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installing (where applicable) and paying for the material contracts, be terminated for convenience, which would allow
itself. To determine whether a DBE is performing a com- the prime contractor to replace the subcontractor or perform
mercially useful function, you must evaluate the amount
of work subcontracted, industry practices, whether the the work with its own forces. Termination for convenience
amount the firm is to be paid under the contract is com- can be prohibited in the case of DBE subcontractors. In Illi-
mensurate with the work it is actually performing, and the nois, for example, contract compliance requirements, for the
DBE credit claimed for its performance of the work, and prime contractor, states that "the contractor shall not termi-
other relevant factors.
(2) A DBE does not perform a commercially useful function nate for convenience a DBE listed in the Utilization Plan and
if its role is limited to that of an extra participant in a then perform the work of the terminated DBE . . . without
transaction, contract, or project through which funds are first obtaining written consent of the Bureau of Small Busi-
passed in order to obtain the appearance of DBE partic-
ipation. In determining whether a DBE is such an extra
ness Enterprises to amend the Utilization Plan." The prime
participant, you must examine similar transactions, par- contractor will need to document the issues related to non-
ticularly those in which DBEs do not participate. performance and seek state STA approval before termina-
(3) If a DBE does not perform or exercise responsibility for tion. In addition, the prime contractor will need to replace the
at least 30% of the total cost of its contract with its own
work force, or the DBE subcontracts a greater portion of
terminated contract dollar volume with an equivalent DBE
the work of a contract than would be expected on the subcontract dollar volume or submit evidence of a good faith
basis of normal industry practice for the type of work effort.
involved, you must presume that it is not performing a
commercially useful function.
(4) When a DBE is presumed not to be performing a com- California is more specific in defining the use of other
mercially useful function as provided in paragraph (c)(3) forces or sources of materials for DBEs listed in the contract.
of this section, the DBE may present evidence to rebut California's Construction Manual (2001) requires a written
this presumption. You may determine that the firm is request for substitution or removal of a DBE and the request
performing a commercially useful function given the
type of work involved and normal industry practices. must match an authorized situation specified in the contract.
(5) Your decisions on commercially useful function matters The following list describes situations where a prime con-
are subject to review by the concerned operating admin- tractor can request a change from a listed DBE subcontractor:
istration, but are not administratively appealable to DOT.
A. The listed DBE, after having had a reasonable opportunity to
The STAs that responded to the study questionnaire follow do so, fails or refuses to execute a written contract, when
these guidelines very closely. Elements that are checked for such written contract, based upon the general terms, condi-
CUF in addition to those specified in the regulation include tions, plans, and specifications for the project, or on terms of
such subcontractor's or supplier's written bid, is presented
by the Contractor.
· Equipment appropriate to the work contracted (owned B. The listed DBE becomes bankrupt or insolvent.
and leased), C. The listed DBE fails or refuses to perform the subcontract or
furnish the listed materials.
· Qualifications of the subcontractor, and
D. The Contractor stipulated that a bond was a condition of exe-
· Observations of the work in the field. cuting a subcontract and the listed DBE subcontractor fails
or refuses to meet the bond requirements of the Contractor.
If it is determined that no CUF is performed some sanc- E. The work performed by the listed subcontractor is substan-
tially unsatisfactory and is not in substantial conformance
tions or penalties may be appropriate. The penalties listed in with the plans and specifications, or the subcontractor is sub-
the survey response include stantially delaying or disrupting the progress of the work.
F. It would be in the best interest of the State.
· Prime contractor suspended from future bidding,
· DBE's certification reviewed,
· Monetary penalties TRACKING INFORMATION
Dollar-for-dollar fine where contract amount for the
The administrative requirements for monitoring the perfor-
DBE is paid to the STA
mance of the DBE program participants require tracking spe-
Suspend payment for work involved in non-CUF
cific types of information. Within this section both monitor-
Withhold payments
· Not counted toward contract goal, and ing and enforcement requirements are required. Information
tracking in this section is focused on data collected as part of
· Have violator secure participation over and above goal
the monitoring function. Enforcement elements are covered
on future contracts.
elsewhere. From the regulation, the information must include
the following (49 CFR 26.37):
TERMINATION OF NONPERFORMING
DISADVANTAGED BUSINESS ENTERPRISE (a) You must implement appropriate mechanisms to ensure
SUBCONTRACTOR compliance with the part's requirements by all program par-
ticipants (e.g., applying legal and contract remedies avail-
able under Federal, state and local law). You must set forth
With most subcontract agreements the prime contractor has these mechanisms in your DBE program.
an ability to terminate the subcontractor for nonperformance (b) Your DBE program must also include a monitoring and
of the contract requirements. Subcontractors can, in most enforcement mechanism to verify that the work committed
