DBE Program Regulations: Termination/Substitution of DBE

DOT has released Official FAQs on DBE Program Regulations. These questions and answers provide guidance and information for compliance with the provisions under 49 CFR part 26. Like all guidance material, these questions and answers are not, in themselves, legally binding or mandatory, and do not constitute regulations.

Can a prime contractor reduce the amount of work committed to a dbe firm at contract award without good cause?

• The Department views such a reduction as a partial termination of the DBE’s contract with the prime contractor. Recipients should dissuade contractors from reducing amounts of work committed to DBEs.
• Reducing the amount of work committed to a DBE at contract award, where this commitment was part of the prime contractor’s good faith efforts to meet a contract goal, is subject to the requirements of section 26.53(f). This means that the prime contractor can reduce the amount of work committed to the DBE only for good cause and only with the written concurrence of the recipient.
• This is true even if the contractor continues to meet its contract goal through other means.
• For example, suppose a prime contractor commits $500,000 to each of two DBE subcontractors, thereby meeting a 10 percent goal on a $10 million prime contract. Part way through the performance of the contract, the prime contractor finds it necessary to expend an additional $100,000 in the work being performed by DBE subcontractor #1. The contractor then wishes to reduce the work assigned to DBE subcontractor #2 by $100,000, reasoning that the 10 percent goal will still be met. In such a situation, the prime contractor cannot act on its own to reduce the work assigned DBE subcontractor #2. It would have to comply with section 26.53(f).