Summary of Selected Items from USDOT Notice of Proposed Rule Making

GCAP Services, Inc. has reviewed the USDOT Notice of Proposed Rule Making and is providing a summary of selected item with our comments.

  • Expands recipient reporting requirements to USDOT to gain greater knowledge of DBE/ACDBE characteristics, bidding/solicitation practices, utilization, and overall program impact
    • Uniform Report would collect additional information such as:
      • names of DBE contractors that performed work and the work categories/trades performed
      • dollar value of contracts
      • number of firms that were listed at commitment but replaced (as well as an explanation for the replacement)
      • number of firms decertified during the reporting period.
        • 2 reasons- exceed size standards or exceed PNW
        • CUCP does not show in database who is decertified or why
    • DBE Bidders List—recipients would enter into an online USDOT system the names of companies bidding on and winning contracts, fields of work, and NAICS codes.
  • Adds and clarifies DBE program definitions
    • Disadvantaged Business Enterprise  
    • Personal net worth
    • Principal place of business
    • Transit vehicle
    • Transit vehicle dealership
    • Transit vehicle manufacturer
    • Unsworn declaration
  • Administrative rules will ease burdens and create firm opportunities
    • Reduces reporting requirement for smaller FTA recipients receiving planning, capital and/or operating assistance between $250,000 and $670,000.
    • Removes the Uniform Report, Uniform Certification Application, and Personal Net Worth Statement from the regulation so that USDOT can easily amend them in the future without requiring a rule change.
    • Expands existing DBE directories to provide an opportunity for firms to market their capabilities and to enable prime contractors to identify competitive and qualified DBEs that may be available for prospective work.
  • Adds a DBE performance plan requirement for design-build projects
    • Requires primes responding to a Request for Proposal on a design-build procurement to submit an open-ended DBE Performance Plan (DPP) with the proposal.
    • DPPs are to detail the types of work the prime will solicit DBEs to perform and a projected timeframe in which actual subcontracts will come to fruition.
    • Recipients monitor the prime’s adherence to the plan throughout the life of the contract to evaluate good faith efforts, and parties may agree to make written DPP revisions throughout life of project.
  • Addresses drop-shipping issues
    • Permits drop-shipping from manufacturers for an added subset of regular dealers with distributorship agreements and when a regular dealer assumes the risk of shipping supplies, allowing 40% credit for the cost of materials.
  • Limits total DBE supplier goal credit; Clarifies regular dealer terminology
    • Limits the total allowable credit for a prime contractor’s expenditures with DBE suppliers (manufacturers, regular dealers, distributors, and transaction facilitators) to no more than 50% of the contract goal but allows exceptions to be granted on a contract-by-contract basis (e.g., material-intensive contracts), with prior USDOT operating administration approval.
    • Requires recipients to establish pre-award procedures to determine whether a DBE supplier submitted by the contractor/bidder as a regular dealer has demonstrated the ability and intent to perform as a regular dealer during the contract. This will ensure preliminary counting determinations and contract goal attainment decisions are based on the DBE’s ability and intent to comply with the rule’s commercially useful function (CUF) requirements.
    • Adds that DBE suppliers that provide supplies that are not typically stocked due to their unique characteristics should receive 60 percent credit only when they own and operate distribution equipment.
  • Expands monitoring and prompt payment requirements
    • Clarifies that (1) a CUF review is necessary for every DBE that performs for credit toward a recipient’s overall goal and a contract goal, (2) DBEs used race-neutrally must be monitored, and (3) recipients must keep an accounting of each contractor’s progress in attaining a contract goal through progressive payments to the committed DBEs. This running tally requirement is essential so recipients can intervene in real-time if they observe a prime contractor falling short of a contract goal. This requirement will be burdensome for agencies with fewer staff or without a tracking system. CUF tracking is a manual process that requires staff or consultant resources to manage every DBE that has been paid and if a CUF was performed.
    • Clarifies that every recipient’s DBE program must include mechanisms it will use for proactive monitoring and oversight of prime contractors’ compliance with subcontract prompt payment and return of retainage requirements. Reliance on complaints or notifications from subcontractors about a contractor’s failure to comply with prompt payment and retainage requirements is insufficient.   
    • Specifies the prompt payment requirements flow down to all lower tier subcontractors.
  • Increases the personal net worth (PNW) cap and simplifies the calculation
    • Raises the PNW cap (last adjusted in 2011) from $1.32 to $1.60 million.
    • Excludes retirement assets from the calculation, which will allow Socially and Economically Disadvantaged Owners (SEDOs) to remove pension, IRA, and 401k savings from their PNW.
    • Removes state marital laws or community property rules from the calculation of the SEDO equity in the primary residence.
    • Divides “household contents” of primary residence equally but motor vehicles of any type belong to the owners who holds the title.
    • USDOT will regularly adjust the PNW cap amount in the future without rulemaking using Federal Reserve data.
  • Evidence and rebuttal of social disadvantage
    • The requirement for an individual’s group membership will change from the person holding him or herself out as a member of that group from “over a long period of time” to a period of at least five years.
    • Individuals claiming the presumption of social disadvantage will now be required to sign a Declaration of Eligibility (DOE) instead of the Affidavit of Certification.   
  • Ownership – changing “Real, Substantial, and Continuing”
    • The requirement for a qualified SEDO to have a real, substantial, and continuing capital contribution and ownership will change to a “reasonable economic sense” standard making the rule less rigid, more objective, and flexible for reviewers.
  • Control (§26.71) – Changes include a requirement that a DBE be fully operating before applying for certification
    • The change would require a firm to have operations in the type of business that it seeks to perform as a DBE before it applies for certification.
    • A change will require that the disadvantaged owner must be the ultimate decision maker – “run the show.”
    • Expertise definition clarified so the SEDO must have an overall understanding of the firm’s business operations to the extent necessary to make managerial decisions.
    • Administrative decisions made by the disadvantaged owner do not prove control.
    • The proposed change makes it clear that the disadvantaged owner must have the power to revoke the delegated authority, but the firm must also show that an obvious chain-of-command exists within the company.
    • Transactions between firms of which the SEDO has 51 percent ownership and control does not violate the independent business rule.
  • Virtual on-site visits (§26.83(c)(1) and (h)(1)
    • Virtual on-site visits announced during COVID-19 pandemic will now be permanent.
  • Timely processing of in-state certification applications
    • Reduces the amount of time a certifier can extend the 90-day review period from 60 days to 30 days.
  • Expedites the interstate certification process through less burdensome procedures
    • A firm would no longer have to provide another state (“State B”) a copy of the entire application package it submitted to the home state (“State A”). It must only request certification in writing, provide evidence of State A’s certification, and submit a declaration of eligibility.
    • If State B verifies the firm has in-state certification, it must certify the firm within 10 business days.
    • After certifying the firm, State B may conduct its own certification review and initiate decertification procedures if it finds there is reasonable cause for determining that the firm is ineligible for certification. The “reasonable cause” standard would replace the current rule’s “good cause” grounds for questioning eligibility. 
    • If USDOT upholds the decertification on appeal, a firm is automatically decertified in all states (except in failure to cooperate cases).
  • Simplifies the “ability to accumulate substantial wealth” factors for rebutting economic disadvantage
    • Proposes to replace the six factors indicative of the disadvantaged owner’s ability to accumulate substantial wealth in favor of a reasonable person standard.
    • USDOT is seeking comments on whether this replacement swings the pendulum too far in the opposite direction.
  • Clarifies how to count DBE participation after decertification or other loss of eligibility
    • (1) prime contractors may add work or extend a completed subcontract with a decertified firm only if it obtains prior, written consent from the recipient. A process will be required by recipients to account for this. This would also need to be included in a recipient’s contract/solicitation language.
    • (2) continued credit toward a contract goal is disallowed if the DBE’s ineligibility after the subcontract is signed is the result of a purchase by, or merger with, a non-DBE firm (in which case the prime contractor would be required to use good faith efforts to replace the DBE if additional credit is needed to meet the contract goal).
    • These changes require that certifying agencies timely and specifically report DBE terminations to allow other recipients to have access to DBE termination information.
  • Clarifies that a vehicle manufactured by a non-TVM should not be considered a transit vehicle and this be included in a recipient’s overall triennial goal and uniform reports.
  • Transit Vehicle Manufacturer (TVM) proposed definition changes
    • Removes “specifically” and “public” from the definition of TVM as this will clarify that TVMs that manufacture vehicles for both public and private transportation may still qualify as TVMs.
    • Treats businesses that perform retrofitting or post-production alterations to vehicles so that such vehicles may be used for public transportation purposes are considered TVMs, removing “off the lot” language, and excluding vehicles that are mass produced and designed to be used by individuals, notwithstanding their actual use, as non-TVMs.

The proposed rule changes summarized above represent key proposed rule changes.  To review the full DBE/ACDBE Notice of Proposed Rulemaking and related items, please click here: DBE/ACDBE Notice of Proposed Rulemaking (NPRM) | US Department of Transportation