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Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs (2011)

Chapter: Appendix C - Sample Collateral Materials from State DBE Programs

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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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Suggested Citation:"Appendix C - Sample Collateral Materials from State DBE Programs." National Academies of Sciences, Engineering, and Medicine. 2011. Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs. Washington, DC: The National Academies Press. doi: 10.17226/14505.
×
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54 APPENDIX C Sample Collateral Materials from State DBE Programs These five agencies provided collateral materials associated with their individual DBE programs. These materials appear on the following pages and at the links provided below. Florida Department of Transportation “Disadvantaged Business Enterprise Program: Race Neutral Outreach Strategies” FDOT’s Business Development Initiative: http://www.dot.state.fl.us/equalopportunityoffice/GeneralBDI.shtm. Idaho Transportation Department “Support Services Benefits for Idaho-Certified Disadvantaged Business Enterprises,” from the state External EEO website: http://itd.idaho.gov/civil/external.htm New Jersey Department of Transportation “Emerging Small Business Enterprise Policy Statement” South Dakota Department of Transportation “Special Provision for Disadvantaged Business Enterprise” Vermont Agency of Transportation Disadvantaged Business Enterprise Program website: http://www.aot.state.vt.us/CivilRights/DBE.htm Electronic archive of DBE newsletters: http://www.aot.state.vt.us/CivilRights/DBE%20Newsletter.htm VTrans Prompt Pay Compliance webpage: http://www.aot.state.vt.us/CivilRights/DBEpromptpay.htm

FLORIDA DEPARTMENT OF TRANSPORTATION DISADVANTAGED BUSINESS ENTERPRISE PROGRAM Race Neutral Outreach Strategies Race Neutral Methods Implementing a race-neutral DBE Program has been a learning experience and a realization that new methods and strategies must be initiated to achieve success. The Department has initiated new strategies over the past seven years and is continuing to develop and implement other new strategies. Some of the strategies that have been implemented in these years have taken time to mature and show results, but the efforts are beginning to be productive. Some of the significant strategies that have been implemented include: 1. Presenting a DBE Report in the monthly Executive Board meetings. The Board is comprised of the Secretary, Assistant Secretaries and District Secretaries. Other attendees include those who report to the Secretary and the Assistant Secretaries and the Division Administrator for the FHWA. Board members are frequently enlisted to continue encouraging contractors and consultants to utilize DBEs. 2. Publishing DBE Reports on the Internet that further breakdown DBE achievement by work category (construction and professional services) and by district. This information is shown for federal-funded projects, state-funded projects, and for all projects combined. 3. Publishing the DBE achievements for each contractor and consultant. For each contractor and consultant, this report shows the number of contracts awarded, the total dollars awarded, and the percent of DBE participation. 4. Presenting and discussing the DBE reports at the annual Construction Conference, quarterly committee meetings that include members of the Florida Institute of Consulting Engineers and Department staff, and other Department meetings. 5. Incorporating into the Department’s Contract Grading System bonus points for contractors who achieve the estimated DBE availability percentage on a contract. 6. Creating a new position in the Equal Opportunity Office entitled “DBE Program Specialist”. This position is responsible for marketing the DBE Program to prime contractors and consultants. 7. Revising the job duties of an existing position so that 50% of the position’s time involves contacting businesses that have let their DBE certification expire and recruiting new businesses into the DBE Program. 8. Modifying the contracts with two DBE Supportive Services Providers to require them to assist prime contractors and consultants in locating ready, willing and able DBEs to participate on contracts and to recruit new businesses into the DBE Program. 9. Requiring submittal of the Anticipated DBE Participation Statement at the pre- construction conference. When the race-neutral Program was initially implemented, this Statement was optional. 55

10. Providing a letter grade (A-F) for all of our prime consultants and contractors. 11. Mailing thank you letters, from the Department’s Secretary, to contractors and consultants who received an A+ or A for their DBE utilization during the previous fiscal year. 12. Mailing neutral letters, from the Department’s Secretary, to contractors and consultants who received a B or C letter for their DBE utilization during the previous fiscal year. 13. Mailing encouragement letters, from the Department’s Secretary, to contractors and consultants who received a D or F for their DBE utilization during the previous fiscal year. This letter states, “Your Company will be contacted by the Department’s DBE Program Specialist to discuss your current strategies and determine if there are additional efforts we can suggest to increase your DBE utilization.” 14. Conducting Title VI assessments on companies that achieved less than 2% utilization. 15. Attending all quarterly contractors meetings throughout the state to discuss the DBE Program and encourage the use of DBEs. 16. Contracting with a firm to recruit minority and female owned businesses into the DBE Program. This contract covers Dade and Broward Counties. 17. Implementing the new Internet-based Equal Opportunity Reporting System that will allow the Department to ensure accurate and prompt reporting and will also allow the Department to better analyze the details and trends in the DBE Program. 18. Working with Florida Transportation Builders Association (FTBA) to present awards to prime contractors with a high DBE utilization and successful DBEs. 19. Amended our current DBE Supportive Services contract to incorporate additional funding from the FHWA to assist DBEs in developing Strategic or Business Plans. 20. Creating a DBE Advisory Committee within the FTBA comprised of DBEs, prime contractors, and Department staff to discuss the DBE Program and improvement opportunities. 21. Creating a DBE Advisory Committee with the Florida Institute of Consulting Engineers comprised of DBEs, prime consultants, and Department staff to discuss the DBE Program and improvement opportunities. 22. Incorporating a monetary incentive clause in our DBE Supportive Services Contract for helping the underutilized DBEs get contracts on FDOT projects. If the DBE Supportive Services provider could demonstrate that they assisted a DBE in getting a prime or sub contract, they would receive a $500 bonus. 23. Sponsoring Matchmaker meetings throughout the State designed to bring together Department staff, DBEs and prime contractors/consultants to facilitate communications. 24. Conducting Title VI assessments on consultants who achieved low DBE utilization on all their dollars awarded during the previous fiscal year. 25. State Legislation passed that would allow the Department to waive bonds up to $250,000 and to raise the prequalification limit to $500,000 in certain circumstances. The Department is still in the process of implementing these changes. 56

Additional strategies that are being considered for the 2008 fiscal year include: 1. A pilot Business Development Initiative (BDI) for small businesses was implemented on state funded projects in July 2006. The Department originally submitted a request to apply this Initiative on federally funded contracts as a race neutral method in our DBE goal calculation methodology in our submittal to the FHWA on July 26, 2006. After much delay, the Department was asked to request this approval separately. On March 6, 2007 the Department submitted a proposal to the FHWA Florida Division requesting to also apply the BDI to federally funded projects. On September 25, 2007, the FHWA Florida Division forwarded the request to FHWA headquarter for approval as an SEP 14. The Department is still waiting for this approval to proceed. The districts have already identified numerous federally funded projects that could be used for the BDI, but many have missed the opportunity as we await approval. 2. Reviewing the possibility of establishing a mentor-protégé program for DBEs. 3. Monitoring DBE participation of those contractors who received a Title VI Assessment over the last two years to determine if good faith efforts are made. 4. Developing a DBE Marketing Plan. 5. Creating a plan for “One on One” sessions with DBEs and primes. 6. Develop a PowerPoint presentation targeting prime contractors and consultants to emphasize the importance of using DBEs and small businesses as subcontractors and sub consultants on Department projects. 57

NEW JERSEY DEPARTMENT OF TRANSPORTATION EMERGING SMALL BUSINESS ENTERPRISE POLICY STATEMENT I. PURPOSE The New Jersey Department of Transportation (NJDOT) has established a Emerging Small Business Enterprise (ESBE) certification in order to meet the maximum feasible portion of its Disadvantaged Business Enterprise (DBE) goal through race-neutral means in accordance with regulations of the U.S. Department of Transportation (USDOT), 49 CFR Part 26.51. NJDOT has received Federal financial assistance from the Department of Transportation, and as a condition of receiving this assistance, NJDOT has signed an assurance that it will comply with 49 CFR Part 26. II. IMPLEMENTATION To ensure that the maximum feasible portion of the overall DBE goal is met by using race-neutral means, NJDOT will establish Small Business participation goals on its federally funded contracts. Prime contractors may use DBEs and ESBEs in order to satisfy these Small Business goals. Small Business contracting goals for USDOT federally funded construction projects will be determined by the NJDOT Contractor Compliance Unit with the help of the NJDOT Bureau of Construction Services. The Contractor Compliance Unit and Bureau of Construction Services will review the construction firm’s Engineer’s Estimate, for a specific project, to identify the items typically subcontracted by a prime contractor on similar projects. This review will determine the subcontracting opportunities on that project and approximate percentage that will be subcontracted to ESBE and DBE firms. In the case of professional services agreements, NJDOT will set Small Business goals at the same level as the overall goal. For example, if the overall goal is 15.61%, then NJDOT will set the Small Business goals on its professional services agreements at 15.61%, provided that there are subconsulting opportunities on those agreements. NJDOT only counts DBE participation when reporting progress toward meeting DBE goals. ESBE participation is not counted. ESBE certification exists solely for the benefit of the DBE program. NJDOT will monitor the effect of ESBE certification on DBE utilization. If it is determined that ESBE certification has a negative impact on DBE utilization, then NJDOT reserves the right to limit, discontinue, or eliminate ESBE certification. 61

III. APPLICABILITY This policy applies only to NJDOT construction and consultant contracts funded in whole or in part with federal financial assistance. This policy is not applicable to the award of NJDOT contracts for the purchase of commodities or on any 100 percent state-funded contracts. Applications and questions regarding eligibility as a ESBE should be addressed to: Disadvantaged and Small Business Programs Unit Division of Civil Rights and Affirmative Action New Jersey Department of Transportation 1035 Parkway Avenue PO Box 600 Trenton, NJ 08625-0600 IV. DEFINITIONS The NJDOT will adopt the definitions contained in 49 CFR Part 26.5 for this policy. V. ELIGIBILITY FOR ESBE CERTIFICATION In general, to be eligible for ESBE certification, the firm must be a small business according to SBA size standards and be 51% owned and controlled by one or more economically disadvantaged individuals whose personal net worth does not exceed $750,000. Eligibility Guidelines for ESBE certification: a. Ownership - The business must be 51% owned by an economically disadvantaged person. b. Business Size Determination - The business (including its affiliates) must be a small business as defined by SBA standards. It must not have annual gross receipts over $22,410,000 in the previous three fiscal years ($47,780,000 for airport concessionaires in general with some exceptions). Under SAFETEA-LU, this threshold will be adjusted annually for inflation by the Secretary. c. Personal Net Worth - Only persons having a personal net worth (PNW) of less than $750,000 can be considered as a potential qualified ESBE. Items excluded from a person's net worth calculation include an individual's ownership interest in the applicant firm, and his or her equity in their primary residence. 62

d. Independence - The business must not be tied to another firm in such a way as to compromise its independence and control. e. Control – An owner seeking certification must possess the power to direct or cause the direction of the management and policies of the firm. The owner must also have an overall understanding of, and managerial and technical competence and experience directly related to, the type of business in which the firm is engaged. 49 CFR 26.71 f. Burden of Proof Allocation - Applicants carry the initial burden of proof regarding their eligibility and must demonstrate that they meet all requirements concerning group membership or individual disadvantage, business size, ownership, and control. 49 CFR 26.61 VI. RULES GOVERNING DETERMINATIONS OF OWNERSHIP a. In determining whether the economically disadvantaged participants in the firm own and control the business, all the facts in the record must be viewed as a whole. b. The firm’s ownership by economically disadvantaged individuals must be real, substantial and continuing, going beyond the pro forma ownership as reflected in its ownership documents. The economically disadvantaged owners must enjoy the customary incidents of ownership and share in the risks and profits commensurate with their ownership interests, as demonstrated by the substance, not merely the form, of arrangements. c. All securities that constitute ownership of a firm shall be held directly by economically disadvantaged individuals. Except as provided in this paragraph, no securities or assets held in trust, or by any guardian for a minor, are considered as held by economically disadvantaged persons in determining the ownership of the applicant business. However, securities or assets held in trust, or by any guardian for a minor, are considered as held by an economically disadvantaged individual for purposes of determining ownership under the following circumstances: i. The beneficial owner of securities or assets held in trust is an economically disadvantaged individual, and the trustee is the same or another such individual; or ii. The beneficial owner of a trust is an economically 63

disadvantaged individual who, rather than the trustee, exercises effective control over the management, policymaking, and daily operational activities of the applicant business. Assets held in a revocable living trust may be counted only in the situation where the same economically disadvantaged individual is the sole grantor, beneficiary, and trustee. d. The contributions of capital or expertise by the economically disadvantaged owners to acquire their ownership interests must be real and substantial. Examples of insufficient contributions include a promise to contribute capital, an unsecured note or mere participation in the firm’s activities as an employee. e. The following requirements apply to situations in which expertise is relied upon as part of an economically disadvantaged owner’s contribution to acquire ownership: i. The owner’s expertise must be: 1. In a specialized field; 2. Of outstanding quality; 3. In areas critical to the business’ operations; 4. Indispensable to the business’ potential success; 5. Specific to the type of work the business performs; and 6. Documented in the records of the business. The records must clearly show the contribution of expertise and its value to the business. ii. The individual whose expertise is relied upon must have a significant financial investment in the business. f. For purposes of determining ownership, the Department shall deem as being held by an economically disadvantaged individual, all interests in a business or other assets obtained by the individual: i. As the result of a final property settlement or court order in a divorce or legal separation, provided that no term or condition of the agreement or divorce decree is inconsistent with this section; or ii. Through inheritance, or otherwise because of the death of the former owner. g. All interests in a business, or other assets obtained by the economically disadvantaged owner as a result of a gift or transfer 64

without adequate consideration, from any non-economically disadvantaged individual or non-ESBE firm will be presumed not to be held by the economically disadvantaged owner if the non- economically disadvantaged individual or non-ESBE firm is: i. Involved in the same business for which the individual is seeking certification, or an affiliate of the business; ii. Involved in the same or similar line of business; or iii. Engaged in an ongoing business relationship with the applicant business, as an affiliate of the applicant business. h. To overcome the presumption and permit the interests or assets to be counted, the economically disadvantaged individual must demonstrate by clear and convincing evidence, that: i. The gift or transfer was made for reasons other than obtaining ESBE certification, and ii. The economically disadvantaged individual actually controls the management, policy and operations of the business, notwithstanding the continuing participation of the non- economically disadvantaged individual who provided the gift or transfer. i. The Department will apply the following rules in situations in which marital assets form a basis for ownership of the business: When marital assets (other than the assets of the business in question) are held jointly or as community property by both spouses, are used to acquire the ownership interest asserted by one spouse, the Department shall deem the ownership interest in the firm to have been acquired by that spouse with his or her own individual resources, provided that the other spouse irrevocably renounces and transfers all rights in the ownership interest in the manner sanctioned by the laws of the state in which either spouse or the firm is domiciled. The Department does not count a greater portion of joint or community property assets toward ownership than state law would recognize as belonging to the economically disadvantaged owner of the applicant firm. VII. RULES GOVERNING DETERMINATIONS OF CONTROL a. In determining whether economically disadvantaged owners control 65

a firm, the Department will consider all the facts of the record, viewed as a whole. b. Only an independent business may be certified as an ESBE. An independent business is one the viability of which does not depend on its relationship with another firm or firms. i. In determining whether a potential ESBE is an independent business, the Department will scrutinize its relationships with non-ESBE businesses in such areas as personnel, facilities, equipment, financial and/or bonding support, and other resources. ii. The Department will consider whether present or recent employer/employee relationships between the ESBE owner of the applicant business and non-ESBE business or persons associated with non-ESBE businesses compromise the independence of the applicant business. iii. The Department will examine the applicant firm’s relationships with prime contractors to determine whether a pattern of exclusive or primary dealings with a prime contractor compromises the independence of the potential ESBE. iv. In considering factors related to the independence of a potential ESBE, the Department will consider the consistency of relationships between the potential ESBE firms and non-ESBE firms with normal industry practice. c. The firm must not be subject to any formal or informal restrictions which limit the customary discretion of the economically disadvantaged owners. There can be no restrictions through corporate charter provisions, by-law provisions, contracts or any other formal or informal devices (e.g. cumulative voting rights, voting powers attached to different classes of stock, employment contracts, requirements for concurrence by non-economically disadvantaged partners, conditions precedent or subsequent, executive agreements, voting trusts, restrictions on or assignments of voting rights) that prevent the economically disadvantaged owners, without the cooperation or vote of any non-economically disadvantaged individual, from making any business decision of the business. This paragraph does not preclude a spousal co- signature on financial, real estate or banking documents as may be required. 66

d. The economically disadvantaged owners must possess the power to direct or cause the direction of the management and policies of the business and to make day-to-day as well as long-term decisions on matters of management, policy and operations. i. The economically disadvantaged owner must hold the highest officer position in the business (e.g., chief executive officer or president). ii. In a corporation, the economically disadvantaged owners must control the board of directors. iii. In a partnership, one or more economically disadvantaged owners must serve as general partners, with control over all partnership decisions. e. Individuals who are not economically disadvantaged may be involved in the applicant business as owners, managers, stockholders, officers, and/or directors. Such individuals must not, however, possess or exercise the power to control the business, or be disproportionately responsible for the operations of the business. f. The economically disadvantaged owners of the business may delegate various areas of the management, policymaking, or daily operations of the business to other participants in the business, regardless of whether these participants are economically disadvantaged individuals. Such delegations of authority must be revocable, and the economically disadvantaged owners must retain the power to hire and fire any person to whom such authority is delegated. The managerial role of the economically disadvantaged owners in the business’s overall affairs must be such that the Department can reasonably conclude that the economically disadvantaged owners actually exercise control over the business’ operations, management, and policies. g. The economically disadvantaged owners must demonstrate to the Department’s satisfaction that they have an overall understanding of, and managerial and technical competence and experience directly related to the type of work or service in which they are engaged. The economically disadvantaged owners are not required to have experience or expertise in every critical area of their business’ operations, or to have greater experience or expertise in a given field than managers or key employees, however, the economically disadvantaged owners must have the ability to intelligently and critically evaluate information presented 67

by other participants in the firm’s activities and to use this information to make independent decisions concerning the firm’s daily operations, management and policymaking. Generally, expertise limited to office management, administration, or bookkeeping functions unrelated to the business’s activities will be insufficient to demonstrate control. h. If state or local law requires an owner to have a particular license or other credential in order to own and/or control a certain type of business, then the economically disadvantaged person(s) who owns and controls the applicant firm must possess the required license or credential. If state or local law does not require such a person to have such a license or credential to own and/or control a business, the Department will not deny certification solely on the ground that the person lacks the license or credential. However, the Department may take into account the absence of the license or credential as one factor in determining whether the economically disadvantaged owner(s) actually control the business. i. The Department shall consider differences in remuneration between the economically disadvantaged owners and other participants in the firm in determining whether to certify a firm as an ESBE. Such consideration shall be in the context of the duties of the persons involved, normal industry practices, the firm’s policy and practice concerning reinvestment of income, and any other explanations for the differences proffered by the business. The Department may determine that an applicant firm is controlled by its economically disadvantaged owner although that owner’s remuneration is lower than that of some other participants in the business. In a case where a non-economically disadvantaged individual formerly controlled the applicant business, and an economically disadvantaged individual now controls it, the Department may consider differences in salary of the former and current owner of the applicant firm as a factor in determining who controls the firm, particularly when the non-economically disadvantaged individual remains involved with the business and continues to receive greater compensation than the economically disadvantaged individual. j. In order to be viewed as controlling the business, an economically disadvantaged owner cannot engage in outside employment or have other business interests that conflict with the management of the business or prevent them from devoting sufficient time and attention to the affairs of the business to control its activities. For 68

example, absentee ownership of a business and part-time work in a full-time business are not viewed as constituting control. However, an individual could be viewed as controlling a part-time business that operates only on evenings and weekends, if the individual controls it all the time it is operating. k. An economically disadvantaged individual may control a business even though one or more of the individual’s immediate family members (who themselves are not economically disadvantaged individuals) participate in the firm as a manager, employee, owner, or in another capacity. Except as otherwise provided in this paragraph, the Department shall make a judgment about the control the economically disadvantaged owner exercises vis-à-vis other persons involved in the business, as in other situations without regard to whether or not the other persons are immediate family members. l. If the Department cannot determine that the economically disadvantaged owners, as distinct from the family as a whole, control the firm, then the economically disadvantaged owners have failed to carry the burden of proof concerning control, even though they may participate significantly in the business’s activities. m. Where a business was formerly owned and/or controlled by a non- economically disadvantaged individual (whether or not an immediate family member), and ownership and/or control were transferred to an economically disadvantaged individual, and the non-economically disadvantaged individual remains involved with the business in any capacity, the economically disadvantaged individual now owning the business must demonstrate to the Department, by clear and convincing evidence, that: i. The transfer of ownership and/or control was made for reasons other than obtaining certification as a ESBE; and ii. The economically disadvantaged individual actually controls the management, policy and operations of the business, notwithstanding the continuing participation of a non- economically disadvantaged individual who formerly owned and/or controlled the business. n. In determining whether a firm is controlled by its economically disadvantaged owners, the Department will consider whether the business owns the equipment necessary to perform its work. However, the Department shall not determine that a firm is not controlled by economically disadvantaged individuals solely 69

because the business leases, rather than owns, such equipment, where leasing equipment is a normal industry practice and the lease does not involve a relationship with a prime contractor or other party that compromises the independence of the business. o. The Department shall grant certification to a firm only for the specific types of work in which the economically disadvantaged owners have the ability to control the firm. To become certified in an additional type of work, the firm need demonstrate to the Department that its economically disadvantaged owners are able to control the firm with respect to that type of work. p. A business operating under a franchise or license agreement may be certified if it meets the standards in this subpart and the franchiser or licenser is not affiliated with the franchisee or licensee. In determining whether affiliation exists, the Department may consider the restraints relating to standardized quality, advertising, accounting format, and other provisions imposed on the franchisee or licensee by the franchise agreement or license, provided that the franchisee or licensee has the right to profit from its efforts and bears the risk of loss commensurate with ownership. Alternatively, even though a franchisee or licensee may not be controlled by virtue of such provisions in the franchise agreement or license, affiliation could arise through other means, such as common management or excessive restrictions on the sale or transfer of the franchise interest or license. q. In order for a partnership to be controlled by an economically disadvantaged individual, any non-disadvantaged partners must not have the power, without the specific written concurrence of the economically disadvantaged partner(s), to contractually bind the partnership or subject the partnership to contract or tort liability. r. The economically disadvantaged individuals controlling a firm may use an employee leasing company. The use of such a company does not preclude the economically disadvantaged individuals from controlling their firm if they continue to maintain an employer- employee relationship with the leased employees. This includes being responsible for hiring, firing, training, assigning, and otherwise controlling the on-the-job activities of the employees, as well as ultimate responsibility for wage and tax obligations related to the employees. VIII. ADDITIONAL ELIGIBILITY REQUIREMENTS a. Consideration of whether a firm performs a commercially useful 70

function or is a regular dealer pertains solely to counting toward ESBE goals the participation of firms that have already been certified as ESBEs. Except as provided in this paragraph, the Department will not consider commercially useful function issues in any way in making decisions about whether to certify a firm as a ESBE. b. The Department may consider, in making certification decisions, whether a firm has exhibited a pattern of conduct indicating its involvement in attempts to evade or subvert the intent or requirements of the DBE Program. c. The Department shall evaluate the eligibility of a firm on the basis of present circumstances. A firm will not be refused certification based on historical information indicating a lack of ownership or control of the firm by economically disadvantaged individuals at some time in the past, if the firm currently meets the ownership and control standards of this part. Nor will the Department refuse to certify a firm solely on the basis that it is a newly formed firm. d. ESBE firms and firms seeking ESBE certification shall cooperate fully with requests for information relevant to the certification process. Failure or refusal to provide such information is a ground for denial or removal of certification. e. Only firms organized for profit may be eligible for ESBE certification. Not-for-profit organizations, even though controlled by economically disadvantaged individuals, are not eligible for ESBE certification. f. An eligible ESBE firm must be owned by individuals who are economically disadvantaged. Except as provided in this paragraph a firm that is not owned by economically disadvantaged individuals, but instead is owned by another firm cannot be an eligible ESBE. g. If economically disadvantaged individuals own and control a firm through a parent or holding company, established for tax, capitalization or other purposes consistent with industry practice, and the parent or holding company in turn owns and controls an operating subsidiary, the Department may certify the subsidiary if it otherwise meets all requirements of this subpart. In this situation, the individual owners and controllers of the parent or holding company are deemed to control the subsidiary through the parent or holding company and must be economically disadvantaged as defined under this policy. 71

h. The Department may certify such a subsidiary only if there is cumulatively 51 percent ownership of the subsidiary by economically disadvantaged individuals. i. Recognition of a business as a separate entity for tax or corporate purposes is not necessarily sufficient to demonstrate that a firm is an independent business, owned and controlled by economically disadvantaged individuals. j. The ESBE applicant will not be required to be prequalified as a condition for certification. IX. CERTIFICATION PROCEDURES FOR EMERGING SMALL BUSINESS ENTERPRISES a. A business may apply to the Department at any time to be certified as an Emerging Small Business Enterprise. Such application must be made on the application form supplied by the Department. All firms wishing to participate on projects with ESBE goals must be certified in accordance with this policy. b. If a business is to be counted as an Emerging Small Business Enterprise for the purpose of meeting the ESBE goals for a specific contract, the business must be certified by the Department. In the event a business is not certified by the Department, the complete certification application must be received by the Division of Civil Rights and Affirmative Action in accordance with the following schedule: i. A business that wants to be counted as an Emerging Small Business Enterprise for the purpose of meeting the established ESBE contract goals for a specific contract at the time of the award of that contract, shall submit its completed application at least 15 calendar days prior to the date for the receipt of bids for that contract. ii. A business that wants to be considered as an Emerging Small Business Enterprise for the purpose of meeting established ESBE contract goals for a specific contract, either as an additional or replacement subcontractor after work on the contract has commenced, shall submit its completed application at least 15 calendar days prior to submitting a request for Approval to Sublet (Form DC-18) to the Department. iii. Failure by an uncertified business to submit a completed 72

application for certification for a specific contract in accordance with this subsection shall result in the applicant firm not being considered for certification for that contract. c. All applications must be completed in their entirety before they will be considered by the Department. If an applicant knowingly supplies false or inaccurate information, the applicant shall be disqualified, and may be subject to further penalties as provided by law. d. The business, or any principal owner of the business, must not have been debarred or convicted of bid-related crimes or violations within the past six years in any state or federal jurisdiction, or be under notice of intent to debar in any jurisdiction. X. APPROVAL OR DENIAL OF CERTIFICATION AS AN EMERGING SMALL BUSINESS ENTERPRISE a. When an applicant is approved by the Department as an Emerging Small Business Enterprise, the business will be notified in writing of such certification. The certification shall be effective as of the date of approval and shall be valid for a three year period unless revoked by the Department. ESBE firms shall be required to provide update information and complete a “No Change Affidavit” each year, if applicable, for renewal of their Emerging Small Business Enterprise certification. b. When an applicant is denied certification as an Emerging Small Business Enterprise, it shall be notified in writing of the reasons for that decision. The applicant may request an informal hearing by writing to the Department within 20 State business days of receipt of said denial notice. The burden of proof of eligibility shall be upon the applicant in any such proceeding. The applicant is not prohibited from contracting with the Department during the pendency of its appeal; however, it will be unable to participate on any contract as a ESBE. c. If an applicant requests an informal hearing on the denial of its application the Department shall schedule an informal meeting at which time the applicant may present additional information to contest the cited deficiencies and further support its application. The Commissioner, or his or her designee, shall review this additional information and the applicant shall be advised of the Department’s final decision within 30 business days of the informal meeting. 73

d. When the Department intends to decertify an Emerging Small Business Enterprise for failure to meet the requirements of this policy, or as the result of a third-party challenge, the business shall be notified in writing of the department’s intent to decertify and the reasons why. An investigation may be conducted by the Division of Civil Rights and Affirmative Action to determine the validity of any third-party allegations. If a preliminary determination is made to decertify the firm, the firm will be given an opportunity to appeal the findings either in person at an informal hearing, and/or in writing. The business may request an informal hearing by writing to the Department within 20 business days of receipt of said notice of Intent to Decertify. The ESBE firm will be notified of the Department's decision within 30 business days following the informal hearing. The business shall be eligible to participate as an Emerging Small Business Enterprise in the ESBE goal program during the pendency of its appeal to the Department. e. If a firm’s ESBE certification is denied or revoked by the Department, the applicant may not reapply for ESBE certification for a period of one (1) year from the final date of the denial or decertification decision letter by the NJDOT. XI. SEVERABILITY If any section, subsection, provision, clause or portion of this Policy is adjudged unconstitutional or invalid by a court of competent jurisdiction, the remainder of this Policy shall not be affected thereby. XII. REVIEW The operation of the program contained in this Policy and the need for its continuation shall be reviewed by the Commissioner annually. XIII. AUTHORITY 49 CFR 26.1, 49 CFR 26.23 74

STATE OF SOUTH DAKOTA DEPARTMENT OF TRANSPORTATION SPECIAL PROVISION FOR DISADVANTAGED BUSINESS ENTERPRISE DECEMBER 16, 2010 The South Dakota Department of Transportation (Department) shall not discriminate on the basis of race, color, religion, sex, national origin, age, or disability in the award and performance of any Federal-aid contract or in the administration of the Department’s Disadvantaged Business Enterprise (DBE) program pursuant to the requirements of 49 CFR Part 26. The Department shall take all necessary and reasonable steps under 49 CFR Part 26 to prevent discrimination in the award and administration of Federal-aid contracts. Upon notification to the Department of its failure to carry out its approved program the USDOT may impose sanctions as provided for under Part 26 and may, in appropriate cases, refer the matter for enforcement under 18 USC 1001 and/or the Program Fraud Civil Remedies Act of 1986 (31 USC 3801 et seq.). Implementation of the DBE program is a legal obligation and a bidder’s/Contractor’s failure to carry out the terms of the DBE program shall be treated as a non-responsive bid or as a violation of the construction contract. I. Definitions A. Specified Goal: A DBE participation goal for a contract as indicated by a specific numerical percentage of the total dollar amount of the contract in the bidding documents. B. Not Specified Goal: A project where the DBE participation goal is stated as ‘Not Specified’. While no specific DBE participation percentage commitment is required of the bidder, the requirement for the bidder to submit its good faith efforts documentation will be determined by the average DBE participation commitment of all bidders for that contract, in accordance with Section II of this provision. C. Disadvantaged Business Enterprise (DBE): A for-profit small business that has been certified by the Department and is listed in the DBE Directory available on the Department’s web site. D. Good Faith Effort (GFE): Efforts to achieve a DBE goal which, by their scope, intensity, and appropriateness to the objective, can reasonably be 75

expected to meet the objective of the Department’s DBE program pursuant to 49 CFR 26.1. E. Positive Contact: Communication between the bidder and the DBE in which an oral or written response is received from the DBE stating the DBE’s intention to quote or not quote a project. F. Commitment: The dollar amount of work to be subcontracted to DBEs, according to the bidder’s bid. The commitment may be compared to the dollar amount of all contract items in the bidder’s bid and expressed as a percentage of the total bid amount. II. Bidding Requirements Bidders shall not discriminate on the basis of race, color, religion, sex, national origin, age or disability in the solicitation and/or award to subcontractors and material suppliers. Bidders who demonstrate a pattern of possible discrimination through consistent and repeated under-utilization of DBEs may be subject to investigation and/or sanctions allowed by regulation, administrative rule or law. If a complaint is made that a low bidder has failed to solicit participation from or discriminated against a DBE in the solicitation or award to a subcontractor or supplier, the Department may, at its discretion, request the low bidder to submit documentation of the low bidder’s solicitation efforts. All bidders must include their DBE commitment for the contract in the bidding files provided by the Department, regardless of whether the contract includes a specified DBE contract goal, or is shown as ‘Not Specified’. For each contract, the low bidder must submit, with the low bidder’s bid files, a bidder list of all subcontractors and suppliers (DBEs and non-DBEs) the bidder received quotes from for that contract. Bidders shall make reasonable efforts to provide opportunities for DBEs to participate on Federal-aid contracts throughout the life of the contract. On contracts let with a specified DBE contract participation goal, where the low bidder has not met or exceeded that goal, the bidder must provide GFE documentation as indicated in Section III. On contracts let with a ‘Not Specified’ DBE contract participation goal, the low bidder's commitment will be compared to the average commitment for all eligible bidders to determine whether the low bidder's commitment is at least eighty percent (80%) of the average commitment. 76

If the low bidder’s commitment is less than eighty percent (80%) of the average commitment, the bidder must submit GFE documentation for the project as specified in Section III of this Provision. The low bidder must submit GFE documentation, when requested by the Department, within two (2) calendar days from the date the low bidder is contacted by the Department, not including Saturdays, Sundays, or official State holidays. Section III provides information on the types of action bidders should take as part of their GFE to obtain DBE participation. The low bidder may submit documentation with the bidding files provided all pertinent information is included. The low bidder must submit any missing documentation within two (2) calendar days from the date the Department contacts the low bidder. If the low bidder does not provide documentation showing GFE as specified by this special provision, the Department will consider that bid nonresponsive and may either award the contract to the next lowest responsible bidder with a responsive bid, or reject all bids. Subsequent to the DBE committee’s decision that the low bidder’s efforts do not establish GFE the low bidder will be notified that the bid is not responsive. The low bidder will have two (2) working days from the date of notification to contact the Bid Letting Engineer to arrange a meeting with the Department Secretary, or the Secretary’s designee, to present documentation and arguments about why the bid should not be rejected. The Department Secretary or the Secretary’s designee will make a written decision on award of the contract within two (2) working days after the meeting. If the low bid is rejected for failure to meet the GFE or other requirements, the next low responsible bidder shall be notified, unless all bids are rejected. The next low responsible bidder’s DBE solicitation will also be reviewed, and GFE documentation may be requested. Unless all bids are rejected, award of the contract will be made to the lowest bidder with a responsive bid. The lowest responsible bidder will be required to complete Form 289B, as included in the contract documents, when the contract is sent for signature. This form requires a signature from each DBE identified in the low bidder’s bid. A separate form will be supplied for each DBE, and will be included in the contract documents. Bidders are encouraged to assist interested DBEs in obtaining bonding, lines of credit, insurance, necessary equipment, supplies, materials, or other related services. 77

III. Good Faith Efforts A. Contracts let with a ‘Not Specified’ goal If a GFE package is requested on a contract with a ‘Not Specified’ goal (shown in the bidding documents as ‘Not Specified’), the low bidder must submit documentation of the low bidder’s efforts to the Bid Letting Engineer. 1. The low bidder shall submit a contact log of all solicitation efforts including: • Name of the DBE firm • Name and phone number of the individual with whom contact was made • Date, time, and manner of each and every contact (by phone, in person, fax, mail, e-mail, etc.) • The DBE’s response to the solicitation • Result of the solicitation effort An example of a solicitation log is available on the Department’s Bid Letting website. When bidding utilizing the South Dakota Electronic Bidding System (SDEBS) software, the software may be used to document the log of solicitation efforts for the project. 2. The low bidder shall also submit documentation that shows GFE in relation to the following requirements: a. The bidder must select contract work items to encourage DBE participation. This includes, where appropriate, breaking out contract work items into economically feasible units to facilitate DBE participation, even when the bidder might otherwise prefer to perform these work items with its own forces. b. The bidder must solicit all certified DBEs in the appropriate work classifications that are in the DBE directory and have indicated they are willing to work in the project’s geographic area. If any DBE meeting these requirements has not been solicited, the bidder shall provide a detailed written explanation showing why the DBE was not solicited. Without exception, all DBEs listed on the plan holders list shall be solicited. Initial solicitation must be made at least seven (7) calendar days by mail, or five (5) calendar days by phone, fax or e-mail prior to the letting date to provide adequate time for the DBE to respond with a quote in the normal course of business. c. If positive contact is not received, the bidder shall follow up the initial solicitation with a second solicitation by phone, fax or e-mail to determine whether the DBE is interested in quoting. The second solicitation shall be made in sufficient time for the DBE to provide a 78

reasonable quote. If positive contact is not made after the second solicitation, at least one more contact by phone is required at least two (2) business days prior to the letting. d. The bidder shall provide interested DBEs with adequate and timely information about plans, specifications, and requirements of the contract to assist DBEs in responding to a solicitation. e. If a bidder rejects a DBE quote because of previous problems with a particular DBE, the bidder must prepare a detailed written explanation of the problem. Additional cost involved in finding and using DBEs is not, in itself, sufficient reason for a bidder to fail to meet the obligation of considering DBEs, as long as those costs are reasonable. Bidders must not reject DBEs as being unqualified without sound reasons based on a thorough investigation of the DBE’s capabilities. f. Any additional information requested by the Department. B. Contracts let with a specified goal If a GFE package is requested on a contract with a specified goal, the low bidder must submit documentation of the low bidder’s efforts to the Bid Letting Engineer. Documentation in the GFE package shall comply with all of the requirements of Section III.A. In addition, the low bidder shall submit documentation that shows compliance with the following requirements: 1. The bidder must consider qualified DBEs whose quotes are reasonably competitive. If the bidder rejects any quote because it is considered not to be “reasonably competitive,” the bidder must provide copies of all DBE and non-DBE quotes, and a work item price spreadsheet comparing DBE quotes to non-DBE quotes. The spreadsheet must show which quote was included in the bid for the work items being compared. The ability or desire of a bidder to perform the work with its own forces does not relieve the bidder of the responsibility to make GFE. In the event a bidder elects to use its own forces over a DBE, the bidder must include, on the spreadsheet, documentation of the costs of using its own forces. This can be shown in a number of ways, which may include submitting portions of the bidder’s work sheets used to prepare the bid. 2. The bidder must explain why the specified goal could not be met. 3. The bidder must identify any additional efforts the bidder made to secure DBE participation. 79

IV. Counting DBE Participation The contract commitment, as submitted with the bid, shall be included on Form 289R/N or 289R/C as included in the contract documents. Only the portion of a contract that is performed by the DBE’s own forces will count toward DBE participation. Included is the cost of supplies and materials obtained by the DBE for the contract, including supplies purchased or equipment leased by the DBE. Including supplies and equipment the DBE subcontractor purchased or leased from the Contractor or its affiliate is not allowed. When a DBE performs as a participant in an approved joint venture, only the portion of the total dollar value of the contract equal to the distinct, clearly defined portion of the work of the contract that the DBE performs with its own forces will count toward DBE participation. A bidder may count toward its DBE participation only that percentage of expenditures to DBEs that perform a commercially useful function (CUF) in the performance of a contract. A DBE performs a CUF when it is responsible for execution of the work of a contract and is carrying out its responsibilities by actually performing, managing and supervising the work involved. To perform a CUF, the DBE must also be responsible, with respect to materials and supplies used on the contract, for negotiating prices, determining quality and quantity, ordering and installing (where applicable) the materials, and paying for the material itself. To determine whether a DBE is performing a CUF, the Department will evaluate the amount of work subcontracted, industry practice, whether the amount the DBE is to be paid is commensurate with the work it is actually performing, DBE credit claimed for performance of the work, and other relevant factors. A DBE is not performing a CUF if it performs less than 30% of the total cost of its contract with its own work force, or if its role is limited to that of an extra participant in a transaction, project, or contract through which funds are passed in order to obtain the appearance of DBE participation. In determining whether a DBE is simply an extra participant, the Department will examine similar transactions, particularly those in which DBEs do not participate. DBE participation will be counted for trucking services as follows: The bidder/Contractor will receive credit toward DBE participation for the total value of the transportation services the DBE provides on the contract using trucks the DBE owns, insures, and operates which are driven by drivers the DBE employs. A DBE may lease trucks from another DBE firm, including an owner-operator who is certified as a DBE. When a DBE leases trucks from another DBE, the 80

bidder/Contractor can count the total value of the transportation services the lessee DBE provides on the contract toward DBE participation. The DBE may also lease trucks from a non-DBE firm, including an owner- operator. When a DBE leases trucks from a non-DBE, the bidder/Contractor can count toward DBE participation only the fee or commission the DBE receives as a result of the lease arrangement. The bidder/Contractor does not receive credit toward DBE participation for the total value of the transportation services, since all services are not provided by a DBE. The bidder may count toward DBE participation expenditures to DBE firms for materials, supplies, or services as follows: If the materials or supplies are obtained from a DBE manufacturer, count 100 percent of the cost of the materials or supplies toward DBE participation. A manufacturer is a firm that operates or maintains a factory or establishment that produces, on the premises, the materials, supplies, articles, or equipment required under the contract and of general character described by the specifications. If the materials or supplies are purchased from a DBE regular dealer, count 60 percent of the cost of the materials or supplies toward DBE participation. A regular dealer is a firm that owns, operates, or maintains a store, warehouse or other establishment in which the materials, supplies, articles, or equipment are bought, kept in stock, and regularly sold or leased to the public in the usual course of business. If the materials or supplies are purchased from a DBE which is neither a manufacturer nor a regular dealer, count only the amount of fee or commission charged for assistance in the procurement of the materials or supplies or fee or transportation charges for the delivery of materials or supplies required at the job site toward DBE participation. In order to be counted, the Department must determine the fee to be reasonable and not excessive as compared to fees customarily allowed for similar services. The cost of the materials and supplies themselves will not count toward DBE goals. The Department will not count toward DBE participation materials or services provided by a DBE who is not currently certified. Any intended or actual subcontracting arrangement which is contrived to artificially inflate DBE participation is not allowed. This includes, but is not limited to, DBE middlemen which serve no commercially useful function, or arrangements where a DBE is acting essentially as a broker of goods or services, but has been counted as a manufacturer, regular dealer, or subcontractor. 81

The Department will review and monitor projects for compliance with the bidder’s intended DBE participation. Failure by the Contractor to fulfill the contract commitment constitutes a breach of contract. The Department may also investigate the form and substance of particular business arrangements between and among DBE and Contractors with regard to specific contracts. If, as a result of an investigation, the Department determines that a particular business arrangement is not allowable, the dollar amount of the unallowable DBE participation shall be subtracted from the Contractor’s DBE participation on that project. The Contractor will be notified if the apparent DBE participation is not adequate to meet the DBE participation stated on the 289R/C or 289R/N Form. The Contractor will be directed to seek additional participation from other DBEs to meet the unallowable portion on that contract. In cases where it is determined that a Contractor was a knowing and willing participant in a business arrangement determined by the Department to be unallowable, or in the event of repeated violations, falsification or misrepresentation, the Department shall provide for imposition of sanctions. Sanctions may include, but are not limited to one or more of the following: Assessment of liquidated damages as stated in Section V below Suspension of bidding privileges or debarment Withholding progress payments Securing additional DBE participation on future Federal-aid contracts sufficient to make up for the DBE participation found to be unallowable Referral of the matter for criminal prosecution The Contractor shall maintain a running tally of payments to DBEs to make available to the Department. Within thirty (30) calendar days of physical completion of the project the Contractor shall submit a DOT-289 (Certification of DBE Participation) listing all DBE firms that participated in this contract, and report the total dollar amount paid (and anticipated to be paid) to each. The Contractor’s final payment will not be released until receipt of the DOT-289. V. Liquidated Damages A. If the Contractor has failed to meet its contract commitment, the Department shall assess liquidated damages according to the following schedule: 1. For the first $1,000 DBE deficiency, one hundred percent (100%) of the deficiency. 82

2. For the next $9,000 DBE deficiency, fifty percent (50%) of the deficiency. 3. For the next $10,000 DBE deficiency, twenty five percent (25%) of the deficiency. 4. For any remaining DBE deficiency, ten percent (10%) of the deficiency. This liquidated damage provision shall not be applicable where actual payment to a DBE is within ninety percent (90%) of the commitment, or where there are good and sufficient reasons, properly documented, for the deficiency such as quantity under-runs, project changes, or other unexpected occurrences. B. If a Contractor finds it impossible, for reasons beyond his control, to meet the contract commitment on Form 289R/C or 289R/N, the Contractor may, at any time prior to completion of the project, provide a written request to the DBE Compliance Officer for a complete or partial waiver of liquidated damages. Any request for a waiver will not be accepted after Acceptance of Field Work has been made. VI. Contractor Utilization of Subcontractors and Suppliers Except as otherwise provided in this provision, each DBE firm listed on Form 289R/C or 289R/N will perform the work specified (or provide materials or services as indicated), and at the dollar levels specified. Substitutions of DBEs reported on Form 289R/C or 289R/N are not allowed, except for performance or scheduling problems on the part of the DBE, or if the DBE has requested to be removed from that particular contract. Substitution shall not take place without written approval by the DBE Compliance Officer. The Contractor must provide timely notification to the DBE Compliance Officer of the reason(s) for the substitution. Prior to approval by the DBE Compliance Officer, the Contractor must also provide documentation showing reasonable efforts to replace the designated DBE with another DBE. In instances where time is critical to project progress, this process may be handled verbally, with written confirmation to follow. If the Contractor fails to make payments to DBEs as required, liquidated damages shall be assessed as specified in Section V. In addition, if the Contractor is found to have knowingly and willingly attempted to circumvent the DBE contract provisions, sanctions referred to in Section IV will be imposed. All Contractors and DBEs participating in Federal-aid contracts are expected to cooperate fully and promptly with the Department in compliance reviews, 83

investigations, and other requests for information. Failure to do so shall be grounds for appropriate sanctions or action against the party as indicated in Section IV. The DBE Compliance Officer will enforce compliance with contract requirements regarding the use of DBE subcontractors and suppliers. The DBE Compliance Officer, or said officer’s designee, may conduct compliance reviews on selected projects each year to verify compliance by Contractors. Violations will be handled in accordance with contract provisions and statutory or regulatory requirements. * * * * * 84

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Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs Get This Book
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TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 416: Implementing Race-Neutral Measures in State Disadvantaged Business Enterprise Programs explores race-neutral strategies being used effectively by state departments of transportation (DOTs) to meet their Disadvantaged Business Enterprises (DBE) participation goals. It also reviews and synthesizes problems faced by state DOTs in the administration of their DBE programs and identifies race-neutral remedies used to overcome these challenges.

As state DOT's carry out their highway construction programs, they are required to direct a portion of their federal-aid fund expenditures toward small businesses called DBEs. A DBE is defined as a small, for-profit business concern that is at least 51% owned and controlled by one or more socially and economically disadvantaged individuals. States are required to meet the maximum feasible portion of their DBE participation goals using race-neutral means designed to remove barriers and enhance opportunities for all small businesses, not just DBEs.

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