Disadvantaged Business Enterprise: Program Improvements, 25815-25828 [2010-10968]
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Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules
25815
SUBSTITUTES THAT ARE ACCEPTABLE SUBJECT TO USE CONDITIONS—Continued
End use
Substitute
Retail Food Refrigeration (stand-alone
only) New Only.
Propane, R–290, as a
substitute for CFC–
12 and HCFC–22.
Decision
Acceptable subject to
use conditions.
Use conditions
Further information
(c) ‘‘CAUTION—Risk of Fire or Explosion.
Flammable Refrigerant Used. Consult Repair Manual/Owner’s Guide Before Attempting To Service This Product. All
Safety Precautions Must be Followed.’’
(d) ‘‘CAUTION—Risk of Fire or Explosion.
Dispose of Properly In Accordance With
Federal Or Local Regulations. Flammable
Refrigerant Used.’’
(e) ‘‘CAUTION—Risk of Fire or Explosion
Due To Puncture Of Refrigerant Tubing;
Follow Handling Instructions Carefully.
Flammable Refrigerant Used.’’ This marking shall be provided near all exposed refrigerant tubing.
The marking described in clause (a) above
shall be permanently attached on or near
any evaporators that can be contacted by
the consumer. The markings described in
clauses (b) and (c) above shall be located
near the machine compartment. The
marking described in clause (d) above
shall be permanently attached on the exterior of the refrigerator. The marking described in clause (e) above shall be permanently attached near any and all exposed refrigerant tubing. All of these
markings shall be in letters no less than
6.4 mm (1⁄4 inch) high.
7. Retail food refrigeration using R–290
must have fittings colored red as described above in use condition number
four and which differ from fittings used in
equipment or containers using non-flammable refrigerant. ‘‘Differ’’ means that either the diameter must differ by at least
1⁄16 inch or the thread direction must be
reversed (i.e., right handed vs. left handed). The unique fittings must be permanently affixed to the unit, and may not be
accessed with an adaptor, until the endof-life of the unit;
8. R–290 may not be sold as a refrigerant in
containers containing less than five
pounds (2.8 kg) of refrigerant.
Note: In accordance with the limitations provided in Section 310(a) of the Clean Air Act (42 U.S.C. 7610(a)), nothing in this table shall affect the Occupational Safety and Health Administrations’ authority to promulgate and enforce standards and other requirements under the Occupational Safety and Health Act of 1970 (29
U.S.C. 651 et seq.)
[FR Doc. 2010–10959 Filed 5–7–10; 8:45 am]
BILLING CODE 6560–50–P
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Part 26
[Docket No. OST–2010–0118]
RIN 2105–AD75
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Disadvantaged Business Enterprise:
Program Improvements
AGENCY:
Office of the Secretary (OST),
DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
SUMMARY: This notice of proposed
rulemaking (NPRM) would propose to
improve the administration of the
Disadvantaged Business Enterprise
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(DBE) program by increasing
accountability for recipients with
respect to good faith efforts to meet
overall goals, modifying and updating
certification requirements, adjusting the
personal net worth (PNW) threshold for
inflation, providing for expedited
interstate certification, adding
provisions to foster small business
participation and improve post-award
oversight, and addressing other issues.
DATES: Comments on this proposed rule
must be received by July 9, 2010.
ADDRESSES: You may submit comments
(identified by the agency name and DOT
Docket ID Number OST–2010–0118) by
any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov and follow
the online instructions for submitting
comments.
• Mail: Docket Management Facility:
U.S. Department of Transportation, 1200
New Jersey Avenue, SE., West Building
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Ground Floor, Room W12–140,
Washington, DC 20590–0001
• Hand Delivery or Courier: West
Building Ground Floor, Room W12–140,
1200 New Jersey Avenue, SE., between
9 a.m. and 5 p.m. ET, Monday through
Friday, except Federal holidays.
• Fax: 202–493–2251
Instructions: You must include the
agency name (Office of the Secretary,
DOT) and Docket number (OST–2010–
0118) for this notice at the beginning of
your comments. You should submit two
copies of your comments if you submit
them by mail or courier. Note that all
comments received will be posted
without change to https://
www.regulations.gov including any
personal information provided and will
be available to internet users. You may
review DOT’s complete Privacy Act
Statement in the Federal Register
published on April 11, 2000 (65 FR
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19477) or you may visit https://
DocketsInfo.dot.gov.
Docket: For internet access to the
docket to read background documents
and comments received, go to https://
www.regulations.gov. Background
documents and comments received may
also be viewed at the U.S. Department
of Transportation, 1200 New Jersey Ave,
SE., Docket Operations, M–30, West
Building Ground Floor, Room W12–140,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
FOR FURTHER INFORMATION CONTACT:
Robert C. Ashby, Deputy Assistant
General Counsel for Regulation and
Enforcement, U.S. Department of
Transportation, 1200 New Jersey
Avenue, SE., Washington, DC, 20590,
Room W94–302, 202–366–9310,
bob.ashby@dot.gov.
SUPPLEMENTARY INFORMATION: The
Department of Transportation issued an
advance notice of proposed rulemaking
(ANPRM) on April 8, 2009, concerning
several DBE program issues (74 FR
15904). The first concerned counting of
items obtained by a DBE subcontractor
from its prime contractor. The second
concerned ways of encouraging the
‘‘unbundling’’ of contracts to facilitate
participation by small businesses,
including DBEs. The third was a request
for comments on potential
improvements to the DBE application
form and personal net worth (PNW),
and the fourth asked for suggestions
related to program oversight. The fifth
concerned potential regulatory action to
facilitate certification for firms seeking
to work as DBEs in more than one state.
The sixth concerned additional
limitations on the discretion of prime
contractors to terminate DBEs for
convenience, once the prime contractor
had committed to using the DBE as part
of its showing of good faith efforts. The
Department received approximately 30
comment letters concerning these
issues. This NPRM makes regulatory
proposals concerning many of these
issues.
In addition, since the ANPRM was
published, both the House of
Representatives and the Senate have
passed their versions of a Federal
Aviation Administration (FAA)
reauthorization bill. These bills include
a provision requiring an inflationary
adjustment to the current $750,000
personal net worth (PNW) cap. Because
the timing of the enactment of an FAA
reauthorization bill is not yet clear, and
the provisions of the bill do not apply
to the Department’s highway and transit
programs in any case, the Department
has decided to propose an inflationary
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adjustment of the PNW cap to $1.3
million, the figure that would result
from the House and Senate bills.
Finally, the Department is proposing
amendments to the certification-related
provisions of the DBE regulation. These
proposals result from the Department’s
experience in dealing with certification
issues and certification appeal cases
during the years since the last major
revision of the DBE rule in 1999. The
amendments are intended to clarify
issues that have arisen and avoid
problems with which recipients (i.e.,
state highway agencies, transit
authorities, and airport sponsors who
receive DOT grant financial assistance)
and the Department have had to grapple
over the last 11 years.
Accountability for Recipients With
Respect to Overall Goals
Section 26.47 of the rule states that a
recipient cannot be penalized for failing
to meet overall goals. To penalize a
recipient simply for failing to ‘‘hit a
number’’ could create an impermissible
quota system. Nonetheless, recipients
are required to implement their DBE
programs in good faith in order to
remain in compliance with Part 26.
The Department takes this ‘‘good faith
implementation’’ requirement very
seriously. Accountability is the key to
ensuring effective program
implementation, and the Department
believes that it is useful to add a new
provision to increase the accountability
of recipients with respect to overall
goals and their attainment.
An overall goal is the recipient’s
estimate of the ‘‘level playing field’’
amount of DBE participation that it
would expect to achieve in the absence
of discrimination or its effects. Failing
to meet the overall goal means that the
measures the recipient has employed in
carrying out its DBE program have not
fully created that level playing field,
and that discrimination or its effects
have not fully been remedied. In order
to implement its program in good faith,
a recipient should make strong efforts to
understand the reasons why it has not
met its overall goal and to figure out
what it can do to correct the situation.
For this reason, the Department is
proposing to add a new paragraph (c) to
§ 26.47. If at the end of a fiscal year (FY)
1, (e.g., September 30), a recipient has
failed to meet its overall goal for that
FY, the recipient must do two things: (1)
Thoroughly analyze why it fell short of
meeting its overall goal for FY1 and (2)
establish specific steps and milestones
for correcting identified problems so
that the recipient will meet its overall
goal in FY2 and subsequent years. State
highway agencies, the largest 50 transit
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authorities as designated by FTA, and
Operational Evaluation Airports and
other airports designated by FAA would
have to submit this material to FHWA,
FTA, or FAA, as applicable. The NPRM
proposes a period of 60 days to submit
this material. The Department seeks
comment on this process. Other FTA
and FAA recipients would retain the
information, so that DOT officials
conducting program or compliance
reviews could review it.
This section also proposes that, if a
recipient fails to take actions required
under the new provisions, the recipient
could be regarded as in noncompliance
with § 26.47 and hence subject to the
remedies stated in § § 26.101 through
26.105 or other applicable regulations.
These remedies include suspension or
termination of Federal assistance,
refusal to approve projects, payments,
grants, or contracts, or other action at
the discretion of the operating
administration involved.
Goal Submission
On February 2010, the Department
amended § 26.45 to allow recipients to
submit overall goals every three years,
rather than annually (75 FR 5535). This
change was intended to reduce
administrative burdens for recipients, as
well as to permit DOT staff to give
greater scrutiny to recipients’
submissions. In this NPRM, we propose
a clarification of this amendment. While
the recipient need only submit a new
goal every three years, it is still
responsible for good faith
implementation of that goal in each
year.
In carrying out the accountability
provision discussed above, the
Department would hold recipients
responsible for each year’s
implementation activity. For example,
suppose that a recipient has a 12
percent goal for FY 1–3. If the recipient
fell short of 12 percent in FY 1, the
§ 26.47 requirements for analysis of the
shortfall and steps to remedy the
problems in FY 2 would apply. The
recipient would not be able to say, in
effect, ‘‘We don’t need to worry about
our FY 1 shortfall because we’ll catch
up in FY 3.’’
It is possible, however, that a
recipient might anticipate a funding
stream for projects that would in fact
differ from one year to the next. For
example, an airport with a 12 percent
goal might expect, given the projects,
FAA assistance, and DBE availability
that it anticipates, that it would have 6
percent DBE participation in FY 1, 18
percent in FY 2, and 12 percent in FY
3. The Department seeks comment on
whether a recipient could, if it wished,
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provide a year-to-year projection of its
likely DBE participation within the
framework of a goal and methodology
submitted only every three years, with
the result that in applying the
accountability provision of proposed
§ 26.47, those year-to-year projections,
rather than the three-year overall goal
number, would be the benchmark for
determining whether the analysis/
corrective action requirements would be
triggered. This could increase flexibility,
but could undercut, to an extent, the
purpose of the three-year goal
submission interval. We anticipate that
this approach would be relevant
primarily, or perhaps only, in FAA
programs, where Federal funding is
more likely to change from year to year
than in the FHWA and FTA programs.
Improving Oversight
The ANPRM asked for suggestions on
how to improve program oversight. The
Department received 17 comments.
Several recipients commented to the
effect that additional resources,
including Federal assistance, would be
necessary if they were to conduct
additional oversight. Other commenters
suggested that additional training and
information in areas like contract
compliance and close-out enforcement
could be useful. A DBE organization
noted that training for recipient
executive-level officials, as well as
operating-level staff, would be helpful.
This commenter also wanted to
emphasize the need for a direct DBE
Liaison Officer connection to the top
official of the organization. Other
comments simply supported the
concept of better oversight, without
specifying how this could best be
accomplished.
Program oversight is not a new
concept in the DBE program. Existing
§ 26.37 requires monitoring and
enforcement mechanisms. To strengthen
these existing provisions, the
Department is proposing to add a
sentence to § 26.37(b), calling on
recipients to make a written certification
that they have reviewed contracting
records and monitored the work on-site
to ensure that DBEs have actually
performed the work in question on each
contract involving DBE participation
counted toward contract or overall
goals. To comply with this requirement,
the recipient would have to make one
such certification for every contract on
any contract with DBE participation.
This sentence would simply make more
explicit a requirement that the
Department believes is implicit in the
existing regulatory language.
Existing § 26.25 already requires that
the DBE liaison officer (DBELO) must
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have direct, independent access to the
Chief Executive Officer (CEO) of the
recipient’s organization concerning DBE
program matters. This means that the
DEBLO must not be required to get
anyone’s consent or sign-off, or ‘‘go
through channels,’’ to talk and write
personally to the CEO about DBE
program matters. The Department does
not believe that additional regulatory
language is needed on this point: the
existing provision is already explicit.
We also call attention to the last
section of § 26.25, which requires that
the recipient have adequate staff to
administer the DBE program. In times of
budget stringency, it may be tempting to
cut back on staff and other resources
needed for certification, program
oversight, and other key DBE program
functions. This sentence emphasizes
that it is a requirement of Federal law
that the DBE program be adequately
staffed to ensure compliance with Part
26.
Personal Net Worth
The personal net worth (PNW)
criterion has been a perennially
controversial subject in the DBE rule. It
is intended to ensure that only
economically disadvantaged individuals
participate in the DBE program, lest the
program become overinclusive. The
$750,000 PNW ‘‘cap,’’ taken from SBA
materials dating to 1989 or earlier, has
been criticized by DBEs as penalizing
success and imposing a glass ceiling on
the growth and competitiveness of DBE
firms. At the same time, the PNW cap
has been a part of the package of narrow
tailoring features that has helped the
Department to defend the DBE program
successfully against court challenges.
As noted above, the House and Senate
versions of the currently pending FAA
reauthorization bills both call for an
inflationary adjustment in the PNW cap,
relating back to 1989. Based on these
provisions, the Department did a
straight-line inflationary adjustment
using the Consumer Price Index (CPI),
which suggests a 73 percent inflation
since 1989. This results in an adjusted
PNW cap of $1.31 million. It is very
important to understand that this does
not represent an increase in the actual
personal net worth which DBE owners
may have, viewed in real dollar terms.
Rather, $1.31 million today has the
same value, in real dollar terms, as
$750,000 in 1989. The inflationary
adjustment simply maintains the
economic status quo.
The Department is aware that there
are a number of methodologies and
approaches to making inflationary
adjustments. The Department seeks
comment on whether the straight-line
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CPI approach used in the NPRM is
appropriate, or whether there are other
approaches or techniques that would be
better or more accurate. Also, it would
not make sense for the Department to
have one PNW number for FAA
programs and another for FTA and
FHWA programs. Therefore, the
Department’s proposal would apply the
$1.31 million PNW cap to all programs
covered by Part 26.
The pending FAA bills address
another issue related to PNW,
concerning the handling of retirement
savings. Under the Department’s current
regulation, assets in retirement savings
plans are regarded as part of an
individual’s wealth, and hence are
counted as assets for PNW purposes.
Some DBEs have long objected to this
approach, saying that it is inappropriate
to count these assets, which are not
liquid and therefore not readily
available for purposes of an owner’s
business. While giving the Department a
degree of regulatory discretion, the
pending FAA reauthorization bills
direct the Department not to count such
assets toward the PNW cap.
If these provisions are enacted, the
Department will need to devise
implementing rules. We seek comment
on how best to do so. What sort of
retirement savings should be covered by
a new provision (e.g., 401(k)s, IRAs,
Roth IRAs, Keough Plans, stocks and
bonds, certificates of deposit or savings
plans, life insurance, etc.)? Should there
be any limitation on the amount of
money that could be eliminated from
counting toward the PNW cap by being
in a retirement savings product? Is there
a potential problem of abuse, in which
DBE owners could shelter assets from
PNW consideration in inappropriate
ways? If so, how would the Department
attempt to deal with such a problem?
Would the eliminating consideration of
these assets have unintended
distributive consequences across the
breadth of the DBE program (e.g.,
helping more affluent firms at the
expense of smaller DBEs without such
assets, having a racially disparate
impact)? We seek comment on how we
should shape the details of a future rule
implementing the pending statutory
provisions.
Interstate Certification and Related
Issues
Under the current DBE rule,
certification occurs on a statewide basis.
The Unified Certification Program (UCP)
in each state ensures ‘‘one-stop
shopping’’ for DBE applicants within
that state. The UCP requirement, which
came into effect in 1999, has simplified
certification by making it unnecessary
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for recipients to apply multiple times
for certification by various transit
authorities, airports, and highway
departments within a given state.
The present structure, however, does
not address problems that occur when
DBEs certified in their home state
attempt to become certified in other
states. As we mentioned in the ANPRM,
DBEs and prime contractors have
frequently expressed frustration at what
they view as unnecessary obstacles to
certification by one state of firms
located in other states. They complain
of unnecessarily repetitive, duplicative,
and burdensome administrative
processes and what they see as the
inconsistent interpretation of the DOT
rules by various UCPs. There have been
a number of requests for nationwide
reciprocity or some other system in
which one certification was sufficient
throughout the country.
The Department believes that more
should be done to facilitate interstate
certification. Interstate reciprocity has
always been authorized under Part 26
(see § 26.81 (e) and (f)), and in 1999 we
issued a Q&A encouraging this
approach. To further encourage such
efforts, the Department issued another
Q&A in 2008, suggesting an approach to
facilitating interstate certifications. In
the ANPRM, we asked for comment on
proposing a regulatory provision based
on this guidance, or, in the alternative,
whether some version of the nationwide
certification reciprocity or Federalizing
the certification process would be
desirable. We pointed out that
nationwide reciprocity could raise
concerns about firms engaging in forum
shopping to find the ‘‘easy graders’’
among certifying agencies. Federalizing
certification, such as having a unitary
certification system operated by DOT,
would likely raise significant resource
issues. Such an approach could also
result in less local ‘‘on the ground’’
knowledge of the circumstances of
applicant firms, which can be a valuable
part of the certification process. The
Department asked for comment on how,
if at all, these issues could be addressed,
and whether there is merit in one or
another nationwide approach to
certification.
There were about 30 comments on
this subject. Most of them favored taking
steps to make interstate certification
easier. Thirteen commenters favored
one variety or another of national
reciprocity, with eight of these
suggesting that, where a UCP had
qualms about an out-of-state firm’s bona
fides, the UCP could remove the firm’s
certification after the fact. That is, a firm
certified in its home state, State A,
would send its certification to State B.
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State B would immediately put the firm
on its list of certified firms, and the firm
would become eligible immediately to
participate as a DBE. However, State B
could subsequently decertify the firm if
it appeared that the certification in State
A was obtained by fraud or was
otherwise invalid. One comment
endorsed the rebuttable presumption
approach suggested in the Department’s
Q&A. Three favored one version or
another of Federalizing certification,
either by having the Department
maintain a centralized certification
database or having the Department make
certification decisions other than,
perhaps, the initial decision in each
case.
Other commenters expressed some
concerns about reciprocity. Three
commenters favored using paperwork
submitted to other states to reduce
administrative burdens, but reserving to
each state the right to make its own
decision. Another four commenters
opposed or had serious doubts about
reciprocity, expressing concerns such as
the possibility of forum shopping or
variations in state laws that might affect
the validity of State A’s certification in
State B. Three commenters emphasized
the necessity for better and more
uniform training, without which, some
thought, reciprocity would be unlikely
to work.
As the Department stated in the
ANPRM, we favor making interstate
certification easier and reducing
burdens on small businesses seeking to
work in more than one state. Before
1999, businesses had to make multiple
applications in each state if they wanted
to work as a DBE for more than one DOT
recipient. The Department dealt
successfully with that problem by
creating the UCP system in the 1999
revision to the DBE regulation. National
reciprocity or one-stop shopping for a
single nationwide certification system
are worthwhile goals to discuss, but the
Department believes that an incremental
approach is more likely to be
practicable.
It is important to keep in mind that
certification has two purposes. One is to
foster and facilitate DBE participation
by as many firms as can be determined
to be eligible. The other is to preserve
the integrity of the program, a strong
certification system being the first line
of defense against program fraud. To
some extent, these goals can be in
tension with one another. We believe
that the concerns expressed by
commenters about issues like forum
shopping, training, and variations in
state laws have validity. Recipients’
concerns about having the integrity of
their programs damaged by having to
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accept what they view as poorlyconsidered certification decisions made
elsewhere are also important. The
Department’s task is to balance, as best
we can, the desire to make interstate
certification less onerous for small
businesses with the imperative of
maintaining the integrity of the
program.
A seamless, nationwide, one-stopshopping eligibility process for all firms
is, in a sense, the ‘‘holy grail’’ of
certification. The Department does not
believe we are currently in a position to
make this objective a reality. As
commenters pointed out, better
nationwide uniform training (which has
been proposed in Congress as a
requirement in pending FAA
reauthorization legislation) and
considerable additional resources at the
Federal level (e.g., for the database and
staff that would likely be necessary to
make a more centralized certification
system practical) are not yet in place.
Given what the Department views as the
very real concerns about forum
shopping and variations in the quality
of certifications that commenters and
participants in DOT stakeholder
meetings have expressed, we believe
that moving at this time to a nationwide
reciprocity approach would be
premature and could endanger the
integrity of the program.
As noted above, several commenters
favored a slightly modified national
reciprocity approach in which a firm
certified in its home state would
automatically be certified in ‘‘State B,’’
immediately eligible to participate as a
DBE in State B’s contracts. However, if
State B determined that the firm had
obtained its home state certification by
fraud, or other information questioning
its eligibility came to State B’s attention,
State B could remove the firm’s
certification. In our view, this approach
does not differ significantly from a
straight national reciprocity approach,
in that the ability to decertify a certified
firm already exists. Moreover, the
‘‘certify first and ask questions later’’
tenor of this approach does not inspire
confidence: by the time the questions
got asked, and a dubious firm removed
from the eligible list, it could have
received contracts in place of genuinely
eligible firms. As a practical matter, it is
hard to imagine how a certification
agency in, say, Utah, would learn in a
timely fashion about fraud or other
problems with a firm originally certified
in, for example, Florida.
Having considered the comments, the
Department believes the best course is
to propose a ‘‘rebuttable presumption’’
approach akin to the Department’s
recent guidance Q&A. Proposed
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regulatory language to carry out this
approach is found in §§ 26.84 through
26.85 of the NPRM. Under this
approach, a firm certified in its home
state would not have to create a second
application package. It would send its
home state application package, together
with other existing documentation (e.g.,
its affidavits of no change submitted to
the home state since the time of the
firm’s original certification), to State B.
State B would obtain a copy of the onsite review report from the home state.
State B would be required to certify the
firm within 30 days from the date it
received this information unless State B
had good cause to object to the home
state’s certification. If it objected, State
B would hold a proceeding similar to a
decertification proceeding in this case,
in which State B would bear the burden
of proof to show that the firm should
not be certified in State B,
notwithstanding its certification in State
A. The Department seeks comment on
the burden of proof in such a
proceeding: Should the firm, rather than
State B, bear this burden? This latter
approach would be more consistent
with the usual rule that the applicant
carries the burden of proof with respect
to eligibility matters, but it could limit
the extent to which the new procedures
would actually facilitate interstate
certification.
This approach is a significant
incremental step toward nationwide
reciprocity, which would significantly
reduce burdens and obstacles in the
path of firms seeking certification
outside their home states. Within 30
days of providing copies of existing
documentation to State B and receiving
a copy of State A’s on-site review report,
the firm would either be certified in
State B or be on notice of specific
problems with its eligibility that State B
had found. The opportunity for a
hearing would have to take place within
the next 30 days, with a decision issued
30 days after that. The Department
expects that, because providing notice
and a hearing and issuing a decision on
this ‘‘fast track’’ basis is not something
that UCPs would do lightly, UCPs
would not overuse their authority to
delay certification pending this process.
Of course, as is now the case, UCPs
could accept the home state’s
certification without further review.
The Department seeks comment on
whether the 30-day period for initial
review of an out-of-state certification,
and a decision on whether to accept it,
is an appropriate time period. Would
this period place unwarranted pressure
on State B to accept State A’s
certification, even if it were not
warranted? On the other hand, would a
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longer period defeat the purpose of the
proposed interstate certification
process? Again, the question goes to
achieving the best balance between the
two purposes of the proposed process.
The Department seeks comment on
one potential technical problem in this
proposed system. When it is asked by
State B to send an on-site review of a
firm certified in State A, State A is
supposed to send a copy of the report
to State B within seven days. In this era
of e-mail and pdf documents, doing so
should be quick and easy. However,
what happens if State A does not
provide a timely response? Proposed
§ 26.84(e) would say that if State B has
not received the report by 14 days after
State B’s request, State B may hold
action on the firm’s application in
abeyance pending receipt of State A’s
report. State B would need to inform the
firm of the situation. The Department
seeks comment on what, if anything, the
Department should do in a final rule to
address situations in which a State A’s
response to a request for an on-site
report is delayed.
In proposing these new provisions to
the DBE rule, the Department is also
proposing to make certain changes to
existing rules. We would remove
§ 26.83(e), which is no longer needed in
light of the proposed new § 26.84
interstate certification procedures. We
would also amend § 26.83(h) to put to
rest a misunderstanding that has
continued to exist, despite the
Department’s efforts to clarify it. Once a
firm is certified as a DBE, it stays
certified unless and until it is
decertified using the procedures of
§ 26.87, the rule’s decertification
procedure. There is no periodic
‘‘recertification’’ or ‘‘reapplication’’
procedure required or even authorized.
Certifications do not lapse after a given
number of years. However, UCPs can,
and, in our view, should, review each
existing certified firm’s eligibility,
including a new on-site review, from
time to time. The Department seeks
comment on the most appropriate
interval for such reviews (comments to
the ANPRM suggested periods of
between three and six years).
One phenomenon the Department’s
staff has noticed in recent years is the
withdrawal by applicants of their
applications before a UCP has made a
decision in the matter. In some cases,
this may reflect ‘‘games-playing’’ by
applicants of dubious merit, as they
seek repeatedly to revise their
organizations to avoid problems that
come up in the UCP’s review of the
application, without triggering the
waiting period for reapplication that
follows a denial of the application.
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However, in other cases, there can be
innocent explanations for a withdrawal.
The Department seeks comment on
whether the rule should be amended to
authorize recipients to apply to firms
withdrawing an application the same
reapplication waiting period that they
can apply after a denial. This would
reduce administrative burdens on
certifying agencies. However, doing so
might also penalize firms with
legitimate reasons for withdrawing and
resubmitting an application or create the
perception or reality that recipients
might act inconsistently, seeming to
favor some firms over others with
respect to applying the reapplication
period.
Current §§ 26.84 and 26.85 relate to a
1999 memorandum of understanding
(MOU) between DOT and SBA
concerning DBE certification of SBA
8(a) and 8(d) firms and 8(a) and 8(d)
certifications of certified DBEs. This
MOU lapsed in 2004 and has not been
renewed. Consequently, much of the
existing material in these sections has
become outdated. Proposed § 26.85
would continue a portion of the current
provisions. If an 8(a) firm applies to a
DOT UCP, the 8(a) firm could submit its
SBA application package in lieu of a
new DBE application package. The UCP
would have to do the statutorilymandated on-site review of the firm,
since on-site reviews are not normally
part of the 8(a) application process. The
UCP could also request additional
information from the applicant to
ensure that all Part 26 requirements are
met and that all information has been
updated. The UCP would have to certify
the firm unless information from the onsite review and other information
received by the UCP demonstrates that
the firm does not meet Part 26 eligibility
criteria. If the 8(a) firm is not from the
UCP’s state, the UCP would not have to
process the application in the absence of
the home state’s on-site review report,
which it would obtain in the same way
as it obtains such reports under the
‘‘rebuttable presumption’’ system of
proposed § 26.84(d)(1).
The proposed § 26.84 contains the
proposed rebuttable presumption
reciprocity system. When this section
refers to State A (a firm’s home state) or
State B, it means the UCP of that state.
As under the current rule, a UCP always
has the option of accepting, without
further ado, a certification by another
state’s UCP. The only new element this
provision would add is a basic
requirement for the UCP to verify that
the out-of-state certification presented
by the applicant is genuine.
The main obligation of a firm seeking
to get certified outside its home state is
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to provide ‘‘State B’’ with a full package
of all relevant existing documentation,
including its home state application,
affidavits of no change, reports of
changes, decisions or correspondence
relating to certification matters from
other states, certification appeal
decisions, etc. Any prudent company
would keep photocopies or electronic
versions of all this documentation, and
firms would send in copies of this
documentation, rather than generating
new documents. There would have to be
an affidavit, under penalty of perjury,
that the documents were full, complete,
and unaltered.
When State B receives this full
package of information, it contacts the
home state and requests the on-site
review report. It is crucial to the
operation of this system that the home
state respond promptly; otherwise, the
certification of the firm can be delayed
(see proposed paragraph 26.84(e)). State
B must certify the firm within 30 days,
unless it finds good cause to believe that
the firm should not be certified. If State
B fails to respond within 30 days, the
Department would regard the firm as
having been certified.
Good cause to object to a reciprocal
certification could arise from a number
of sources: evidence that the home state
certification had been obtained
fraudulently or if there was new
evidence not available to the home state;
differences in state law (e.g., home state
does not require a professional license
for the person controlling a given type
of company; State B law does impose
such a requirement); or the information
the applicant provided was inadequate
or insufficient or otherwise not meet the
rule’s requirements (e.g., the applicant
failed to disclose a denial or
decertification in another state).
One of the proposed bases to find
good cause bears a bit more discussion.
The proposed language would permit
State B to find good cause if the home
state’s certification was factually
erroneous or inconsistent with Part 26.
For example, suppose State B reviews
the documentation used by the home
state to certify Firm Y and finds an
outcome-determinative fact about Firm
Y that the home state overlooked, or
State B notices that the home state had
based its decision on what is clearly a
misreading or misinterpretation by the
home state of Part 26 or DOT guidance.
In these cases, under the proposal, State
B could find good cause to begin a
proceeding to deny reciprocal
certification. On the other hand, it is
often the case that reasonable people
can differ in their conclusions about
whether the facts surrounding a firm’s
application demonstrate that the firm
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meets Part 26 criteria. We would not
want this provision simply to become a
way for what amounts to no more than
differences of opinion to obstruct
interstate certification. We seek
comment on how, if at all, the language
of this provision should be refined to
avoid that result.
Where the UCP finds good cause, it
must so notify the firm, and provide the
reasons for its finding. The firm must
have the opportunity, within 30 days,
for a proceeding—including a hearing, if
the firm wants it—that is essentially the
same as a decertification hearing.
Importantly, as in a decertification
proceeding, the burden of proof is on
the UCP to demonstrate that the firm is
ineligible. The UCP must render its
decision within another 30 days. The
Department proposes these short time
frames in the belief that reciprocal
certification actions should be on a fast
track, lest the ability of a firm to become
certified outside its home state becomes
overly subject to bureaucratic delay.
One of the issues that arises in
discussions of reciprocity of
certifications is how to handle denials
of certification and decertifications. If
firm X is certified in its home state,
reciprocally certified in State B, and
then decertified in his home state, what
is State B supposed to do? If, in the
‘‘rebuttable presumption’’ process
described above, the home state certifies
Firm X, but State B rejects the firm’s
certification after the hearing process,
what is State C supposed to do when
Firm X applies for certification there?
In this NPRM, we are proposing to
have UCPs send to the Departmental
Office of Civil Rights (DOCR) online
database information about firms whose
applications have been denied, which
have been decertified, or which have
been rejected for reciprocal certification
after the rebuttable presumption process
described above, as well as the date of
the action and a very brief summary of
the reason for the action. UCPs would
be responsible for checking the DOCR
Web site to see if any applicant for
certification or currently certified firm
appears on the list. For example, if State
D’s UCP saw Firm X (which State D had
certified) on the list as having been
decertified by State F’s UCP, State D’s
UCP would request from the State F’s
UCP a copy of State F’s decertification
decision. State F’s UCP would promptly
provide the copy. State D’s UCP would
take the information in State F’s
decision into account in determining
what action, if any, to take with respect
to Firm X. The Department seeks
comment not only on the merits of this
proposal but also on any other measures
that would address this overall issue.
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The Department intends that this
interstate certification process apply to
airport concessions DBEs as well as
those DBEs who seek work on
Federally-assisted contracts.
Consequently, we will subsequently
propose a conforming amendment to 49
CFR Part 23.
Fostering Small Business Participation
One of the matters discussed in the
ANPRM was the issue of ‘‘unbundling,’’
as well as other ways of reducing
barriers to the participation of small
businesses, including DBEs, on DOTassisted contracts. The relatively small
number of comments on this subject
generally suggested that while
unbundling was a good thing, it was
difficult to achieve, and recipients
should have discretion concerning
whether and how to implement
initiatives in this area.
The Department believes that
fostering small business participation in
a race-neutral way is an important
component of a successful DBE
program. For that reason, we are
proposing to require recipients to create
a small business element of their DBE
programs, that could include a number
of different approaches. The NPRM, in
§ 26.39, proposes a menu of strategies
that are neither exhaustive nor
mandatory to include in this program
element. The Department seeks
comment on this overall approach, as
well as on the individual menu items
proposed. Are there additional strategies
that should be considered? How much
time should recipients be given to
amend their DBE program plans to
include a small business element?
As noted in a March 2010 DBE
conference held by the Department’s
Office of Small and Disadvantaged
Business Utilization, some states (e.g.,
Missouri, Wisconsin) have devised
innovative approaches to increasing
small business and DBE participation.
The Department seeks comment on the
extent to which this experience can be
generalized and on whether any
elements of these approaches should be
included as recommended or required
practices in the DBE regulation.
The pending FAA reauthorization
legislation mentioned above would
direct the Department to issue rules to
prohibit discriminatory or excessive
bonding practices. The Department
seeks comment on whether there are
such practices, what they are, and how
DOT rules could best be crafted to
implement such a statutory
requirement, if it is enacted. For
example, we have heard in stakeholder
meetings that prime contractors
sometimes require subcontractors to be
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bonded at a level well above the amount
of the subcontract or in a way that
duplicates bonding that has already
been provided to the project owner. Do
such practices exist, and, if so, are they
common?
Terminations and Substitutions of DBE
Subcontractors
The Department had noted some
concerns about termination and
substitution practices by prime
contractors that negatively impacted
DBE subcontractors committed during
the contract award process and sought
comment on whether § 26.53(f)(1)
should be modified. There was
overwhelming support to revise the
section by recipients and DBE trade
groups in their response to this inquiry.
They supported requiring recipients to
concur in terminations and
substitutions of DBE subcontractors who
are being used for DBE credit on a
contract, with concurrence to be
provided only if the action was for good
cause. Prime contractors and their
respective trade groups took a contrary
view and wanted to retain their
independent authority. These
commenters suggested that recipients
should have no say regarding a change
or termination of a DBE subcontractor in
instances where the change does not
impact DBE goal achievement.
Many recipients commented that they
currently do require prime contractors
to receive written approval from the
recipient prior to the prime substituting
DBE subcontractors. In addition, some
comments recommended that the
Department adopt a regulation
containing a standard similar to that
required under California Law PCC
4107, which requires notice prior to
termination.
The Department is cognizant of the
prime contractors’ position that primes
should have the ability to remove a
nonperforming or poorly performing
subcontractor. However, the Department
does not believe a revision to this
section of the rule requiring a recipient’s
approval prior to termination of a DBE
subcontractor for other than good cause
would undermine this authority or
insert an onerous burden on prime
contractors. Moreover, based on the
comments from recipients, this change
would formalize a practice already
undertaken by many recipients.
Accordingly, the Department is
proceeding with the proposed revision,
proposed to be located in § 26.53(f), in
order to maintain program integrity and
ensure a more meaningful commitment
to a particular DBE firm that the prime
contractor listed as part of the contract
award process. The proposed section
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includes a list of actions that would
constitute good cause for this purpose.
We seek comment on whether there
should be any additions or changes to
this list.
Counting Issue
The ANPRM discussed the
background of this issue in some detail
(see 74 FR 15905). For convenience of
readers, we are summarizing that
discussion here. Section 26.55(a)(1) of
the Department’s DBE rule provides as
follows:
(a) When a DBE participates in a
contract, you count only the value of the
work actually performed by the DBE
toward DBE goals.
(a)(1) Count the entire amount of that
portion of a construction contract (or
other contract not covered by paragraph
(a)(2) of this section) that is performed
by the DBE’s own forces. Include the
cost of supplies and materials obtained
by the DBE for the work of the contract,
including supplies purchased or
equipment leased by the DBE (except
supplies and equipment the DBE
subcontractor purchases or leases from
the prime contractor or its affiliate.
The preamble discussion of this
provision said the following:
The value of work performed by DBEs
themselves is deemed to include the
cost of materials and supplies
purchased, and equipment leased, by
the DBE from non-DBE sources. For
example, if a DBE steel erection firm
buys steel from a non-DBE
manufacturer, or leases a crane from a
non-DBE construction firm, these costs
count toward DBE goals. There is one
exception: if a DBE buys supplies or
leases equipment from the prime
contractor on its contract, these costs do
not count toward DBE goals. Several
comments from prime contractors
suggested these costs should count, but
this situation is too problematic, in our
view, from an independence and
commercially useful function (CUF)
point of view to permit DBE credit. 64
FR5115–16, February 2, 1999.
This provision creates an intentional
inconsistency between the treatment of
purchases or leases of items by DBEs
from non-DBE sources. If a DBE
contractor buys or rents items from a
non-DBE source other than the prime
contractor, the recipient counts those
items for DBE credit on the contract. If
a DBE subcontractor buys or rents the
same items from the prime contractor
for the DBE’s subcontract, the recipient
does not award DBE credit for the items.
The policy rationale for this
provision, as the preamble quotation
notes, is that permitting the prime
contractor to provide an item to its own
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25821
DBE subcontractor, and then claim DBE
credit for the value of that item, raises
issues concerning whether the DBE is
actually independent and performing a
CUF. The rule regards the item as
having been provided by the prime
contractor to the project and,
consequently, not as part of the ‘‘work
actually performed by the DBE.’’
Therefore, the rule does not permit it to
be counted for DBE credit.
Some prime contractors and DBE
contractors have objected to this
provision, both in correspondence with
the Department and in stakeholder
meeting discussions. They assert that
26.55(a)(1) prevents DBE firms from
successfully competing for projects
involving the purchase of commodities
like asphalt, concrete, or quarried rock,
since the DBE credit they could bring to
the project would be limited to the
installation and labor costs of the job
(likely a relatively small percentage of
the overall contract). This is particularly
true, they say, when there are only one
or two suppliers of the commodity
within a reasonable distance of the DBE,
and those suppliers are owned by or
affiliated with a prime contractor.
Participants in the stakeholder
meeting discussions also suggested that
the current rule could lead to
competitive inequities between prime
contractors. For example, suppose
Prime Contractor A has an asphalt
plant—the only one in the area—and
Prime Contractor B does not. Both are
bidding on a highway construction
contract on which there is a DBE goal.
Prime Contractor A cannot count for
DBE credit the asphalt that a DBE
paving contractor buys, while Prime
Contractor B can. This makes it easier
for B to meet the DBE goal on the
contract.
The ANPRM asked for comments on
four alternatives: (1) No change; (2) keep
current rule in place, but allow
recipients to make exceptions in limited
circumstances; (3) permit items
obtained by DBEs for a contract to be
counted for DBE credit regardless of
their non-DBE source; or (4) prohibit
items obtained by a DBE from any nonDBE source to be counted for DBE
credit. Twenty-eight comments
addressed this issue, and each of the
options attracted support (11 favored
option 1, 6 favored option 2, 7 favored
option 3, and 4 favored option 4).
The Department believes that the
basic policy objective of the current
regulation—preventing items actually
supplied by prime contractors from
counting for DBE credit by being passed
through their DBE subcontractors—is a
sound one. Simply allowing such items
to count toward DBE goals in all
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situations, as option 3 would provide, is
too contrary to this objective for the
Department to consider further. Option
2’s authorization of exceptions to this
general rule could lead to very
inconsistent, and arguably arbitrary,
results within and among states. Option
4 establishes consistency in how items
obtained by DBEs are treated, but would
likely result in reduced dollar amounts
overall DBE participation. Option 1,
which received at least plurality support
among commenters and prevents prime
contractors from counting as DBE
participation items that they themselves
contribute to a project, appears the best
approach. Consequently, the
Department is not proposing to change
this section. We will continue to
consider comments on the issue,
however.
is added) should be described in terms
of six-digit North American Industry
Classification System (NAICS) codes, or
another classification scheme of
equivalent detail and specificity. In
order to meet its burden of proof, a firm
must provide detailed information the
certifying agency needs and/or requests
so that the certifying agency may make
an appropriate NAICS code designation.
Firms are also responsible for ensuring
that the NAICS codes cited in a
certification are up-to-date and
accurately reflect work which the UCP
has determined the firm’s owners can
control. To assist recipients and firms
address these issues, the Department is
proposing an amendment to § 26.71(n),
which would codify the substance of a
guidance Q & A the Department issued
in 2009.
Application and PNW Forms
The ANPRM asked for comments on
potential improvements to the rule’s
application and personal net worth
(PNW) forms. This is an important
matter, and one requiring detailed
attention as well as thorough analysis of
the information collection burdens
involved. For this reason, while the
Department is currently working on
revised forms, we are deferring
proposing new forms to a subsequent
NPRM.
Section 26.73 What are other rules
affecting certification?
The Department has learned, through
the Department’s certification appeal
process and from oversight of recipients’
DBE programs, that some recipients may
deny certification to firms on the basis
that they do not appear prepared to
perform a particular project, are newly
formed, or lack employees or specific
pieces of equipment. We have learned
that recipients are taking this action
after perceiving the firm incapable of
success later down the road. This is
somewhat of a premature determination
and akin to a finding that a firm’s work
would not be counted for DBE credit
sometime in the future. We have
consistently held that counting issues
are separate from certification; and we
continue to hold that firms should be
evaluated based on their present
circumstances. The Department
therefore, is restating § 26.73(b), which
prohibits a recipient from refusing to
certify a firm solely on the basis that it
is a newly formed firm; and adding a
section (b)(2) to emphasize also that
recipients should not refuse to certify a
firm that has not completed contracts or
projects at the time of its application,
has not yet realized profits from its
activities, or has not demonstrated a
potential for success. We stress that if
the firm meets the size, ownership, and
control requirements of this part, the
firm is eligible for certification.
A firm must be a going concern in
order to be certified. It is not realistic to
expect a recipient, for example, to
conduct an on-site review of a business
plan that exists only on paper.
Nevertheless, given that one of the
primary purposes of the DBE program is
to serve as an incubator for start-up
businesses, recipients should not create
unauthorized or unnecessary barriers to
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Certification-Related Provisions
This NPRM also proposes a number of
modifications to the certification
provisions of the rule, based primarily
on the Department’s experience in
certification appeals cases and other
issues that have come to the
Department’s attention. The Department
is continuing to review and update
certification provisions, and we
anticipate proposing several additional
modifications in the subsequent NPRM
that will also propose revised PNW and
application forms. Minor technical
changes to references within the
existing definitions are also proposed.
Section 26.71 What rules govern
determinations concerning control?
‘‘Generic’’ certification of a firm as a
DBE is not proper in the program. Under
§ 26.71(n), DBEs are certified by
recipients and UCPs only with respect
to specific types of work in which the
certifying agency has determined that
the socially and economically
disadvantaged owners control. When
applying for certification, an applicant
is asked to describe the ‘‘primary
business and professional activities the
firm is engaged in.’’ The types of work
a firm can perform (whether on initial
certification or when a new type of work
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the participation of newer firms. For
example, it would be contrary to this
section for a certifying agency to insist
on two years of business tax returns
from a firm that had only been in
business six months.
Section 26.83 What procedures do
recipients follow in making certification
decisions?
The Department wants to
reemphasize, in § 26.83(h), that once a
firm is certified, is stays certified unless
and until its certification is removed
under § 26.87. Certifications do not
expire or lapse, whether after three
years or any particular number of years.
Firms cannot be required to reapply for
certification. However, recipients may
properly conduct certification reviews
of certified firms, including a new onsite review, three years from the date of
the most recent certification of the firm
or sooner if changed circumstances
relating to the firm’s ownership, control,
size or disadvantaged status warrant. In
addition, recipients may conduct on-site
visits on an unannounced basis at the
firm’s offices and job sites if information
comes to a recipients’ attention
regarding the firm’s eligibility. The
Department seeks comment on whether
periodic new on-site reviews should be
conducted (e.g., every three or five
years) to ensure that information about
certified firms is up-to-date and that
firms have not changed in ways that
adversely impact their eligibility?
Would such a requirement make the
interstate certification process work
better? What would the resource
implications be?
One of the problems that the
Department has seen is that on-site
reviews, once conducted, are not
periodically updated by some certifying
agencies. The result may be that the
information in an on-site review report
may be stale. This is a particular
concern given the interstate certification
provisions of proposed § 26.84, in
which a ‘‘State B’ must rely on the onsite report of the applicant firm’s home
state. If the on-site report is 5 or 10 years
old, can other states safely rely on the
information? If not, should we require
updated on-site reviews to be conducted
by firms’ home states at a given interval
(e.g., every three years)? Should states
be permitted to charge user fees to firms
for updated on-site reviews? Are there
ways of reducing burdens of on-site
reviews (e.g., by use of
videoconferencing or other
technologies)? Could the need for
updated on-site reviews be mitigated if
firms had to submit additional annual
update information (e.g., PNW
statements, tax returns, data about the
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firm’s finances and transactions)? The
Department seeks comment on this
topic.
The Department has learned, through
the Department’s certification appeal
process and oversight of recipients’ DBE
programs, of instances in which
applicants may have been unaware that
their application lacked the necessary
information, through either a
misunderstanding of the process and/or
submitting some, but not all, of the
information a recipient needs to make a
decision. It is therefore useful for
recipients to inform each applicant
within 20 business days after receiving
an application, whether the application
is complete and ready for evaluation,
and if not, what additional information
or action is required. Many recipients
engage in this practice and promptly
notify firms, either by e-mail or certified
mail of their need for additional
information. The addition of a
requirement to this effect, therefore,
does not seem onerous and we added a
new lead sentence in paragraph (l) to
reflect this addition.
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Other Provisions
The Uniform Report of DBE Awards
or Commitments and Payments, found
in Appendix B of Part 26, has long been
required to be submitted by DOT
recipients. The form itself states that
FHWA and FTA recipients submit the
form twice a year, while FAA recipients
submit it annually. It was called to our
attention, however, that body of the
regulation does not specifically
reference the form. To remedy this
situation, we propose adding such a
reference to § 26.11. There is no change
to the existing requirement for
submission of the form and no
additional information collection
burden involved.
In § 26.45, the NPRM would clarify
requirements concerning project overall
goals and the implementation of the
recent amendment calling for
submission of overall goals on a
triennial, rather than annual, basis. In
§ 26.51, the NPRM would clarify that, if
a recipient had an all race-neutral
overall goal, it nevertheless would use
race-conscious contract goals if, part
way through the year, it became
necessary to do so in order to have a
reasonable opportunity to meet the
overall goal. This proposed amendment
is related to the proposed
‘‘accountability’’ mechanism in
proposed § 26.47. Finally, an obsolete
citation to suspension and debarment
rules would be replaced by the current
citation in § 26.107.
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Regulatory Analyses and Notices
Executive Order 12866 and DOT
Regulatory Policies and Procedures
This is a nonsignificant regulation for
purposes of Executive Order 12866 and
the Department of Transportation’s
Regulatory Policies and Procedures. The
proposals involve administrative
modifications to several provisions of a
long-existing and well-established
program, designed to improve the
program’s implementation. The
proposals, if made final, would not alter
the direction of the program, make
major policy changes, or impose
significant new costs or burdens.
Regulatory Flexibility Act
A number of provisions of the NPRM
would reduce small business burdens or
increase opportunities for small
business, notably the interstate
certification process and the small
business DBE program element
proposals. Small recipients would not
be required to prepare or transmit
reports concerning the reasons for
overall goal shortfalls and corrective
action steps to be taken. Only State
DOTs, the 50 largest transit authorities,
and the 30–50 airports receiving the
greatest amount of FAA financial
assistance would have to file these
reports. The task of sending copies of
on-site review reports to other
certification entities fall on UCPS,
which are not small entities, and in any
case can be handled electronically by emailing PDF copies of the documents.
While all recipients would have to input
information about decertifications and
denials into a DOT database, this would
be a quick electronic process that would
not be costly or burdensome. The NPRM
would not make major policy changes
that would cause recipients to expend
significant resources on program
modifications. For these reasons, the
Department certifies that the NPRM, if
made final, would not have a significant
economic effect on a substantial number
of small entities.
Federalism
A rule has implications for federalism
under Executive Order 13132,
Federalism, if it has a substantial direct
effect on State or local governments and
would either preempt State law or
impose a substantial direct cost of
compliance on them. We have analyzed
this proposed rule under the Order and
have determined that it does not have
implications for federalism, since it
merely makes administrative
modifications to an existing program. It
does not change the relationship
between the Department and State or
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25823
local governments, pre-empt State law,
or impose substantial direct compliance
costs on those governments.
Paperwork Reduction Act
As required by the Paperwork
Reduction Act of 1995, DOT will submit
Information Collection Requests (ICRs)
to the Office of Management and Budget
(OMB). Before OMB decides whether to
approve these proposed collections of
information and issue a control number,
the public must be provided 30 days to
comment. Organizations and
individuals desiring to submit
comments on the collection of
information should direct them to the
Office of Management and Budget,
Attention: Desk Officer for the Office of
the Secretary of Transportation, Office
of Information and Regulatory Affairs,
Washington, DC 20503. We also request
that a copy of such comments be sent
to the docket for this NPRM. OMB is
required to make a decision concerning
the collection of information
requirements contained in this rule
between 30 and 60 days after
publication of this document in the
Federal Register. Therefore, a comment
is best assured of having its full effect
if OMB receives it within 30 days of
publication.
The items in this NPRM for which
DOT intends to seek Paperwork
Reduction Act approvals are the
following:
Proposed § 23.39(b): Submission of
small business program element.
Proposed § 26.47 (c): Submission of
analysis of reasons for falling short of
overall goal corrective actions.
Proposed § 26.84(c)(4): Affidavit
concerning information of
certification information.
Proposed § 26.84(f): Submission of
certification information to DOT
database.
List of Subjects in 49 CFR Part 26
Administrative practice and
procedure, Airports, Civil rights,
Government contracts, Grantprograms—transportation, Mass
transportation, Minority businesses,
Reporting and record keeping
requirements.
Issued This Day of May, 2010, at
Washington DC.
Ray Lahood,
Secretary of Transportation.
For the reasons set forth in the
preamble, the Department of
Transportation proposes to amend 49
CFR part 26 as follows:
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PART 26—PARTICIPATION BY
DISADVANTAGED BUSINESS
ENTERPRISES IN DEPARTMENT OF
TRANSPORTATION FINANCIAL
ASSISTANCE PROGRAMS
1. The authority citation for part 26
continues to read as follows:
Authority: 23 U.S.C. 324; 42 U.S.C. 2000d,
et seq. ; 49 U.S.C 1615, 47107, 47113, 47123;
Sec. 1101(b), Pub. L. 105–178, 112 Stat. 107,
113.
2. Add § 26.11(a) to read as follows:
§ 26.11 What records do recipients keep
and report?
(a) You must transmit the Uniform
Report of DBE Awards or Commitments
and Payments, found in Appendix B to
this part, at the intervals stated on the
form.
*
*
*
*
*
3. Revise § 26.31 to read as follows:
§ 26.31 What information must you include
in your DBE directory?
You must maintain and make
available to interested persons a
directory identifying all firms eligible to
participate as DBEs in your program. In
the listing for each firm, you must
include its address, phone number, and
the types of work the firm has been
certified to perform as a DBE.
4. Revise § 26.37 (b) to read as
follows:
§ 26.37 What are a recipient’s
responsibilities for monitoring the
performance of other program participants?
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*
*
*
*
*
(b) Your DBE program must also
include a monitoring and enforcement
mechanism to ensure that work
committed to DBEs at contract award or
subsequently (e.g., as the result of
modification to the contract) is actually
performed by the DBEs to which the
work was committed, where the DBEs’
work is intended to count toward DBE
goals. This mechanism must include a
written certification for each such
contract that you have reviewed
contracting records for and monitored
the work on-site for the contract to
ensure that DBEs have actually
performed the work in question.
*
*
*
*
*
5. Add a new § 26.39 to subpart B, to
read as follows:
§ 26.39 Fostering small business
participation.
(a) Your DBE program must include
an element to structure contracting
requirements to facilitate competition
by small business concerns, taking all
reasonable steps to eliminate obstacles
to their participation, including
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unnecessary and unjustified bundling of
contract requirements that may preclude
small business participation in
procurements as prime contractors.
(b) This element must be submitted to
the appropriate DOT operating
administration for approval as a part of
your DBE program. As part of this
program element you may include, but
are not limited to, the following
strategies:
(1) Establishing a race-neutral small
business set-aside for prime contracts
under a stated amount (e.g., $1 million).
(2) In multi-year design-build
contracts or other large contracts (e.g.,
for ‘‘meagprojects’’) requiring bidders on
the prime contract to specify elements
of the contract or specific subcontracts
that are of a size that small businesses,
including DBEs, can reasonably
perform.
(3) On prime contracts not having
DBE contract goals, requiring the prime
contractor to provide subcontracting
opportunities of a size that small
businesses, including DBEs, can
reasonably perform, rather than selfperforming all the work involved.
(4) Identifying alternative acquisition
strategies and structuring procurements
to facilitate the ability of consortia or
joint ventures consisting of small
businesses, including DBEs, to compete
for and perform prime contracts.
(5) If you are implementing your
overall goal wholly through race-neutral
measures,, ensuring that a reasonable
number of prime contracts are of a size
that small businesses, including DBEs,
can reasonably perform.
6. Revise § 26.45(e)(2), (e)(3), (f)(1),
and (f)(2) to read as follows:
§ 26.45
goals?
How do recipients set overall
*
*
*
*
*
(e) * * *
(2) If you are an FTA or FAA
recipient, as a percentage of all FTA or
FAA funds (exclusive of FTA funds to
be used for the purchase of transit
vehicles) that you will expend in FTA
or FAA-assisted contracts in the three
forthcoming fiscal years.
(3) In appropriate cases, the FHWA,
FTA or FAA Administrator may permit
you to express your overall goal as a
percentage of funds for a particular
grant or project or group of grants and/
or projects. Like other overall goals, a
project goal may be adjusted to reflect
changed circumstances, with the
concurrence of the appropriate
operating administration.
(i) A project goal is an overall goal,
and must meet all the substantive and
procedural requirements of this section
pertaining to overall goals.
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(ii) A project goal covers the entire
length of the project to which it applies.
(iii) The project goal should include a
projection of the DBE participation
anticipated to be obtained during each
fiscal year covered by the project goal.
(iv) The funds for the project to which
the project goal pertains are separated
from the base from which your regular
overall goal, applicable to contracts not
part of the project covered by a project
goal, is calculated.
(f)(1)(i) If you set your overall goal on
a fiscal year basis, you must submit it
to the applicable DOT operating
administration by August 1 at three-year
intervals, based on a schedule
established by the FHWA, FTA, or FAA,
as applicable, and posted on that
agency’s Web site.
(ii) You must submit to the operating
administration for approval any
significant adjustment you make to your
goal during the three-year period based
on changed circumstances. The
operating administration may direct you
to undertake a review of your goal if
necessary to ensure that the goal
continues to fit your circumstances
appropriately.
(iii) While you are required to submit
an overall goal to FHWA, FTA, or FAA
only every three years, the overall goal
and the provisions of § 26.47(c) apply to
each year during that three-year period.
(2) If you are a recipient and set your
overall goal on a project or grant basis
as provided in paragraph (e)(3) of this
section, you must submit the goal for
review at a time determined by the
FHWA, FTA or FAA Administrator, as
applicable.
*
*
*
*
*
7. Add new paragraph (c) and (d) to
§ 26.47, to read as follows:
§ 26.47 Can recipients be penalized for
failing to meet overall goals?
*
*
*
*
*
(c) If the awards and commitments
shown on your Uniform Report of
Awards or Commitments and Payments
at the end of any fiscal year are less than
the overall goal applicable to that fiscal
year, you must do the following in order
to be regarded by the Department as
implementing your DBE program in
good faith:
(1) Analyze in detail the reasons for
the difference between the overall goal
and your awards and commitments in
that fiscal year;
(2) Establish specific steps and
milestones to correct the problems you
have identified in your analysis and to
enable you to meet fully your goal for
the new fiscal year;
(3) (i) If you are a State highway
agency; one of the 50 largest transit
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authorities as determined by the FTA; or
an Operational Evolution Partnership
Plan airport or other airport designated
by the FAA, you must submit, within 60
days of the end of the fiscal year, the
analysis and corrective actions
developed under paragraphs (c)(1) and
(2) of this section to the appropriate
operating administration for approval. If
the operating administration approves
the report, you will be regarded as
complying with the requirements of this
section for the remainder of the fiscal
year.
(ii) As a transit authority or airport
not meeting the criteria of paragraph
(c)(3)(i) of this section, you must retain
analysis and corrective actions in your
records for three years and make it
available to FTA or FAA on request for
their review.
(4) FHWA, FTA, or FAA may impose
conditions on the recipient as part of its
approval of the recipient’s analysis and
corrective actions including, but not
limited to, modifications to your overall
goal methodology, changes in your race
conscious/race neutral split, or the
introduction of additional race-neutral
or race-conscious measures.
(5) You may be regarded as being in
noncompliance with this Part, and
therefore subject to the remedies in
§§ 26.103 or 26.105 of this part and
other applicable regulations,for failing
to implement your DBE program in good
faith if any of the following things
occur:
(i) You do not submit your analysis
and corrective actions to FHWA, FTA,
or FAA in a timely manner as required
under paragraph (c)(3) of this section;
(ii) FHWA, FTA, or FAA disapproves
your analysis or corrective actions; or
(iii) You do not fully implement the
corrective actions to which you have
committed or conditions that FHWA,
FTA, or FAA has imposed following
review of your analysis and corrective
actions.
(d) If, as recipient, your 6-month
Uniform Report of DBE Awards or
Commitments and Payments (for FHWA
and FTA recipients) or other
information coming to the attention of
FTA, FHWA, or FAA, demonstrates that
you are falling short of the DBE awards
and commitments that would be
necessary to allow you to meet your
overall goal at the end of the fiscal year,
FHWA, FTA, or FAA, as applicable,
may require you to make further good
faith efforts, such as by modifying your
race-conscious/race neutral split or
introducing additional race-neutral or
race-conscious measures for the
remainder of the fiscal year.
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8. Revise § 26.51(b)(1), (f)(1), and the
example to paragraph (f)(1), to read as
follows:
§ 26.51 What means do recipients use to
meet overall goals?
*
*
*
*
*
(b) Race-neutral means include, but
are not limited to, the following:
(1) Arranging solicitations; times for
the presentation of bids, quantities,
specifications, and delivery schedules
in ways that facilitate participation by
DBEs and other small businesses and by
making contracts more accessible to
small businesses, by means such as
those provided under § 26.39 of this
part.
*
*
*
*
*
(f) * * *
(1) If your approved projection under
paragraph (c) of this section estimates
that you can meet your entire overall
goal for a given year through raceneutral means, you must implement
your program without setting contract
goals during that year, unless it becomes
necessary to do so to avoid falling short
of our overall goal.
Example to Paragraph (f)(1): Your overall
goal for Year 1 is 12 percent. You estimate
that you can obtain 12 percent or more DBE
participation through the use of race-neutral
measures, without any use of contract goals.
In this case, you do not set any contract goals
for the contracts that will be performed in
Year 1. However, if part way through Year 1,
your DBE awards or commitments are not at
a level that would permit you to achieve your
overall goal for Year 1, you would begin
setting race-conscious DBE contract goals
during the remainder of the year as part of
your obligation to implement your program
in good faith.
*
*
*
*
*
9. In § 26.53, redesignate paragraph (g)
as paragraph (i), redesignate paragraphs
(f)(2) and (3) as paragraphs (g) and (h)
respectively, revise paragraph (f)(1), and
add new paragraphs (f)(2) through (5) to
read as follows:
§ 26.53 What are the good faith efforts
procedures recipients follow in situations
where there are contract goals?
*
*
*
*
*
(f)(1) You must require that a prime
contractor not terminate a DBE
subcontractor listed in response to
paragraph (b)(2) of this section (or an
approved substitute DBE firm) without
your written concurrence 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 a substitute DBE firm.
(2) You may provide such written
consent only if you agree, for reasons
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25825
stated in your concurrence document,
that the prime contractor has good cause
to terminate the DBE firm.
(3) For purposes of this paragraph,
good cause includes the following
circumstances:
(i) The listed DBE subcontractor fails
or refuses to execute a written contract;
(iii) The listed DBE subcontractor fails
or refuses to perform its subcontract;
(iv) The listed DBE subcontractor fails
to perform its work on the subcontract
in a way that is acceptable to you;
(v) The listed DBE subcontractor fails
or refuses to meet the prime contractor’s
reasonable bond requirements;
(vi) The listed DBE subcontractor
becomes bankrupt, insolvent, or exhibits
credit unworthiness;
(vii) The listed DBE subcontractor is
ineligible to work on public works
projects because of suspension and
debarment proceedings pursuant 2 CFR
Parts 180, 215 and 1200 or applicable
state law;
(viii) You have determined that the
listed DBE subcontractor is not a
responsible contractor;
(ix) The listed DBE subcontractor
voluntarily withdraws from the project
and provides to you written notice of its
withdrawal;
(x) The listed DBE is ineligible to
receive DBE credit for the type of work
required;
(xi) A DBE owner dies or becomes
disabled with the result that the listed
DBE contractor is unable to complete its
work on the contract.
(xii) Other good cause that you
determine compels the termination of
the DBE subcontractor, with the
concurrence of FHWA, FTA, or FAA, as
applicable.
(3) Before transmitting to you its
request to terminate and/or substitute a
DBE subcontractor, the prime contractor
must give notice in writing to the DBE
subcontractor, with a copy to you, of its
intent to request to terminate and/or
substitute, and the reason for the
request.
(4) The prime contractor must give the
DBE 5 days to respond to the prime
contractor’s notice and advise you and
the contractor of the reasons, if any,
why it objects to the proposed
termination of its subcontract and why
you should not approve the prime
contractor’s action.
(5) In addition to post-award
terminations, the provisions of this
section apply to preaward deletions of
or substitutions for DBE firms put
forward by offerors in negotiated
procurements.
*
*
*
*
*
10. Revise § 26.67 (a)(2)(i) to read as
follows:
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§ 26.67 What rules determine social and
economic disadvantage?
(a) * * *
(2)(i) You must require each
individual owner of a firm applying to
participate as a DBE (except a firm
applying to participate as a DBE airport
concessionaire under 49 CFR part 23)
whose ownership and control are relied
upon for DBE certification to certify that
he or she has a personal net worth that
does not exceed $1.3 million.
*
*
*
*
*
11. Revise § 26.71(n) to read as
follows:
§ 26.71 What rules govern determinations
concerning control?
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*
*
*
*
*
(n) You must grant certification to a
firm only for specific types of work in
which the socially and economically
disadvantaged owners have the ability
to control the firm. To become certified
in an additional type of work, the firm
need demonstrate to you only that its
socially and economically
disadvantaged owners are able to
control the firm with respect to that type
of work. You may not, in this situation,
require that the firm be recertified or
submit a new application for
certification, but you must verify the
disadvantaged owner’s control of the
firm in the additional type of work.
(1) The types of work a firm can
perform (whether on initial certification
or when a new type of work is added)
must be described in terms of NAICS
codes or a classification scheme of
equivalent detail and specificity. A
correct NAICS code is one that
describes, as specifically as possible, the
principal goods or services which the
firm would provide to DOT recipients.
Multiple NAICS codes may be assigned,
where appropriate. Program participants
must rely on, and not depart from, the
plain meaning of NAICS code
descriptions in determining the scope of
a firm’s certification.
(2) Firms and recipients must check
carefully to make sure that the NAICS
codes cited in a certification are kept
up-to-date and accurately reflect work
which the UCP has determined the
firm’s owners can control. The firm
bears the burden of providing detailed
company information the certifying
agency needs to make an appropriate
NAICS code designation.
(3) If a firm believes that there is not
a NAICS code that fully or clearly
describes the type(s) of work in which
it is seeking to be certified as a DBE, the
firm may request that the certifying
agency, in its certification
documentation, supplement the
assigned NAICS code(s) with a clear,
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specific, and detailed narrative
description of the type of work in which
the firm is certified. A vague, general, or
confusing description is not sufficient
for this purpose, and recipients should
not rely on such a description in
determining whether a firm’s
participation can be counted toward
DBE goals.
(4) A certifier is not precluded from
changing a certification classification or
description if there is a factual basis in
the record. However, certifiers should
not make after-the-fact statements about
the scope of a certification, not
supported by evidence in the record of
the certification action.
*
*
*
*
*
12. Revise § 26.73(b) to read as
follows:
§ 26.73 What are other rules affecting
certification?
certified DBE firm, including a new onsite review, three years from the date of
the firm’s most recent certification, or
sooner if appropriate in light of changed
circumstances (e.g., of the kind
requiring notice under paragraph (i) of
this section), a complaint, or other
information concerning the firm’s
eligibility. If information comes to your
attention that leads you to question the
firm’s eligibility, you may conduct an
on-site review on an unannounced
basis, at the firm’s offices and jobsites.
*
*
*
*
*
(l) As a recipient or UCP, you must
advise each applicant within 20
business days from your receipt of the
application whether the application is
complete and suitable for evaluation
and, if not, what additional information
or action is required.
15. Revise § 26.84 to read as follows
*
§ 26.84
*
*
*
*
(b)(1)You must evaluate the eligibility
of a firm on the basis of present
circumstances. You must not refuse to
certify a firm based solely on historical
information indicating a lack of
ownership or control of the firm by
socially and economically
disadvantaged individuals at some time
in the past, if the firm currently meets
the ownership and control standards of
this part.
(2) You must not refuse to certify a
firm solely on the basis that it is a newly
formed firm, has not completed projects
or contracts at the time of its
application, has not yet realized profits
from its activities, or has not
demonstrated a potential for success. If
the firm meets disadvantaged, size,
ownership, and control requirements of
this Part, the firm is eligible for
certification.
*
*
*
*
*
§ 26.81
[Amended]
13. Amend § 26.81(g) by removing the
period at the end of the last sentence
and adding the words ‘‘and shall revise
the print version of the Directory at least
once a year.’’
14. In § 26.83, remove and reserve
paragraph (e), revise paragraph (h), and
add a new paragraph (l) to read as
follows:
§ 26.83 What procedures do recipients
follow in making certification decisions?
*
*
*
*
*
(h) Once you have certified a DBE, it
shall remain certified until and unless
you have removed its certification, in
whole or in part, through the procedures
of § 26.87. You may not require DBEs to
reapply for certification. However, you
may conduct a certification review of a
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Interstate certification.
(a) This section applies with respect
to any firm that is currently certified in
its home State.
(b) When a firm currently certified in
its home State (‘‘State A’’) applies to
another State (‘‘State B’’) for DBE
certification, State B may, at its
discretion, accept State A’s certification
and certify the firm,. without further
procedures.
(1) To obtain certification in this
manner, the firm must provide to
State B a copy of its certification notice
from State A.
(2) Before certifying the firm, State B
must confirm that the firm has a current
valid certification from State A. State B
can do so by reviewing State A’s
electronic directory or getting written
confirmation from the home State.
(c) In any situation in which State B
chooses not to accept State A’s
certification of a firm as provided in
paragraph (b) of this section, as the
applicant firm you must provide the
following information in paragraphs
(c)(1) through (4) of this section to
State B.
(1) You must provide to State B a
complete copy of the application form,
all supporting documents, and any other
information you have submitted to State
A related to your firm’s certification.
This includes affidavits of no change
(see § 26.83(j) and any notices of
changes (see § 26.83(i) that you have
submitted to State A, as well as any
correspondence you have had with State
A’s UCP or any recipient concerning
your application or status as a DBE firm.
(2) You must also provide to State B
any notices or correspondence from
states other than State A relating to your
status as an applicant or certified DBE
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in those states. For example, if you have
been denied certification or decertified
in State C, or subject to a decertification
action there, you must inform State B of
this fact and provide all documentation
concerning this action to State B.
(3) If you have filed a certification
appeal with DOT (see § 26.89), you must
inform State B of the fact and provide
your letter of appeal and DOT’s
response to State B.
(4) You must submit an affidavit
sworn to by the firm’s owners before a
person who is authorized by State law
to administer oaths or an unsworn
declaration executed under penalty of
perjury of the laws of the United States.
This affidavit must affirm that you have
submitted all the information required
by 49 CFR 26.84(c) and the information
is complete and, in the case of the
information required by § 26.84(c)(1), an
identical copy of the information
submitted to State A.
(d) As State B, when you receive from
an applicant firm all the information
required by paragraph (c) of this section,
you must take the following actions:
(1) Immediately contact State A and
request a copy of the site visit review
report for the firm (see § 26.83(c)(1)),
any updates to the site visit review, and
any evaluation of the firm based on the
site visit. As State A, you must transmit
this information to State B within seven
days of receiving the request.
(2) Determine, within 30 days,
whether there is good cause to believe
that State A’s certification of the firm is
erroneous or should not apply in your
State. Reasons for making such a
determination may include, but are not
limited to, the following:
(i) Evidence that State A’s
certification was obtained by fraud;
(ii) New information, not available to
State A at the time of its certification,
indicating that the firm does not meet
all eligibility criteria;
(iii) State A’s certification was
factually erroneous or was inconsistent
with the requirements of this part;
(iv) The State law of State B leads to
a result different from that of the State
law of State A.
(v) The information provided by the
applicant firm did not meet the
requirements of paragraph (c) of this
section.
(3) If, as State B, unless you have
determined that there is good cause to
believe that State A’s certification is
erroneous or should not apply in your
State, you must, no later than 30 days
from the date on which you received
from the applicant firm all the
information required by paragraph (c) of
this section, send to the applicant firm
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16:19 May 07, 2010
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a notice that it is certified and place the
firm on your directory of certified firms.
(4) If, as State B, you have determined
that there is good cause to believe that
State A’s certification is erroneous or
should not apply in your State, you
must, no later than 30 days from the
date on which you received from the
applicant firm all the information
required by paragraph (c) of this section,
send to the applicant firm a notice
stating the reasons for your
determination.
(i) This notice must meet the
requirements of § 26.87(b) of this part
and offer the firm the opportunity for a
hearing meeting the requirements of
§ 26.87(d), (e)(2), and (g) of this part.
(ii) If the firm elects to have a hearing,
you must ensure that it takes place
within 30 days, and your decision must
be issued within 30 days after the date
of the hearing.
(iii) Consistent with the provisions of
§ 26.87(d)(1) and (3) of this part, you
bear the burden of proving, by a
preponderance of the evidence, that the
firm does not meet the certification
standards of this part.
(iv) The firm’s application for
certification is stayed pending the
outcome of this proceeding.
(v) The firm may appeal the outcome
of this proceeding to DOT as provided
in § 26.89 of this part.
(e) As State B, if you have not
received from State A a copy of the site
visit review report by a date 14 days
after you have made a timely request for
it, you may hold action required by
paragraphs (d)(2) through (4) of this
section in abeyance pending receipt of
the site visit review report. In this event,
you must, no later than 30 days from the
date on which you received from an
applicant firm all the information
required by paragraph (c) of this section,
notify the firm in writing of the delay in
the process and the reason for it.
(f)(1) As a UCP, when you deny a
firm’s application, reject the application
of a firm certified in State A or any other
State in which the firm is certified,
through the procedures of paragraph
(d)(4) of this section, or decertify a firm,
in whole or in part, you must make an
entry to the Department of
Transportation Office of Civil Rights’
(DOCR’s) Ineligibility Determination
online database. You must enter the
following information:
(i) The name of the firm;
(ii) The name(s) of the firm’s owner(s);
(iii) The type and date of the action;
(iv) The reason for the action.
(2) As a UCP, you must check the
DOCR Web site at least once every
month to determine whether any firm
that is applying to you for certification
PO 00000
Frm 00043
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Sfmt 4702
25827
or that you have already certified is on
the list.
(3) For any such firm that is on the
list, you must promptly request a copy
of the listed decision from the UCP that
made it. As the UCP receiving such a
request, you must provide a copy of the
decision to the requesting UCP within 7
days of receiving the request. As the
UCP receiving the decision, you must
then consider the information in the
decision in determining what, if any,
action to take with respect to the
certified DBE firm or applicant.
16. Revise § 26.85 to read as follows:
§ 26.85
firms.
Certification of SBA 8(a)-certified
(a) As a recipient or UCP, if a firm
certified by SBA under its 8(a) program
applies to you for certification as a DBE,
you must follow the procedures of this
section.
(b) When an SBA 8(a)-certified firm
applies for certification, you must
accept the certification applications,
forms and packages submitted by a firm
to the SBA for 8(a) program
certification, in lieu of requiring the
applicant firm to complete your own
application forms and packages. The
applicant may submit the package
directly, or may request that the SBA
forward the package to you.
(c) Before certifying a firm based on
its SBA 8(a) certification, you must
conduct an on-site review of the firm
(see § 26.83(c)(1)). You may also request
additional relevant information from the
firm to ensure that the requirements of
this Part for DBE certification have been
met. If the SBA application package
presented by the firm is more than two
years old, you must obtain updated
information from the applicant.
(d) Unless you determine, based on
the on-site review and other information
obtained in connection with the firm’s
application that the firm does not meet
the eligibility requirements of subpart D
of this part, you must certify the firm.
(e) For an SBA 8(a) firm that you
certify under this section, you must
determine, based on the on-site and
other information you have gathered,
the NAICS codes in which the firm may
participate in your contracts as a DBE.
(f) You are not required to process an
application for certification from an
SBA-certified firm having its principal
place of business outside the State(s) in
which you operate unless there is a
report of a ‘‘home State’’ on-site review
on which you may rely.
(g) If the SBA 8(a) firm applying to
you is already certified as a DBE by
another State’s UCP, you must use the
procedures of § 26.84 of this part, rather
E:\FR\FM\10MYP1.SGM
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Federal Register / Vol. 75, No. 89 / Monday, May 10, 2010 / Proposed Rules
than those of this section, for
considering its eligibility.
§ 26.81
[Amended]
17. In § 26.107 (a) and (b), remove ‘‘49
CFR part 29’’ and add in its place, ‘‘2
CFR parts 180 and 1200.’’
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Agencies
[Federal Register Volume 75, Number 89 (Monday, May 10, 2010)]
[Proposed Rules]
[Pages 25815-25828]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-10968]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Part 26
[Docket No. OST-2010-0118]
RIN 2105-AD75
Disadvantaged Business Enterprise: Program Improvements
AGENCY: Office of the Secretary (OST), DOT.
ACTION: Notice of proposed rulemaking (NPRM).
-----------------------------------------------------------------------
SUMMARY: This notice of proposed rulemaking (NPRM) would propose to
improve the administration of the Disadvantaged Business Enterprise
(DBE) program by increasing accountability for recipients with respect
to good faith efforts to meet overall goals, modifying and updating
certification requirements, adjusting the personal net worth (PNW)
threshold for inflation, providing for expedited interstate
certification, adding provisions to foster small business participation
and improve post-award oversight, and addressing other issues.
DATES: Comments on this proposed rule must be received by July 9, 2010.
ADDRESSES: You may submit comments (identified by the agency name and
DOT Docket ID Number OST-2010-0118) by any of the following methods:
Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the online instructions for submitting
comments.
Mail: Docket Management Facility: U.S. Department of
Transportation, 1200 New Jersey Avenue, SE., West Building Ground
Floor, Room W12-140, Washington, DC 20590-0001
Hand Delivery or Courier: West Building Ground Floor, Room
W12-140, 1200 New Jersey Avenue, SE., between 9 a.m. and 5 p.m. ET,
Monday through Friday, except Federal holidays.
Fax: 202-493-2251
Instructions: You must include the agency name (Office of the
Secretary, DOT) and Docket number (OST-2010-0118) for this notice at
the beginning of your comments. You should submit two copies of your
comments if you submit them by mail or courier. Note that all comments
received will be posted without change to https://www.regulations.gov
including any personal information provided and will be available to
internet users. You may review DOT's complete Privacy Act Statement in
the Federal Register published on April 11, 2000 (65 FR
[[Page 25816]]
19477) or you may visit https://DocketsInfo.dot.gov.
Docket: For internet access to the docket to read background
documents and comments received, go to https://www.regulations.gov.
Background documents and comments received may also be viewed at the
U.S. Department of Transportation, 1200 New Jersey Ave, SE., Docket
Operations, M-30, West Building Ground Floor, Room W12-140, Washington,
DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except
Federal holidays.
FOR FURTHER INFORMATION CONTACT: Robert C. Ashby, Deputy Assistant
General Counsel for Regulation and Enforcement, U.S. Department of
Transportation, 1200 New Jersey Avenue, SE., Washington, DC, 20590,
Room W94-302, 202-366-9310, bob.ashby@dot.gov.
SUPPLEMENTARY INFORMATION: The Department of Transportation issued an
advance notice of proposed rulemaking (ANPRM) on April 8, 2009,
concerning several DBE program issues (74 FR 15904). The first
concerned counting of items obtained by a DBE subcontractor from its
prime contractor. The second concerned ways of encouraging the
``unbundling'' of contracts to facilitate participation by small
businesses, including DBEs. The third was a request for comments on
potential improvements to the DBE application form and personal net
worth (PNW), and the fourth asked for suggestions related to program
oversight. The fifth concerned potential regulatory action to
facilitate certification for firms seeking to work as DBEs in more than
one state. The sixth concerned additional limitations on the discretion
of prime contractors to terminate DBEs for convenience, once the prime
contractor had committed to using the DBE as part of its showing of
good faith efforts. The Department received approximately 30 comment
letters concerning these issues. This NPRM makes regulatory proposals
concerning many of these issues.
In addition, since the ANPRM was published, both the House of
Representatives and the Senate have passed their versions of a Federal
Aviation Administration (FAA) reauthorization bill. These bills include
a provision requiring an inflationary adjustment to the current
$750,000 personal net worth (PNW) cap. Because the timing of the
enactment of an FAA reauthorization bill is not yet clear, and the
provisions of the bill do not apply to the Department's highway and
transit programs in any case, the Department has decided to propose an
inflationary adjustment of the PNW cap to $1.3 million, the figure that
would result from the House and Senate bills.
Finally, the Department is proposing amendments to the
certification-related provisions of the DBE regulation. These proposals
result from the Department's experience in dealing with certification
issues and certification appeal cases during the years since the last
major revision of the DBE rule in 1999. The amendments are intended to
clarify issues that have arisen and avoid problems with which
recipients (i.e., state highway agencies, transit authorities, and
airport sponsors who receive DOT grant financial assistance) and the
Department have had to grapple over the last 11 years.
Accountability for Recipients With Respect to Overall Goals
Section 26.47 of the rule states that a recipient cannot be
penalized for failing to meet overall goals. To penalize a recipient
simply for failing to ``hit a number'' could create an impermissible
quota system. Nonetheless, recipients are required to implement their
DBE programs in good faith in order to remain in compliance with Part
26.
The Department takes this ``good faith implementation'' requirement
very seriously. Accountability is the key to ensuring effective program
implementation, and the Department believes that it is useful to add a
new provision to increase the accountability of recipients with respect
to overall goals and their attainment.
An overall goal is the recipient's estimate of the ``level playing
field'' amount of DBE participation that it would expect to achieve in
the absence of discrimination or its effects. Failing to meet the
overall goal means that the measures the recipient has employed in
carrying out its DBE program have not fully created that level playing
field, and that discrimination or its effects have not fully been
remedied. In order to implement its program in good faith, a recipient
should make strong efforts to understand the reasons why it has not met
its overall goal and to figure out what it can do to correct the
situation.
For this reason, the Department is proposing to add a new paragraph
(c) to Sec. 26.47. If at the end of a fiscal year (FY) 1, (e.g.,
September 30), a recipient has failed to meet its overall goal for that
FY, the recipient must do two things: (1) Thoroughly analyze why it
fell short of meeting its overall goal for FY1 and (2) establish
specific steps and milestones for correcting identified problems so
that the recipient will meet its overall goal in FY2 and subsequent
years. State highway agencies, the largest 50 transit authorities as
designated by FTA, and Operational Evaluation Airports and other
airports designated by FAA would have to submit this material to FHWA,
FTA, or FAA, as applicable. The NPRM proposes a period of 60 days to
submit this material. The Department seeks comment on this process.
Other FTA and FAA recipients would retain the information, so that DOT
officials conducting program or compliance reviews could review it.
This section also proposes that, if a recipient fails to take
actions required under the new provisions, the recipient could be
regarded as in noncompliance with Sec. 26.47 and hence subject to the
remedies stated in Sec. Sec. 26.101 through 26.105 or other
applicable regulations. These remedies include suspension or
termination of Federal assistance, refusal to approve projects,
payments, grants, or contracts, or other action at the discretion of
the operating administration involved.
Goal Submission
On February 2010, the Department amended Sec. 26.45 to allow
recipients to submit overall goals every three years, rather than
annually (75 FR 5535). This change was intended to reduce
administrative burdens for recipients, as well as to permit DOT staff
to give greater scrutiny to recipients' submissions. In this NPRM, we
propose a clarification of this amendment. While the recipient need
only submit a new goal every three years, it is still responsible for
good faith implementation of that goal in each year.
In carrying out the accountability provision discussed above, the
Department would hold recipients responsible for each year's
implementation activity. For example, suppose that a recipient has a 12
percent goal for FY 1-3. If the recipient fell short of 12 percent in
FY 1, the Sec. 26.47 requirements for analysis of the shortfall and
steps to remedy the problems in FY 2 would apply. The recipient would
not be able to say, in effect, ``We don't need to worry about our FY 1
shortfall because we'll catch up in FY 3.''
It is possible, however, that a recipient might anticipate a
funding stream for projects that would in fact differ from one year to
the next. For example, an airport with a 12 percent goal might expect,
given the projects, FAA assistance, and DBE availability that it
anticipates, that it would have 6 percent DBE participation in FY 1, 18
percent in FY 2, and 12 percent in FY 3. The Department seeks comment
on whether a recipient could, if it wished,
[[Page 25817]]
provide a year-to-year projection of its likely DBE participation
within the framework of a goal and methodology submitted only every
three years, with the result that in applying the accountability
provision of proposed Sec. 26.47, those year-to-year projections,
rather than the three-year overall goal number, would be the benchmark
for determining whether the analysis/corrective action requirements
would be triggered. This could increase flexibility, but could
undercut, to an extent, the purpose of the three-year goal submission
interval. We anticipate that this approach would be relevant primarily,
or perhaps only, in FAA programs, where Federal funding is more likely
to change from year to year than in the FHWA and FTA programs.
Improving Oversight
The ANPRM asked for suggestions on how to improve program
oversight. The Department received 17 comments. Several recipients
commented to the effect that additional resources, including Federal
assistance, would be necessary if they were to conduct additional
oversight. Other commenters suggested that additional training and
information in areas like contract compliance and close-out enforcement
could be useful. A DBE organization noted that training for recipient
executive-level officials, as well as operating-level staff, would be
helpful. This commenter also wanted to emphasize the need for a direct
DBE Liaison Officer connection to the top official of the organization.
Other comments simply supported the concept of better oversight,
without specifying how this could best be accomplished.
Program oversight is not a new concept in the DBE program. Existing
Sec. 26.37 requires monitoring and enforcement mechanisms. To
strengthen these existing provisions, the Department is proposing to
add a sentence to Sec. 26.37(b), calling on recipients to make a
written certification that they have reviewed contracting records and
monitored the work on-site to ensure that DBEs have actually performed
the work in question on each contract involving DBE participation
counted toward contract or overall goals. To comply with this
requirement, the recipient would have to make one such certification
for every contract on any contract with DBE participation. This
sentence would simply make more explicit a requirement that the
Department believes is implicit in the existing regulatory language.
Existing Sec. 26.25 already requires that the DBE liaison officer
(DBELO) must have direct, independent access to the Chief Executive
Officer (CEO) of the recipient's organization concerning DBE program
matters. This means that the DEBLO must not be required to get anyone's
consent or sign-off, or ``go through channels,'' to talk and write
personally to the CEO about DBE program matters. The Department does
not believe that additional regulatory language is needed on this
point: the existing provision is already explicit.
We also call attention to the last section of Sec. 26.25, which
requires that the recipient have adequate staff to administer the DBE
program. In times of budget stringency, it may be tempting to cut back
on staff and other resources needed for certification, program
oversight, and other key DBE program functions. This sentence
emphasizes that it is a requirement of Federal law that the DBE program
be adequately staffed to ensure compliance with Part 26.
Personal Net Worth
The personal net worth (PNW) criterion has been a perennially
controversial subject in the DBE rule. It is intended to ensure that
only economically disadvantaged individuals participate in the DBE
program, lest the program become overinclusive. The $750,000 PNW
``cap,'' taken from SBA materials dating to 1989 or earlier, has been
criticized by DBEs as penalizing success and imposing a glass ceiling
on the growth and competitiveness of DBE firms. At the same time, the
PNW cap has been a part of the package of narrow tailoring features
that has helped the Department to defend the DBE program successfully
against court challenges.
As noted above, the House and Senate versions of the currently
pending FAA reauthorization bills both call for an inflationary
adjustment in the PNW cap, relating back to 1989. Based on these
provisions, the Department did a straight-line inflationary adjustment
using the Consumer Price Index (CPI), which suggests a 73 percent
inflation since 1989. This results in an adjusted PNW cap of $1.31
million. It is very important to understand that this does not
represent an increase in the actual personal net worth which DBE owners
may have, viewed in real dollar terms. Rather, $1.31 million today has
the same value, in real dollar terms, as $750,000 in 1989. The
inflationary adjustment simply maintains the economic status quo.
The Department is aware that there are a number of methodologies
and approaches to making inflationary adjustments. The Department seeks
comment on whether the straight-line CPI approach used in the NPRM is
appropriate, or whether there are other approaches or techniques that
would be better or more accurate. Also, it would not make sense for the
Department to have one PNW number for FAA programs and another for FTA
and FHWA programs. Therefore, the Department's proposal would apply the
$1.31 million PNW cap to all programs covered by Part 26.
The pending FAA bills address another issue related to PNW,
concerning the handling of retirement savings. Under the Department's
current regulation, assets in retirement savings plans are regarded as
part of an individual's wealth, and hence are counted as assets for PNW
purposes. Some DBEs have long objected to this approach, saying that it
is inappropriate to count these assets, which are not liquid and
therefore not readily available for purposes of an owner's business.
While giving the Department a degree of regulatory discretion, the
pending FAA reauthorization bills direct the Department not to count
such assets toward the PNW cap.
If these provisions are enacted, the Department will need to devise
implementing rules. We seek comment on how best to do so. What sort of
retirement savings should be covered by a new provision (e.g., 401(k)s,
IRAs, Roth IRAs, Keough Plans, stocks and bonds, certificates of
deposit or savings plans, life insurance, etc.)? Should there be any
limitation on the amount of money that could be eliminated from
counting toward the PNW cap by being in a retirement savings product?
Is there a potential problem of abuse, in which DBE owners could
shelter assets from PNW consideration in inappropriate ways? If so, how
would the Department attempt to deal with such a problem? Would the
eliminating consideration of these assets have unintended distributive
consequences across the breadth of the DBE program (e.g., helping more
affluent firms at the expense of smaller DBEs without such assets,
having a racially disparate impact)? We seek comment on how we should
shape the details of a future rule implementing the pending statutory
provisions.
Interstate Certification and Related Issues
Under the current DBE rule, certification occurs on a statewide
basis. The Unified Certification Program (UCP) in each state ensures
``one-stop shopping'' for DBE applicants within that state. The UCP
requirement, which came into effect in 1999, has simplified
certification by making it unnecessary
[[Page 25818]]
for recipients to apply multiple times for certification by various
transit authorities, airports, and highway departments within a given
state.
The present structure, however, does not address problems that
occur when DBEs certified in their home state attempt to become
certified in other states. As we mentioned in the ANPRM, DBEs and prime
contractors have frequently expressed frustration at what they view as
unnecessary obstacles to certification by one state of firms located in
other states. They complain of unnecessarily repetitive, duplicative,
and burdensome administrative processes and what they see as the
inconsistent interpretation of the DOT rules by various UCPs. There
have been a number of requests for nationwide reciprocity or some other
system in which one certification was sufficient throughout the
country.
The Department believes that more should be done to facilitate
interstate certification. Interstate reciprocity has always been
authorized under Part 26 (see Sec. 26.81 (e) and (f)), and in 1999 we
issued a Q&A encouraging this approach. To further encourage such
efforts, the Department issued another Q&A in 2008, suggesting an
approach to facilitating interstate certifications. In the ANPRM, we
asked for comment on proposing a regulatory provision based on this
guidance, or, in the alternative, whether some version of the
nationwide certification reciprocity or Federalizing the certification
process would be desirable. We pointed out that nationwide reciprocity
could raise concerns about firms engaging in forum shopping to find the
``easy graders'' among certifying agencies. Federalizing certification,
such as having a unitary certification system operated by DOT, would
likely raise significant resource issues. Such an approach could also
result in less local ``on the ground'' knowledge of the circumstances
of applicant firms, which can be a valuable part of the certification
process. The Department asked for comment on how, if at all, these
issues could be addressed, and whether there is merit in one or another
nationwide approach to certification.
There were about 30 comments on this subject. Most of them favored
taking steps to make interstate certification easier. Thirteen
commenters favored one variety or another of national reciprocity, with
eight of these suggesting that, where a UCP had qualms about an out-of-
state firm's bona fides, the UCP could remove the firm's certification
after the fact. That is, a firm certified in its home state, State A,
would send its certification to State B. State B would immediately put
the firm on its list of certified firms, and the firm would become
eligible immediately to participate as a DBE. However, State B could
subsequently decertify the firm if it appeared that the certification
in State A was obtained by fraud or was otherwise invalid. One comment
endorsed the rebuttable presumption approach suggested in the
Department's Q&A. Three favored one version or another of Federalizing
certification, either by having the Department maintain a centralized
certification database or having the Department make certification
decisions other than, perhaps, the initial decision in each case.
Other commenters expressed some concerns about reciprocity. Three
commenters favored using paperwork submitted to other states to reduce
administrative burdens, but reserving to each state the right to make
its own decision. Another four commenters opposed or had serious doubts
about reciprocity, expressing concerns such as the possibility of forum
shopping or variations in state laws that might affect the validity of
State A's certification in State B. Three commenters emphasized the
necessity for better and more uniform training, without which, some
thought, reciprocity would be unlikely to work.
As the Department stated in the ANPRM, we favor making interstate
certification easier and reducing burdens on small businesses seeking
to work in more than one state. Before 1999, businesses had to make
multiple applications in each state if they wanted to work as a DBE for
more than one DOT recipient. The Department dealt successfully with
that problem by creating the UCP system in the 1999 revision to the DBE
regulation. National reciprocity or one-stop shopping for a single
nationwide certification system are worthwhile goals to discuss, but
the Department believes that an incremental approach is more likely to
be practicable.
It is important to keep in mind that certification has two
purposes. One is to foster and facilitate DBE participation by as many
firms as can be determined to be eligible. The other is to preserve the
integrity of the program, a strong certification system being the first
line of defense against program fraud. To some extent, these goals can
be in tension with one another. We believe that the concerns expressed
by commenters about issues like forum shopping, training, and
variations in state laws have validity. Recipients' concerns about
having the integrity of their programs damaged by having to accept what
they view as poorly-considered certification decisions made elsewhere
are also important. The Department's task is to balance, as best we
can, the desire to make interstate certification less onerous for small
businesses with the imperative of maintaining the integrity of the
program.
A seamless, nationwide, one-stop-shopping eligibility process for
all firms is, in a sense, the ``holy grail'' of certification. The
Department does not believe we are currently in a position to make this
objective a reality. As commenters pointed out, better nationwide
uniform training (which has been proposed in Congress as a requirement
in pending FAA reauthorization legislation) and considerable additional
resources at the Federal level (e.g., for the database and staff that
would likely be necessary to make a more centralized certification
system practical) are not yet in place. Given what the Department views
as the very real concerns about forum shopping and variations in the
quality of certifications that commenters and participants in DOT
stakeholder meetings have expressed, we believe that moving at this
time to a nationwide reciprocity approach would be premature and could
endanger the integrity of the program.
As noted above, several commenters favored a slightly modified
national reciprocity approach in which a firm certified in its home
state would automatically be certified in ``State B,'' immediately
eligible to participate as a DBE in State B's contracts. However, if
State B determined that the firm had obtained its home state
certification by fraud, or other information questioning its
eligibility came to State B's attention, State B could remove the
firm's certification. In our view, this approach does not differ
significantly from a straight national reciprocity approach, in that
the ability to decertify a certified firm already exists. Moreover, the
``certify first and ask questions later'' tenor of this approach does
not inspire confidence: by the time the questions got asked, and a
dubious firm removed from the eligible list, it could have received
contracts in place of genuinely eligible firms. As a practical matter,
it is hard to imagine how a certification agency in, say, Utah, would
learn in a timely fashion about fraud or other problems with a firm
originally certified in, for example, Florida.
Having considered the comments, the Department believes the best
course is to propose a ``rebuttable presumption'' approach akin to the
Department's recent guidance Q&A. Proposed
[[Page 25819]]
regulatory language to carry out this approach is found in Sec. Sec.
26.84 through 26.85 of the NPRM. Under this approach, a firm certified
in its home state would not have to create a second application
package. It would send its home state application package, together
with other existing documentation (e.g., its affidavits of no change
submitted to the home state since the time of the firm's original
certification), to State B. State B would obtain a copy of the on-site
review report from the home state. State B would be required to certify
the firm within 30 days from the date it received this information
unless State B had good cause to object to the home state's
certification. If it objected, State B would hold a proceeding similar
to a decertification proceeding in this case, in which State B would
bear the burden of proof to show that the firm should not be certified
in State B, notwithstanding its certification in State A. The
Department seeks comment on the burden of proof in such a proceeding:
Should the firm, rather than State B, bear this burden? This latter
approach would be more consistent with the usual rule that the
applicant carries the burden of proof with respect to eligibility
matters, but it could limit the extent to which the new procedures
would actually facilitate interstate certification.
This approach is a significant incremental step toward nationwide
reciprocity, which would significantly reduce burdens and obstacles in
the path of firms seeking certification outside their home states.
Within 30 days of providing copies of existing documentation to State B
and receiving a copy of State A's on-site review report, the firm would
either be certified in State B or be on notice of specific problems
with its eligibility that State B had found. The opportunity for a
hearing would have to take place within the next 30 days, with a
decision issued 30 days after that. The Department expects that,
because providing notice and a hearing and issuing a decision on this
``fast track'' basis is not something that UCPs would do lightly, UCPs
would not overuse their authority to delay certification pending this
process. Of course, as is now the case, UCPs could accept the home
state's certification without further review.
The Department seeks comment on whether the 30-day period for
initial review of an out-of-state certification, and a decision on
whether to accept it, is an appropriate time period. Would this period
place unwarranted pressure on State B to accept State A's
certification, even if it were not warranted? On the other hand, would
a longer period defeat the purpose of the proposed interstate
certification process? Again, the question goes to achieving the best
balance between the two purposes of the proposed process.
The Department seeks comment on one potential technical problem in
this proposed system. When it is asked by State B to send an on-site
review of a firm certified in State A, State A is supposed to send a
copy of the report to State B within seven days. In this era of e-mail
and pdf documents, doing so should be quick and easy. However, what
happens if State A does not provide a timely response? Proposed Sec.
26.84(e) would say that if State B has not received the report by 14
days after State B's request, State B may hold action on the firm's
application in abeyance pending receipt of State A's report. State B
would need to inform the firm of the situation. The Department seeks
comment on what, if anything, the Department should do in a final rule
to address situations in which a State A's response to a request for an
on-site report is delayed.
In proposing these new provisions to the DBE rule, the Department
is also proposing to make certain changes to existing rules. We would
remove Sec. 26.83(e), which is no longer needed in light of the
proposed new Sec. 26.84 interstate certification procedures. We would
also amend Sec. 26.83(h) to put to rest a misunderstanding that has
continued to exist, despite the Department's efforts to clarify it.
Once a firm is certified as a DBE, it stays certified unless and until
it is decertified using the procedures of Sec. 26.87, the rule's
decertification procedure. There is no periodic ``recertification'' or
``reapplication'' procedure required or even authorized. Certifications
do not lapse after a given number of years. However, UCPs can, and, in
our view, should, review each existing certified firm's eligibility,
including a new on-site review, from time to time. The Department seeks
comment on the most appropriate interval for such reviews (comments to
the ANPRM suggested periods of between three and six years).
One phenomenon the Department's staff has noticed in recent years
is the withdrawal by applicants of their applications before a UCP has
made a decision in the matter. In some cases, this may reflect ``games-
playing'' by applicants of dubious merit, as they seek repeatedly to
revise their organizations to avoid problems that come up in the UCP's
review of the application, without triggering the waiting period for
reapplication that follows a denial of the application. However, in
other cases, there can be innocent explanations for a withdrawal. The
Department seeks comment on whether the rule should be amended to
authorize recipients to apply to firms withdrawing an application the
same reapplication waiting period that they can apply after a denial.
This would reduce administrative burdens on certifying agencies.
However, doing so might also penalize firms with legitimate reasons for
withdrawing and resubmitting an application or create the perception or
reality that recipients might act inconsistently, seeming to favor some
firms over others with respect to applying the reapplication period.
Current Sec. Sec. 26.84 and 26.85 relate to a 1999 memorandum of
understanding (MOU) between DOT and SBA concerning DBE certification of
SBA 8(a) and 8(d) firms and 8(a) and 8(d) certifications of certified
DBEs. This MOU lapsed in 2004 and has not been renewed. Consequently,
much of the existing material in these sections has become outdated.
Proposed Sec. 26.85 would continue a portion of the current
provisions. If an 8(a) firm applies to a DOT UCP, the 8(a) firm could
submit its SBA application package in lieu of a new DBE application
package. The UCP would have to do the statutorily-mandated on-site
review of the firm, since on-site reviews are not normally part of the
8(a) application process. The UCP could also request additional
information from the applicant to ensure that all Part 26 requirements
are met and that all information has been updated. The UCP would have
to certify the firm unless information from the on-site review and
other information received by the UCP demonstrates that the firm does
not meet Part 26 eligibility criteria. If the 8(a) firm is not from the
UCP's state, the UCP would not have to process the application in the
absence of the home state's on-site review report, which it would
obtain in the same way as it obtains such reports under the
``rebuttable presumption'' system of proposed Sec. 26.84(d)(1).
The proposed Sec. 26.84 contains the proposed rebuttable
presumption reciprocity system. When this section refers to State A (a
firm's home state) or State B, it means the UCP of that state. As under
the current rule, a UCP always has the option of accepting, without
further ado, a certification by another state's UCP. The only new
element this provision would add is a basic requirement for the UCP to
verify that the out-of-state certification presented by the applicant
is genuine.
The main obligation of a firm seeking to get certified outside its
home state is
[[Page 25820]]
to provide ``State B'' with a full package of all relevant existing
documentation, including its home state application, affidavits of no
change, reports of changes, decisions or correspondence relating to
certification matters from other states, certification appeal
decisions, etc. Any prudent company would keep photocopies or
electronic versions of all this documentation, and firms would send in
copies of this documentation, rather than generating new documents.
There would have to be an affidavit, under penalty of perjury, that the
documents were full, complete, and unaltered.
When State B receives this full package of information, it contacts
the home state and requests the on-site review report. It is crucial to
the operation of this system that the home state respond promptly;
otherwise, the certification of the firm can be delayed (see proposed
paragraph 26.84(e)). State B must certify the firm within 30 days,
unless it finds good cause to believe that the firm should not be
certified. If State B fails to respond within 30 days, the Department
would regard the firm as having been certified.
Good cause to object to a reciprocal certification could arise from
a number of sources: evidence that the home state certification had
been obtained fraudulently or if there was new evidence not available
to the home state; differences in state law (e.g., home state does not
require a professional license for the person controlling a given type
of company; State B law does impose such a requirement); or the
information the applicant provided was inadequate or insufficient or
otherwise not meet the rule's requirements (e.g., the applicant failed
to disclose a denial or decertification in another state).
One of the proposed bases to find good cause bears a bit more
discussion. The proposed language would permit State B to find good
cause if the home state's certification was factually erroneous or
inconsistent with Part 26. For example, suppose State B reviews the
documentation used by the home state to certify Firm Y and finds an
outcome-determinative fact about Firm Y that the home state overlooked,
or State B notices that the home state had based its decision on what
is clearly a misreading or misinterpretation by the home state of Part
26 or DOT guidance. In these cases, under the proposal, State B could
find good cause to begin a proceeding to deny reciprocal certification.
On the other hand, it is often the case that reasonable people can
differ in their conclusions about whether the facts surrounding a
firm's application demonstrate that the firm meets Part 26 criteria. We
would not want this provision simply to become a way for what amounts
to no more than differences of opinion to obstruct interstate
certification. We seek comment on how, if at all, the language of this
provision should be refined to avoid that result.
Where the UCP finds good cause, it must so notify the firm, and
provide the reasons for its finding. The firm must have the
opportunity, within 30 days, for a proceeding--including a hearing, if
the firm wants it--that is essentially the same as a decertification
hearing. Importantly, as in a decertification proceeding, the burden of
proof is on the UCP to demonstrate that the firm is ineligible. The UCP
must render its decision within another 30 days. The Department
proposes these short time frames in the belief that reciprocal
certification actions should be on a fast track, lest the ability of a
firm to become certified outside its home state becomes overly subject
to bureaucratic delay.
One of the issues that arises in discussions of reciprocity of
certifications is how to handle denials of certification and
decertifications. If firm X is certified in its home state,
reciprocally certified in State B, and then decertified in his home
state, what is State B supposed to do? If, in the ``rebuttable
presumption'' process described above, the home state certifies Firm X,
but State B rejects the firm's certification after the hearing process,
what is State C supposed to do when Firm X applies for certification
there?
In this NPRM, we are proposing to have UCPs send to the
Departmental Office of Civil Rights (DOCR) online database information
about firms whose applications have been denied, which have been
decertified, or which have been rejected for reciprocal certification
after the rebuttable presumption process described above, as well as
the date of the action and a very brief summary of the reason for the
action. UCPs would be responsible for checking the DOCR Web site to see
if any applicant for certification or currently certified firm appears
on the list. For example, if State D's UCP saw Firm X (which State D
had certified) on the list as having been decertified by State F's UCP,
State D's UCP would request from the State F's UCP a copy of State F's
decertification decision. State F's UCP would promptly provide the
copy. State D's UCP would take the information in State F's decision
into account in determining what action, if any, to take with respect
to Firm X. The Department seeks comment not only on the merits of this
proposal but also on any other measures that would address this overall
issue.
The Department intends that this interstate certification process
apply to airport concessions DBEs as well as those DBEs who seek work
on Federally-assisted contracts. Consequently, we will subsequently
propose a conforming amendment to 49 CFR Part 23.
Fostering Small Business Participation
One of the matters discussed in the ANPRM was the issue of
``unbundling,'' as well as other ways of reducing barriers to the
participation of small businesses, including DBEs, on DOT-assisted
contracts. The relatively small number of comments on this subject
generally suggested that while unbundling was a good thing, it was
difficult to achieve, and recipients should have discretion concerning
whether and how to implement initiatives in this area.
The Department believes that fostering small business participation
in a race-neutral way is an important component of a successful DBE
program. For that reason, we are proposing to require recipients to
create a small business element of their DBE programs, that could
include a number of different approaches. The NPRM, in Sec. 26.39,
proposes a menu of strategies that are neither exhaustive nor mandatory
to include in this program element. The Department seeks comment on
this overall approach, as well as on the individual menu items
proposed. Are there additional strategies that should be considered?
How much time should recipients be given to amend their DBE program
plans to include a small business element?
As noted in a March 2010 DBE conference held by the Department's
Office of Small and Disadvantaged Business Utilization, some states
(e.g., Missouri, Wisconsin) have devised innovative approaches to
increasing small business and DBE participation. The Department seeks
comment on the extent to which this experience can be generalized and
on whether any elements of these approaches should be included as
recommended or required practices in the DBE regulation.
The pending FAA reauthorization legislation mentioned above would
direct the Department to issue rules to prohibit discriminatory or
excessive bonding practices. The Department seeks comment on whether
there are such practices, what they are, and how DOT rules could best
be crafted to implement such a statutory requirement, if it is enacted.
For example, we have heard in stakeholder meetings that prime
contractors sometimes require subcontractors to be
[[Page 25821]]
bonded at a level well above the amount of the subcontract or in a way
that duplicates bonding that has already been provided to the project
owner. Do such practices exist, and, if so, are they common?
Terminations and Substitutions of DBE Subcontractors
The Department had noted some concerns about termination and
substitution practices by prime contractors that negatively impacted
DBE subcontractors committed during the contract award process and
sought comment on whether Sec. 26.53(f)(1) should be modified. There
was overwhelming support to revise the section by recipients and DBE
trade groups in their response to this inquiry. They supported
requiring recipients to concur in terminations and substitutions of DBE
subcontractors who are being used for DBE credit on a contract, with
concurrence to be provided only if the action was for good cause. Prime
contractors and their respective trade groups took a contrary view and
wanted to retain their independent authority. These commenters
suggested that recipients should have no say regarding a change or
termination of a DBE subcontractor in instances where the change does
not impact DBE goal achievement.
Many recipients commented that they currently do require prime
contractors to receive written approval from the recipient prior to the
prime substituting DBE subcontractors. In addition, some comments
recommended that the Department adopt a regulation containing a
standard similar to that required under California Law PCC 4107, which
requires notice prior to termination.
The Department is cognizant of the prime contractors' position that
primes should have the ability to remove a nonperforming or poorly
performing subcontractor. However, the Department does not believe a
revision to this section of the rule requiring a recipient's approval
prior to termination of a DBE subcontractor for other than good cause
would undermine this authority or insert an onerous burden on prime
contractors. Moreover, based on the comments from recipients, this
change would formalize a practice already undertaken by many
recipients. Accordingly, the Department is proceeding with the proposed
revision, proposed to be located in Sec. 26.53(f), in order to
maintain program integrity and ensure a more meaningful commitment to a
particular DBE firm that the prime contractor listed as part of the
contract award process. The proposed section includes a list of actions
that would constitute good cause for this purpose. We seek comment on
whether there should be any additions or changes to this list.
Counting Issue
The ANPRM discussed the background of this issue in some detail
(see 74 FR 15905). For convenience of readers, we are summarizing that
discussion here. Section 26.55(a)(1) of the Department's DBE rule
provides as follows:
(a) When a DBE participates in a contract, you count only the value
of the work actually performed by the DBE toward DBE goals.
(a)(1) Count the entire amount of that portion of a construction
contract (or other contract not covered by paragraph (a)(2) of this
section) that is performed by the DBE's own forces. Include the cost of
supplies and materials obtained by the DBE for the work of the
contract, including supplies purchased or equipment leased by the DBE
(except supplies and equipment the DBE subcontractor purchases or
leases from the prime contractor or its affiliate.
The preamble discussion of this provision said the following:
The value of work performed by DBEs themselves is deemed to include
the cost of materials and supplies purchased, and equipment leased, by
the DBE from non-DBE sources. For example, if a DBE steel erection firm
buys steel from a non-DBE manufacturer, or leases a crane from a non-
DBE construction firm, these costs count toward DBE goals. There is one
exception: if a DBE buys supplies or leases equipment from the prime
contractor on its contract, these costs do not count toward DBE goals.
Several comments from prime contractors suggested these costs should
count, but this situation is too problematic, in our view, from an
independence and commercially useful function (CUF) point of view to
permit DBE credit. 64 FR5115-16, February 2, 1999.
This provision creates an intentional inconsistency between the
treatment of purchases or leases of items by DBEs from non-DBE sources.
If a DBE contractor buys or rents items from a non-DBE source other
than the prime contractor, the recipient counts those items for DBE
credit on the contract. If a DBE subcontractor buys or rents the same
items from the prime contractor for the DBE's subcontract, the
recipient does not award DBE credit for the items.
The policy rationale for this provision, as the preamble quotation
notes, is that permitting the prime contractor to provide an item to
its own DBE subcontractor, and then claim DBE credit for the value of
that item, raises issues concerning whether the DBE is actually
independent and performing a CUF. The rule regards the item as having
been provided by the prime contractor to the project and, consequently,
not as part of the ``work actually performed by the DBE.'' Therefore,
the rule does not permit it to be counted for DBE credit.
Some prime contractors and DBE contractors have objected to this
provision, both in correspondence with the Department and in
stakeholder meeting discussions. They assert that 26.55(a)(1) prevents
DBE firms from successfully competing for projects involving the
purchase of commodities like asphalt, concrete, or quarried rock, since
the DBE credit they could bring to the project would be limited to the
installation and labor costs of the job (likely a relatively small
percentage of the overall contract). This is particularly true, they
say, when there are only one or two suppliers of the commodity within a
reasonable distance of the DBE, and those suppliers are owned by or
affiliated with a prime contractor.
Participants in the stakeholder meeting discussions also suggested
that the current rule could lead to competitive inequities between
prime contractors. For example, suppose Prime Contractor A has an
asphalt plant--the only one in the area--and Prime Contractor B does
not. Both are bidding on a highway construction contract on which there
is a DBE goal. Prime Contractor A cannot count for DBE credit the
asphalt that a DBE paving contractor buys, while Prime Contractor B
can. This makes it easier for B to meet the DBE goal on the contract.
The ANPRM asked for comments on four alternatives: (1) No change;
(2) keep current rule in place, but allow recipients to make exceptions
in limited circumstances; (3) permit items obtained by DBEs for a
contract to be counted for DBE credit regardless of their non-DBE
source; or (4) prohibit items obtained by a DBE from any non-DBE source
to be counted for DBE credit. Twenty-eight comments addressed this
issue, and each of the options attracted support (11 favored option 1,
6 favored option 2, 7 favored option 3, and 4 favored option 4).
The Department believes that the basic policy objective of the
current regulation--preventing items actually supplied by prime
contractors from counting for DBE credit by being passed through their
DBE subcontractors--is a sound one. Simply allowing such items to count
toward DBE goals in all
[[Page 25822]]
situations, as option 3 would provide, is too contrary to this
objective for the Department to consider further. Option 2's
authorization of exceptions to this general rule could lead to very
inconsistent, and arguably arbitrary, results within and among states.
Option 4 establishes consistency in how items obtained by DBEs are
treated, but would likely result in reduced dollar amounts overall DBE
participation. Option 1, which received at least plurality support
among commenters and prevents prime contractors from counting as DBE
participation items that they themselves contribute to a project,
appears the best approach. Consequently, the Department is not
proposing to change this section. We will continue to consider comments
on the issue, however.
Application and PNW Forms
The ANPRM asked for comments on potential improvements to the
rule's application and personal net worth (PNW) forms. This is an
important matter, and one requiring detailed attention as well as
thorough analysis of the information collection burdens involved. For
this reason, while the Department is currently working on revised
forms, we are deferring proposing new forms to a subsequent NPRM.
Certification-Related Provisions
This NPRM also proposes a number of modifications to the
certification provisions of the rule, based primarily on the
Department's experience in certification appeals cases and other issues
that have come to the Department's attention. The Department is
continuing to review and update certification provisions, and we
anticipate proposing several additional modifications in the subsequent
NPRM that will also propose revised PNW and application forms. Minor
technical changes to references within the existing definitions are
also proposed.
Section 26.71 What rules govern determinations concerning control?
``Generic'' certification of a firm as a DBE is not proper in the
program. Under Sec. 26.71(n), DBEs are certified by recipients and
UCPs only with respect to specific types of work in which the
certifying agency has determined that the socially and economically
disadvantaged owners control. When applying for certification, an
applicant is asked to describe the ``primary business and professional
activities the firm is engaged in.'' The types of work a firm can
perform (whether on initial certification or when a new type of work is
added) should be described in terms of six-digit North American
Industry Classification System (NAICS) codes, or another classification
scheme of equivalent detail and specificity. In order to meet its
burden of proof, a firm must provide detailed information the
certifying agency needs and/or requests so that the certifying agency
may make an appropriate NAICS code designation. Firms are also
responsible for ensuring that the NAICS codes cited in a certification
are up-to-date and accurately reflect work which the UCP has determined
the firm's owners can control. To assist recipients and firms address
these issues, the Department is proposing an amendment to Sec.
26.71(n), which would codify the substance of a guidance Q & A the
Department issued in 2009.
Section 26.73 What are other rules affecting certification?
The Department has learned, through the Department's certification
appeal process and from oversight of recipients' DBE programs, that
some recipients may deny certification to firms on the basis that they
do not appear prepared to perform a particular project, are newly
formed, or lack employees or specific pieces of equipment. We have
learned that recipients are taking this action after perceiving the
firm incapable of success later down the road. This is somewhat of a
premature determination and akin to a finding that a firm's work would
not be counted for DBE credit sometime in the future. We have
consistently held that counting issues are separate from certification;
and we continue to hold that firms should be evaluated based on their
present circumstances. The Department therefore, is restating Sec.
26.73(b), which prohibits a recipient from refusing to certify a firm
solely on the basis that it is a newly formed firm; and adding a
section (b)(2) to emphasize also that recipients should not refuse to
certify a firm that has not completed contracts or projects at the time
of its application, has not yet realized profits from its activities,
or has not demonstrated a potential for success. We stress that if the
firm meets the size, ownership, and control requirements of this part,
the firm is eligible for certification.
A firm must be a going concern in order to be certified. It is not
realistic to expect a recipient, for example, to conduct an on-site
review of a business plan that exists only on paper. Nevertheless,
given that one of the primary purposes of the DBE program is to serve
as an incubator for start-up businesses, recipients should not create
unauthorized or unnecessary barriers to the participation of newer
firms. For example, it would be contrary to this section for a
certifying agency to insist on two years of business tax returns from a
firm that had only been in business six months.
Section 26.83 What procedures do recipients follow in making
certification decisions?
The Department wants to reemphasize, in Sec. 26.83(h), that once a
firm is certified, is stays certified unless and until its
certification is removed under Sec. 26.87. Certifications do not
expire or lapse, whether after three years or any particular number of
years. Firms cannot be required to reapply for certification. However,
recipients may properly conduct certification reviews of certified
firms, including a new on-site review, three years from the date of the
most recent certification of the firm or sooner if changed
circumstances relating to the firm's ownership, control, size or
disadvantaged status warrant. In addition, recipients may conduct on-
site visits on an unannounced basis at the firm's offices and job sites
if information comes to a recipients' attention regarding the firm's
eligibility. The Department seeks comment on whether periodic new on-
site reviews should be conducted (e.g., every three or five years) to
ensure that information about certified firms is up-to-date and that
firms have not changed in ways that adversely impact their eligibility?
Would such a requirement make the interstate certification process work
better? What would the resource implications be?
One of the problems that the Department has seen is that on-site
reviews, once conducted, are not periodically updated by some
certifying agencies. The result may be that the information in an on-
site review report may be stale. This is a particular concern given the
interstate certification provisions of proposed Sec. 26.84, in which a
``State B' must rely on the on-site report of the applicant firm's home
state. If the on-site report is 5 or 10 years old, can other states
safely rely on the information? If not, should we require updated on-
site reviews to be conducted by firms' home states at a given interval
(e.g., every three years)? Should states be permitted to charge user
fees to firms for updated on-site reviews? Are there ways of reducing
burdens of on-site reviews (e.g., by use of videoconferencing or other
technologies)? Could the need for updated on-site reviews be mitigated
if firms had to submit additional annual update information (e.g., PNW
statements, tax returns, data about the
[[Page 25823]]
firm's finances and transactions)? The Department seeks comment on this
topic.
The Department has learned, through the Department's certification
appeal process and oversight of recipients' DBE programs, of instances
in which applicants may have been unaware that their application lacked
the necessary information, through either a misunderstanding of the
process and/or submitting some, but not all, of the information a
recipient needs to make a decision. It is therefore useful for
recipients to inform each applicant within 20 business days after
receiving an application, whether the application is complete and ready
for evaluation, and if not, what additional information or action is
required. Many recipients engage in this practice and promptly notify
firms, either by e-mail or certified mail of their need for additional
information. The addition of a requirement to this effect, therefore,
does not seem onerous and we added a new lead sentence in paragraph (l)
to reflect this addition.
Other Provisions
The Uniform Report of DBE Awards or Commitments and Payments, found
in Appendix B of Part 26, has long been required to be submitted by DOT
recipients. The form itself states that FHWA and FTA recipients submit
the form twice a year, while FAA recipients submit it annually. It was
called to our attention, however, that body of the regulation does not
specifically reference the form. To remedy this situation, we propose
adding such a reference to Sec. 26.11. There is no change to the
existing requirement for submission of the form and no additional
information collection burden involved.
In Sec. 26.45, the NPRM would clarify requirements concerning
project overall goals and the implementation of the recent amendment
calling for submission of overall goals on a triennial, rather than
annual, basis. In Sec. 26.51, the NPRM would clarify that, if a
recipient had an all race-neutral overall goal, it nevertheless would
use race-conscious contract goals if, part way through the year, it
became necessary to do so in order to have a reasonable opportunity to
meet the overall goal. This proposed amendment is related to the
proposed ``accountability'' mechanism in proposed Sec. 26.47. Finally,
an obsolete citation to suspension and debarment rules would be
replaced by the current citation in Sec. 26.107.
Regulatory Analyses and Notices
Executive Order 12866 and DOT Regulatory Policies and Procedures
This is a nonsignificant regulation for purposes of Executive Order
12866 and the Department of Transportation's Regulatory Policies and
Procedures. The proposals involve administrative modifications to
several provisions of a long-existing and well-established program,
designed to improve the program's implementation. The proposals, if
made final, would not alter the direction of the program, make major
policy changes, or impose significant new costs or burdens.
Regulatory Flexibility Act
A number of provisions of the NPRM would reduce small business
burdens or increase opportunities for small business, notably the
interstate certification process and the small business DBE program
element proposals. Small recipients would not be required to prepare or
transmit reports concerning the reasons for overall goal shortfalls and
corrective action steps to be taken. Only State DOTs, the 50 largest
transit authorities, and the 30-50 airports receiving the greatest
amount of FAA financial assistance would have to file these reports.
The task of sending copies of on-site review reports to other
certification entities fall on UCPS, which are not small entities, and
in any case can be handled electronically by e-mailing PDF copies of
the documents. While all recipients would have to input information
about decertifications and denials into a DOT database, this would be a
quick electronic process that would not be costly or burdensome. The
NPRM would not make major policy changes that would cause recipients to
expend significant resources on program modifications. For these
reasons, the Department certifies that the NPRM, if made final, would
not have a significant economic effect on a substantial number of small
entities.
Federalism
A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on State or local
governments and would either preempt State law or impose a substantial
direct cost of compliance on them. We have analyzed this proposed rule
under the Order and have determined that it does not have implications
for federalism, since it merely makes administrative modifications to
an existing program. It does not change the relationship between the
Department and State or local governments, pre-empt State law, or
impose substantial direct compliance costs on those governments.
Paperwork Reduction Act
As required by the Paperwork Reduction Act of 1995, DOT will submit
Information Collection Requests (ICRs) to the Office of Management and
Budget (OMB). Before OMB decides whether to approve these proposed
collections of information and issue a control number, the public must
be provided 30 days to comment. Organizations and individuals desiring
to submit comments on the collection of information should direct them
to the Office of Management and Budget, Attention: Desk Officer for the
Office of the Secretary of Transportation, Office of Information and
Regulatory Affairs, Washington, DC 20503. We also request that a copy
of such comments be sent to the docket for this NPRM. OMB is required
to make a decision concerning the collection of information
requirements contained in this rule between 30 and 60 days after
publication of this document in the Federal Register. Therefore, a
comment is best assured of having its full effect if OMB receives it
within 30 days of publication.
The items in this NPRM for which DOT intends to seek Paperwork
Reduction Act approvals are the following:
Proposed Sec. 23.39(b): Submission of small business program element.
Proposed Sec. 26.47 (c): Submission of analysis of reasons for falling
short of overall goal corrective actions.
Proposed Sec. 26.84(c)(4): Affidavit concerning information of
certification information.
Proposed Sec. 26.84(f): Submission of certification information to DOT
database.
List of Subjects in 49 CFR Part 26
Administrative practice and procedure, Airports, Civil rights,
Government contracts, Grant-programs--transportation, Mass
transportation, Minority businesses, Reporting and record keeping
requirements.
Issued This Day of May, 2010, at Washington DC.
Ray Lahood,
Secretary of Transportation.
For the reasons set forth in the preamble, the Department of
Transportation proposes to amend 49 CFR part 26 as follows:
[[Page 25824]]
PART 26--PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN
DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS
1. The authority citation for part 26 continues to read as follows:
Authority: 23 U.S.C. 324; 42 U.S.C. 2000d, et seq. ; 49 U.S.C
1615, 47107, 47113, 47123; Sec. 1101(b), Pub. L. 105-178, 112 Stat.
107, 113.
2. Add Sec. 26.11(a) to read as follows:
Sec. 26.11 What records do recipients keep and report?
(a) You must transmit the Uniform Report of DBE Awards or
Commitments and Payments, found in Appendix B to this part, at the
intervals stated on the form.
* * * * *
3. Revise Sec. 26.31 to read as follows:
Sec. 26.31 What information must you include in your DBE directory?
You must maintain and make available to interested persons a
directory identifying all firms eligible to participate as DBEs in your
program. In the listing for each firm, you must include its address,
phone number, and the types of work the firm has been certified to
perform as a DBE.
4. Revise Sec. 26.37 (b) to read as follows:
Sec. 26.37 What are a recipient's responsibilities for monitoring the
performance of other program participants?
* * * * *
(b) Your DBE program must also include a monitoring and enforcement
mechanism to ensure that work committed to DBEs at contract award or
subsequently (e.g., as the result of modification to the contract) is
actually performed by the DBEs to which the work was committed, where
the DBEs' work is intended to count toward DBE goals. This mechanism
must include a written certification for each such contract that you
have reviewed contracting records for and monitored the work on-site
for the contract to ensure that DBEs have actually performed the work
in question.
* * * * *
5. Add a new Sec. 26.39 to subpart B, to read as follows:
Sec. 26.39 Fostering small business participation.
(a) Your DBE program must include an element to structure
contracting requirements to facilitate competition by small business
concerns, taking all reasonable steps to eliminate obstacles to their
participation, including unnecessary and unjustified bundling of
contract requirements that may p