcement set forth in its DBE program.

Question: Does the STA have a monitoring and enforcement mechanism that ensures work committed to DBE is actually performed? (49 CFR 26.37(b))

Answer: The STA must ensure DBEs do the work committed to them. To ensure this is happening, the STA must in its normal contract administration take the necessary steps to compare actual subcontract awards to commitments and payments to awards.

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Unified Certification Program

Question: Does your UCP have a process to determine specific types of work a potential DBE has the ability to control and possess the equipment and key personnel to perform the work? (49 CFR 26.71(m)(n) & 26.83(c)(4))

Answer:

The UCP must have a provision that allows the STA or certifying agency to consider whether the firm owns equipment necessary to perform its work. However, the STA or certifying agency must recognize that leasing equipment is a normal industry practice and should not use this practice to determine that a DBE owner does not control his or her company. The STA or certifying agency must make sure that the leasing of equipment does not involve a relationship with a prime contractor or other party that compromises the independence of the firm.

You must grant certification only for specific types of work in which the socially and economically disadvantaged owner has been able to demonstrate his or her ability to control the firm. This specific type of work needs to be clearly defined in forms consistent with the type of work such firm will be competing to perform. Such designation as “general contractor” does not fit this definition.

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Administrative Remedies

Question: Does the STA contract provisions include administrative remedies that will be invoked if prime contractors fail to comply with good faith efforts? (49 CFR 26.15(b))

Answer: If prime contractors fail to comply with good faith efforts, the STA contract provisions must include appropriate administrative remedies that will be invoked. The most common administrative remedy is to withhold payment to the prime equal to the short fall that occurred since the prime failed to comply with the good faith efforts provision. It is not intended that the STA exercise this oversight activity at the very end of the contract, but should be monitoring the actual participation of DBE firms throughout the contract so any necessary adjustments can be made by the prime in a timely fashion towards meeting the goal.