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5 CHAPTER ONE INTRODUCTION As highway construction programs are carried out by state It is important to note that states differ in their interpretation departments of transportation (DOTs), they are required by the of which strategies constitute race-neutral measures, and that U.S.DOT to direct a portion of their federal-aid funds expen- a measure viewed as race-neutral by one state may not be con- ditures toward small businesses known as Disadvantaged sidered race-neutral in another Business Enterprises (DBEs), which are defined as small, for-profit business concerns that are at least 51% owned Section 26.51 of Part 26 of the regulations contains a and controlled by one or more socially and economically dis- nonexhaustive list of race-neutral means, including providing advantaged individuals. supportive services targeted at DBEs and activities such as pub- lishing a DBE directory. Despite the program's focus on DBE State DOTs are required to establish an overall DBE firms, U.S.DOT has stated that these measures are considered participation goal for federal-aid highway contracts and a race-neutral (U.S.DOT 2009) (see http://www.osdbu.dot.gov/ methodology for arriving at the goal. Until March 2010, goals DBEProgram/dbeqna.cfm). were required to be set annually; a new rule now requires them to be set every three years (Federal Register 2010). State DOTs States provide supportive services to DBE firms through are further required to meet the maximum feasible portion FHWA's Disadvantaged Business Enterprise Supportive of their goals using race-neutral means--methods designed Services (DBE/SS) program, which operates as an adjunct to to remove barriers and enhance opportunities for all small the federal DBE program. The DBE/SS program provides businesses, not just DBEs. funding to states to support training, assistance, and other services provided to DBE firms "to further the develop- PURPOSE OF REPORT ment of DBEs . . . assisting them to move into non-traditional areas of work and/or compete in the marketplace outside the Race-neutral measures vary from state to state. This synthesis DBE program." was initiated to identify tools and practices to help state DOTs effectively use race-neutral measures as they administer DBE Since 1982, the U.S. Congress has authorized up to $10 mil- programs that comply with federal requirements. To meet that lion annually to accomplish these objectives; the FHWA need, the NCHRP funded this project to review and synthesize awards these funds to the states. In 2010, FHWA awarded problems faced by state DOTs in the administration of their $9.9 million in grants to 33 states, ranging from $30,000 to DBE programs and identify remedies used by states to over- $880,000. This is a discretionary grant program; states are come problems involving race-neutral efforts. not required to apply for the grants every year. The FHWA reports that it receives 35 to 40 grant proposals each year-- BACKGROUND not every state applies for funding. In their applications, states must describe their plans for using the grants, includ- The current FHWA Disadvantaged Business Enterprise pro- ing the purpose and objectives, the target audience, and gram is authorized by Section 1101(b) of the Safe, Account- the period of performance. (For more information about able, Flexible, Efficient Transportation Equity Act: A Legacy the DBE/SS program, see http://www.fhwa.dot.gov/civil for Users (SAFETEA-LU), Public Law 109-59. The FHWA rights/programs/dbe.htm.) implements the program through U.S.DOT regulations in 49 Code of Federal Regulations (CFR) Part 26. (For more infor- In addition to providing supportive services, states also mation, see the U.S.DOT website: http://osdbuweb.dot.gov/ facilitate DBE participation through administrative support DBEProgram/index.cfm.) The regulations include the follow- measures, such as reserving smaller contracts for small busi- ing definitions: nesses, unbundling contracts to separate a larger project into Race-conscious measure or program is one that is focused smaller pieces that DBEs can more easily bid on, and requir- specifically on assisting only DBEs, including women-owned ing pre-bid registration for prime contractors so that DBE DBEs. firms know whom to submit quotes to. Some states provide Race-neutral measure or program is one that is, or can be, used financial assistance as well, such as helping DBEs obtain to assist all small businesses. For the purposes of this part, race- bonding or loans to allow them to compete for contracts with neutral includes gender-neutrality. larger firms.