Chapter 17: Termination and Substitution Requests

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Section 1: Termination and Substitution of a DBE

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Overview

The prime contractor shall not terminate for convenience, in whole or part, a DBE subcontractor listed on the commitment without the written concurrence of the LG. This includes, but is not limited to, instances in which a prime contractor seeks to perform work originally designated for a DBE subcontractor with its own forces or those of an affiliate, a non-DBE firm, or with another DBE firm. Unless consent is provided, the prime contractor will not be entitled to any payment for work or material unless it is performed or supplied by the listed DBE subcontractor.

Good cause for termination of the DBE includes, but is not limited to, the following circumstances:

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  • The listed DBE subcontractor fails or refuses to execute a written contract.
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  • The listed DBE subcontractor fails or refuses to perform the work of its subcontract in a way consistent with normal industry standards. Provided, however, that good cause does not exist if the failure or refusal of the DBE subcontractor to perform its work on the subcontract results from the bad faith or discriminatory action of the prime contractor.
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  • The listed DBE subcontractor fails or refuses to meet the prime contractor’s reasonable, nondiscriminatory bond requirements.
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  • The listed DBE subcontractor becomes bankrupt, insolvent, or exhibits credit unworthiness.
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  • The listed DBE subcontractor is ineligible to work on public works projects because of suspension and debarment proceedings pursuant to 2 CFR, Parts 180 and 1200 or applicable state law.
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  • The prime contractor has determined that the listed DBE subcontractor is not a responsible contractor.
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  • The listed DBE subcontractor voluntarily withdraws from the project and provides written notice of its withdrawal.
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  • The listed DBE firm is ineligible to receive DBE credit for the type of work required.
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  • A DBE firm owner dies or becomes disabled with the result that the listed DBE contractor is unable to complete its work on the contract.
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  • Other documented good cause that the prime contractor determines may compel the termination of the DBE subcontractor.

Good cause does not exist if the prime contractor seeks to terminate a DBE subcontractor it relied upon to obtain the contract so that the prime contractor can self-perform the work for which the DBE subcontractor was engaged or so that the prime contractor can substitute another DBE or non–DBE subcontractor after contract award.

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Commitment Reductions

A prime contractor cannot reduce the amount of work committed to a DBE at contract award without good cause. A reduction is considered a partial termination of the DBE’s contract with the prime contractor.

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Termination Procedures

Step 1: The prime contractor shall submit to the LG request and justification for DBE termination.

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  • The prime contractor shall first give notice in writing to the DBE firm of its intent to terminate and the reason for the termination.
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  • The prime contractor will copy the LG on the Notice of Intent to Terminate correspondence.
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  • The DBE has five calendar days to respond to the prime contractor’s notice and will advise the prime contractor and the LG of the reasons, if any, why it objects to the proposed termination of its subcontract and why the LG should not approve the prime contractor’s request for termination.

Step 2: The LG will review the termination request and related information and if necessary seek additional information to formulate its response.

Step 3: The LG will provide written consent to the termination request within seven days only if the LG agrees, for reasons stated in its concurrence document, that the prime contractor has good cause to terminate the DBE firm. The LG may provide a shorter response time if required in a particular case as a matter of public necessity.

Step 4: If the LG does not approve the request, the prime contractor shall continue to use the committed DBE in accordance with the contract.

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If Termination Does Not Result in DBE Shortfall

If termination of a DBE firm does not result in a DBE contract goal shortfall, the prime contractor is not required to find a substitute DBE firm.

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If Termination Results in a DBE Shortfall

When a termination of a DBE firm results in a shortfall, the prime contractor must make good faith efforts to find, as a substitute for the original DBE, another DBE to perform, at least to the extent needed to meet the established contract goal. The prime contractor will document its good faith efforts to find and secure a substitute DBE within seven days, which may be extended for an additional seven days if necessary at the request of the contractor. The prime contractor must submit the DBE Program Replacement Request ( Form 2228) to the LG and a signed DBE Commitment Form for the certified DBE that will replace the terminated DBE.

The LG will respond in writing to the prime contractor’s request to use the substitute DBE and may seek additional information as necessary to formulate its response.

The substitute DBE cannot work on the contract until its work eligibility has been confirmed and required subcontracts, supply, trucking commitments, or other services have been approved by the LG.

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Process When a Contractor Fails to Secure a Substitute DBE

If a substitute DBE firm is not found that can perform at least the same amount of work as the terminated DBE, the prime contractor shall submit good faith effort documenting the steps taken.

Such documentation shall include, but not be limited to, the following:

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  • Copies of written notification soliciting DBEs.
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  • Efforts to negotiate with DBEs to include at a minimum:
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    • The names, addresses, and telephone numbers of DBEs who were contacted.
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    • A description of the information provided to DBEs regarding the plans and specifications for portions of the work to be performed.
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  • A list of reasons why DBE firm quotes were not accepted.

The LG will provide the prime contractor with a written response either accepting or rejecting the prime contractor’s good faith efforts. If the prime contractor’s good faith efforts are rejected, the LG shall assess whether administrative remedies are appropriate.

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