July 2010

Tougher DBE program will correct long overdue problems

by Frank Di Giacomo, Publisher

A common criticism of the stimulus program and financial assistance given to banks and other Wall Street firms, as well as auto companies, is the lack of help it has provided to small businesses, which are the real engine of new jobs in the U.S. The Obama ­administration hopes to counter some of that criticism with last month's changes to the rules governing the program to help disadvantaged business enterprises (DBEs) participate in federally-funded transportation projects, including transit.

For those who think this is a stretch, Secretary of Transportation Ray LaHood made the connection between small business and DBEs when the rules were announced. "When we help small businesses, we're helping get the economy going," Secretary LaHood said at the time. "This is an important rule that can help small businesses owned and controlled by women and minorities."

Carrots and sticks

The new rule is a combination of both carrots and sticks to support these small companies, and was the result of a high-level task force that looked at the current program and developed recommended changes. On the one hand, it allows grant recipients the flexibility of ensuring compliance with DBE rules over a three-year period, so that if down one year they can explain how they will get to the target over the next two. On the other hand, though, it requires annual submissions, not just at the end of the three-year cycle. To implement this, DOT will phase in the annual reporting on a staggered basis so that all grantees are in the new reporting system at the end of the three years.

In addition, the new rule helps DBEs by raising the personal net worth maximum for owners from the present $750,000, which was established more than 20 years ago, to an inflation-adjusted $1.3 million. It will raise this amount to adjust for inflation every year thereafter. To help ensure that prime contractors better meet the DBE goals, state and local agencies will now be required to do post-award monitoring of each contract for this purpose, and primes will not be able to drop DBE subcontractors without good cause.

Streamline Certification

Finally, and perhaps the best of all, the new DBE regulation will require a reciprocity system: states and transit agencies will have to accept another's certification, unless there is a good reason not to. This should streamline DBE certification significantly and eliminate a major challenge in the program to date.

The DOT's DBE program is one of the most successful of all federal DBE programs. The changes being put into place should make it that much stronger, for businesses of all sizes.

 


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