U.S. DOT’s Disadvantaged Business Enterprise (DBE) Program: The Basics

1. U.S. DOT’s Disadvantaged Business Enterprise (DBE) Program: The Basics FTA Civil Rights Training CalAct Autumn Conference September 22, 2011

2. Why Are We Here? • Update on recent DBE rule changes • Assist recipients achieve full compliance with 49 C.F.R. Part 26

3. Basic Terms • DBE • Small business (as defined by SBA) owned and controlled by a socially and economically disadvantaged individual • UCP • State-level entity responsible for certifying eligible firms as DBEs

4. Basic Terms (Cont’d) • Race conscious • A measure or program that is focused specifically on assisting only DBEs • Includes DBEs owned by women • Contract goals • Race Neutral • A measure or program that is, or can be, used to assist all small businesses

5. DBE Program: 4 Key Elements

6. DBE Program Document Who must have a DBE program? FTA recipients receiving planning, capital, or operating assistance who will award prime contracts exceeding $250,000 in FTA funds in a Federal fiscal year −49 C.F.R. Part 26.21(a)(2)

7. Key Elements of a DBE Program Document • Policy Statement • Standard Contract Assurances • DBE Liaison Officer • Prompt Payment/RetainageProvision(s) • Good Faith Efforts Criteria • Monitoring Mechanisms • Small Business Provision • Goal Setting Methodology

8. Policy Statement • General statement, signed by your organization’s CEO/highest officer, confirming commitment to the DBE program • Use the language from your financial assistance agreement! • Also appears in 49 C.F.R. Part 26.13(a)

9. Contract Assurance • Non-discrimination clause • Must be in every contract you sign with a prime contractor, and every contract your prime contractors sign with subcontractors • Use exact language from 49 C.F.R. Part 26.13(b)

10. DBE Liaison Officer (DBELO) • Individual within your organization primarily responsible for properly implementing the DBE program • Must have: • Direct, independent access to CEO • Adequate staff and resources to administer the program in compliance with the DBE rule

11. Prompt Payment/Retainage • Must have clause in prime contracts requiring the prime to pay subcontractors for satisfactorily completed work no later than 30 days from receipt of payment from the recipient • Must have a mechanism to monitor/ensure prompt payment occurs

12. Good Faith Efforts Criteria • Must have process/criteria in place for evaluating bids on solicitations with DBE contract goals • If don’t meet stated goal, did bidder make and document “good faith efforts” to meet the goal? • See Appendix A for guidance, additional information

13. Monitoring Mechanisms • In the past, the DBE rule required that recipients monitor contracts/projects with DBE participation, but without specifying what must be done • Now, must perform site visits and certify to FTA (or FHWA, FAA) that the DBEs are performing the workassigned to them

14. Small Business Provision • New Rule! • Recipients must add an element to their DBE programs which fosters small business participation • Must submit plan to relevant operating administration by February 12, 2012

15. Goal Setting Methodology What must I submit? • Letter to FTA stating your overall goal, including the race conscious/race neutral split • A copy of the published notice • A copy of the methodology and any worksheets used to calculate the goal

16. What is a DBE goal? Key Points • Should be based on demonstrable evidence of ready, able and willing DBE firms relative to all firms available to perform on your contracts • Your overall DBE goal should reflect what you’d expect DBE participation to be absent the effects of discrimination

17. Step 1: Base Figure All Firms Formula DBEs ÷ All Firms = Relative Availability

18. Step 1 Considerations Do: • Use all current, available data • Accurately account for all contracting opportunities • Use weighting whenever possible

19. Step 1 Considerations Don’t: • Use past participation as your base figure • Utilize local preference • Exclude some contracts/contracting opportunities because you don’t think there will be DBE participation

20. Where do I find DBEs? State UCP Directory Provides “one stop shopping” for recipients, prime contractors, DBEs, and the general public

22. UCP Directory Sample Page

23. Step 1 Example • NAICS 423120 • 2 DBEs in La. • Using census data, state business directory, and prior bidders lists, you’ve identified 18 non-DBEs in La. under NAICS 423120

24. Step 1 Example Formula Calculation 2 DBEs ÷ (2 DBEs + 18 non-DBEs) = 10% Base Figure = DBEs ÷ All Firms Remember, All Firms = DBEs + non-DBEs

25. Weighting • The process by which you consider DBE availability relative to your anticipated available contracting opportunities • May weight goals on either a project-by-project basis, or based on individual contracting opportunities derived from a single project

26. Weighting Formula Weighted Base Figure = (Projects % of total budget) x (Relative Availability)

27. Weighting Example • In addition to your contract for vehicle parts, you are also letting a contract for electrical services • Parts = 75% of total budget • Electric = 25% of total budget • Searching the La. UCP directory, you find 26 firms under NAICS 238210 (Electrical Contractors) • Using census data, state business directory, and prior bidders lists, you’ve identified 374 non-DBEs in La. under NAICS 238210

28. Weighting Example Contract # 1 Contract # 2 26 DBEs ÷ (26 DBEs + 374 non-DBEs) = 6.5% 2 DBEs ÷ (2 DBEs + 18 non-DBEs) = 10%

29. Weighting Example Un-weighted Weighted .75 x (2 DBEs ÷ 20 All Firms) + .25 x (26 DBEs ÷ 400 All Firms) = 9.2% (2 + 26 DBEs) ÷ (28 DBEs + 392 non-DBEs) = 6.6%

30. Step 2: Adjust Your Base Figure Evidence to Consider • Current capacity of DBEs to perform work • Disparity studies • Input from interested parties • Local chambers of commerce • NAACP • Minority business associations • Contracting associations

31. Step 2: Past Participation • May use past participation as Step 2 adjustment if contracting opportunities are the same/similar to those in prior years • If use, determine median past participation, then average with base figure determined in Step 1

32. Past Participation Formula Adjusted DBE Goal = (Step 1 Base Figure + Historic Median) ÷ 2

33. Past Participation Example Data • Base Figure: 15% • Participation: • FFY2008: 7% • FFY2009: 22% • FFY2010: 11% Calculation 15% + 11% = 26% 26% ÷ 2 = 13% Adjusted Goal: 13%

34. Race Conscious-Race Neutral Split Using past DBE achievement, determine what amount of overall goal will be met via race neutral means

35. RC/RN Formula Race Neutral Projection = Adjusted Base Figure x (Past RN Achievement ÷ Past Total Achievement)

36. RC/RN Split Example • Using prior example, we know the adjusted goal is 13% • Using FFY2010 DBE reporting data, you also know the following: • FFY10 Goal: 10% • Achievement: 12% • Race Conscious: 5% • Race Neutral: 7%

37. RC/RN Split Example Calculation Final Result Goal: 13% Race Neutral 7.6% Race Conscious 5.4% 13% x (7 ÷ 12) = 7.6%

38. Accountability and Goal Submissions • New Rule! • If a recipient fails to meet its overall DBE goal, it must analyze the shortfall, develop corrective actions and submit the plan to the relevant operating administration (FTA, FHWA, or FAA) for approval

39. Monitoring and Oversight • Historically under-enforced area of the DBE program • Why important? • Root out fraud—no DBE “fronts”! • Ensure DBEs are getting the opportunity to perform work committed to them

40. New Monitoring Requirements • New Rule! • Recipients must monitor and provide written certification for every contract/project on which DBEs are participating, ensuring the DBE(s) are in fact performing the work

41. Monitoring: Removal of DBE Firms • New Rule! • Prime contractors may not terminate DBE subcontractors from projects without “good cause” and approval from the project sponsor/recipient

42. Question Time!

43. DBE Reporting Basics to Know • Award(s) information corresponds to time of Prime Contract Award • Difference between Race Conscious & Race Neutral • Reporting time frames & due dates • Know your DBE firms!

44. Prime Contracts Awarded this Period? • Notice black mark in Total line? • Subs are a part of prime! • Therefore Prime & Sub must be from the same period

45. RC v RN: What fields to Use? Race Conscious Race Neutral Did not set contract goals Attributed to all the other wonderful things you do Bottom line: Open Bid • Set contract goals… • When projecting goal miss • (4) “must provide for participation by all certified DBEs” • not “divided into group-specific”

46. Due Dates Semiannual ARRA DBE Reports Four (4) Quarters Oct. 1st to Dec. 1st Jan. 1st to Mar. 31st Apr. 1st to June 30th July 1st to Sept. 30th ARRA funds only! Due 10 days after period ends… Plus grace period • Two (2) Halves • October 1st to March 31st • April 1st to September 30th • All funds covered by your goal • Due June 1st and December 1strespectively

47. How do I get this done? • Know your DBE firms • DBELO, How are you monitoring? • Know the Activity • How are you going to assist? • Where is most effective areas for participation? • Know you have access to the CEO.

48. Things to Have: • Bidders List [see § 26.11] • Firm name • Address • DBE status, etc… • Activity reports • What awards were made during the period? • What contracts were completed during the period?

49. More stuff? • DBE Regulations! • ECFR @ GPO Access - Click Me! • Especially § 26.55 • TEAM Account? • With Civil Rights option! • Use old forms to collect information • Practice

50. TEAM Reporting Basics • Must have TEAM Account • Must have Civil Rights • Not there? • Must have applied.