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3 CHAPTER ONE INTRODUCTION BACKGROUND DEFINITIONS The Disadvantaged Business Enterprise (DBE) program was This study will apply the regulation definitions of a DBE and designed to ensure that small businesses owned and con- race-neutral as defined here (49 CFR 26.5, 2003). trolled by minorities, women, and other disadvantaged indi- viduals have an equal opportunity to compete for contract Disadvantaged business enterprise or DBE means a for-profit small business concern--(1) That is at least 51 percent owned by funds on FHWA-, FAA-, and FTA-funded projects. The DBE one or more individuals who are both socially and economically program continues to serve as a mechanism to remedy the disadvantaged or, in the case of a corporation, in which 51 per- effects of current and past discrimination in transportation cent of the stock is owned by one or more such individuals; and contracting practices. (2) Whose management and daily business operations are con- trolled by one or more of the socially and economically disad- vantaged individuals who own it. The program began in 1980 as a minority/women's busi- ness enterprise program established by Title VI of the Civil Race-neutral measure or program is one that is, or can be, used Rights Act of 1964. Since that time, the program has under- to assist all small businesses. For the purposes of this part, race- gone many changes. Key time line elements related to the neutral includes gender-neutrality. evolution of the DBE regulation are as follows: PURPOSE OF SYNTHESIS · 1983--First statutory DBE provision enacted and signed. The U.S.DOT's February 2, 1999, Final Rule revised the · 1987--Program expanded to include airports and DBE regulations. The U.S.DOT believed that this change women-owned firms. was necessary to remove significant barriers to DBE partici- · 1991--Reauthorization of the expanded program (high- pation in DOT-assisted contracts. The regulation required way and transit). state transportation agencies (STAs) and contractors to change · 1992--Reauthorization of the expanded program their way of doing business. Although the regulation pre- (airports). scribes some requirements, it also provides a measure of flex- · 1992--Notice of proposed rule: a major rewrite of the ibility by allowing recipients to determine how other provi- program. sions are achieved. This has resulted in different approaches · 1995--Adarand versus Peña Supreme Court decision. among the states. This study summarizes the various contract · 1997--Further changes resulted in Supplemental administration procedures and methods that have been imple- Notice of Proposed Rule Making. mented by STAs and their contractors to meet the revised · 1998--Transportation Equity Act for the 21st Century DBE regulations. Different approaches will be examined for (TEA-21): reauthorization through 2003. various program requirements, including · 1999--Final Rule for 49 CFR Parts 23 and 26. · 2000--Interim Final Rule corrections. · Bidders list information; · 2001--Proposed Rule Making 49 CFR 26--Uniform · Prompt payment; Reporting and Certification Forms Memorandum of · Retainage; Understanding with Small Business Administration; · Good faith effort analysis; among other issues, the proposed rule redefined per- · Approaches for alternate contracting methods (construc- sonal net worth, retainage, and contract size. tion management, designbuild, etc.); · June 2003--Final Rule published: 49 CFR Part 26. · Measurement of commitments and actual achieve- ment; and This study began with the 1999 Final Rule and interim · Compliance issues related to fraud, substitutions, and modifications as the guiding regulations. Subsequently, the commercially useful function. DBE program Final Rule was published on June 16, 2003, in the Federal Register. The 2003 Final Rule has been used as This study focuses on post-contract award administration the point of reference in the document. issues, but necessarily includes those pre-award issues that