DBE Fraud Cases: A Timely Reminder to Prioritize Commercially Useful Function Reviews

Last month, the U.S. Department of Transportation Office of Inspector General released an investigative report titled "FHWA Suspends Massachusetts-Based DBE Contractor" which details the suspension of a DBE contractor due to fraudulent activities involving both the Prime Contractor and the certified DBE subcontractor.

Essentially, the Prime Contractor was performing work that the DBE subcontractor was contracted to do. This action directly violates the Commercially Useful Function (CUF) regulations of the U.S. DOT Disadvantaged Business Enterprise (DBE) Program which aims to ensure that DBE subcontractors make significant and meaningful contributions to federally funded projects. This requirement is essential for compelling DBEs to engage in authentic tasks aligned with their scope of work and vital to project success.

By adhering to CUF guidelines, federal agencies and Prime Contractors can determine whether DBEs are actively and genuinely involved in project-related responsibilities. In doing so, federal agencies and Primes can effectively avoid and detect fraudulent activities, uphold the program's integrity, and provide gainful utilization of DBE firms as intended by the U.S. DOT DBE Program. CUF reviews serve as a robust mechanism for deterring and identifying fraud within the DBE program, thereby advancing transparency, equity, and accountability in federally funded projects.