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5 CHAPTER TWO BACKGROUND REGULATION OBJECTIVES could realistically expect in the absence of discrimina- tion. Goals must be based on demonstrable evidence of The rule in force at the start of the study was the February 2, the availability of ready, willing, and able DBE firms. 1999, Final Rule with interim revisions. During the project a · Recipients must obtain as much DBE participation as pos- revised final rule was published on June 13, 2003, in the Fed- sible through race-neutral means. Race-neutral measures eral Register. Because this latest final rule is the most current include training, bonding assistance, mentorprotégé regulation, it was integrated into the study and analysis ele- programs, and breaking contracts into smaller pieces. ments. Specific sections of the final rule are referenced peri- · Contract goals, or other race-conscious measures, must odically in this report. Appendix B contains the complete 49 be used only to obtain the DBE participation needed to CFR 26, 2003, Final Rule. The objectives stated for the DBE meet overall goals that cannot be attained under race- program are (49 CFR 26.1, 2003): neutral measures. · When there is a contract goal, bidders must make a good a. To ensure nondiscrimination in the award and administration of DOT-assisted contracts in the Department's highway, tran- faith effort to meet it. sit, and airport financial assistance programs; · If it is determined that DBE firms are overconcentrated b. To create a level playing field on which DBEs can compete in a certain type of work, appropriate measures to address fairly for DOT-assisted contracts; overconcentration should be taken. c. To ensure that the Department's DBE program is narrowly tailored in accordance with applicable law; · Waivers on program elements can be submitted to the d. To ensure that only firms that fully meet this part's eligibility U.S.DOT. standards are permitted to participate as DBEs; · Recipients must collect data about bidders on their con- e. To help remove barriers to the participation of DBEs in DOT- tracts and subcontracts for later use in calculating over- assisted contracts; f. To assist the development of firms that can compete success- all goals. fully in the marketplace outside the DBE program; and g. To provide appropriate flexibility to recipients of Federal Many of these revisions have been incrementally intro- financial assistance in establishing and providing opportuni- ties for DBEs. duced, and the STAs have had the opportunity to modify their processes and program elements to address the new require- ments. The revisions of particular interest to this study are MAJOR RULE CHANGES changes that directly affect contract administration and data collection in the post-award administration activities. Some significant changes were implemented in the new rule. Many of these changes influence the overall DBE program administration as well as the portion detailing contract admin- FHWA REVIEW OF DISADVANTAGED BUSINESS istration. The focus here will be on those changes likely to ENTERPRISE PLANS affect contract administration processes. The U.S.DOT Office of Small and Disadvantaged Business Utilization (OSDBU) In 1999, the FHWA conducted a review of 52 DBE plans. prepared a document, "What's New in the New DBE Rule," A spreadsheet was generated on specific program elements that provides a detailed analysis of the changes. This document (G. Yakowenko, personal communication, Nov. 6, 2002). In is provided in Appendix C and available at http://osdbuweb. addition to collecting data on goals, the spreadsheet summa- dot.gov/business/Dbe/Summary.html. The content is summa- rizes information on prompt payment and retainage payment, rized as follows: when signed DBE commitments were submitted, the method of compiling the bidders list, and the method for monitoring · The rule explicitly prohibits the use of quotas. Set-aside performance. programs are also prohibited, except in extreme cases to remedy severe problems. · The new rule views the national 10% goal as an aspira- GENERAL ACCOUNTING OFFICE REPORT tional goal, which does not require federal-aid recipients SUMMARY to set their goals at 10% or any other particular level. · Recipients are to set their goals to represent a "level TEA-21 was enacted on June 9, 1998, as Public Law 105- playing field"--the amount of DBE participation they 178. TEA-21 authorized the federal surface transportation