Current Practices to Set and Monitor DBE Goals on Design-Build Projects and Other Alternative Project Delivery Methods (2015)

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12 CHAPTER THREE APPLICATION OF TRADITIONAL DISADVANTAGED BUSINESS ENTERPRISE CONTRACT GOALS TO ALTERNATIVE DELIVERY METHOD PROJECTS Interviews were conducted with nearly every state DOT, and other information was obtained for the few state DOTs that did not participate in interviews. Based on this research, 33 of the 48 state transportation departments that appear to have used design-build or P3 methods have applied DBE contract goals to those types of projects. Table 1 provides detailed information for 50 states, the District of Columbia, and Puerto Rico. Based on telephone interviews and other information sources, the first two col- umns indicate whether the state DOT had used design-build or P3 methods. For the 48 state DOTs that had, the next three columns present information about use of DBE contract goals on any of those projects. Eight state DOTs had not set DBE contract goals on design-build or P3 projects, and use of DBE contract goals on past projects was unclear for seven state DOTs. These 15 state DOTs are discussed here: • The Alaska Department of Transportation and Public Facilities (ADOT&PF) does not set a DBE contract goal if the contract is less than $1 million. ADOT&PF reported that it has not had a design-build project in which DBE contract goals were applied in the past 5 years. • Puerto Rico’s design-build project did not receive any federal funds, so it did not use DBE contract goals. • Florida, Idaho, Maine, New Hampshire, and Vermont have 100% race-neutral DBE programs. North Dakota completed two pilot design-build projects that were con- sidered race-neutral projects. State DOTs with 100% race-neutral DBE programs do not apply DBE contract goals to any contracts, regardless of whether they are alternative delivery method or design-bid-build. • Iowa DOT may have used design-build for emergency projects in the past, but the use of DBE goals on emer- gency projects could not be determined. • Alabama, New Jersey, South Dakota, and Wisconsin DOTs completed design-build projects under the SEP-14 program, but current DBE staff were not involved at the time of the SEP-14 projects and were unable to report on the use of DBE contract goals. These states have discon- tinued the use of alternative delivery methods. • The interviewee from Montana DOT reported that the state DOT does not set DBE contract goals on its design-build projects. However, the MDT design-build guidelines suggested that it had (Montana DOT 2008). Many of the state DOTs that apply DBE contract goals to alternative delivery projects began by closely adhering to long-established methods used for their design-bid-build projects. Five of the 33 state DOTs that apply DBE contract goals to design-build and P3 projects appear to retain that approach, as shown in Table 2. Chapter three describes the steps in the traditional meth- ods to applying DBE contract goals, from identification of the project to sanctions for noncompliance. This discussion provides the context for the chapter four examination of how state DOTs have developed new approaches to DBE program application. Also, states that have developed new approaches typically retain certain aspects of traditional methods. EXAMPLES OF STATES APPLYING TRADITIONAL METHODS State transportation departments in Delaware, Indiana, Mississippi, Pennsylvania, and Tennessee apply DBE con- tract goal methods from design-bid-build projects to their design-build and P3 projects. Alaska DOT&PF reports that it plans to use this approach for future alternative delivery method projects. Indiana DOT In its proposals for design-build projects, Indiana DOT (INDOT) requires proposers to meet the DBE contract goal or show good faith efforts to do so. Proposers must show DBE commitments at that time. INDOT evaluates on a pass- fail basis whether the proposer has complied with the DBE requirements. This parallels INDOT’s process for design- bid-build projects. Pennsylvania DOT Pennsylvania DOT (PennDOT) is an example of a large state DOT with substantial design-build experience that applies traditional DBE contract goals to design-build and P3 con- tracts. Under SEP-14, PennDOT had more than 50 design- build projects approved. Pennsylvania was one of the four major states participating in the program, as discussed in chapter two.

13 PennDOT closely follows its methods for design-bid- build contracts in applying DBE goals to design-build proj- ects. It uses a single DBE contract goal on design-build projects. The only difference is a minor one: on a traditional design-bid-build project, the goal is set by the manager of the Contract Awards Office; on design-build projects, the manager of the Contract Awards Office works with his or her counterpart in the Consultant Agreements Office to set the contract goal. PennDOT sub-recipients have also used federal funds to do design-build projects. TABLE 1 USE OF DBE CONTRACT GOALS FOR DESIGN-BUILD OR P3 Have Used D-B or P3 If Used D-B or P3, Applied DBE Contract Goals Yes No Yes No Unclear Alabama • • Alaska • • Arizona • • Arkansas • California • • Colorado • • Connecticut • • Delaware • • District of Columbia • • Florida • • Georgia • • Hawaii • • Idaho • • Illinois • • Indiana • • Iowa • • Kansas • • Kentucky • • Louisiana • • Maine • • Maryland • • Massachusetts • • Michigan • • Minnesota • • Mississippi • • Missouri • • Montana • • Nebraska • Nevada • • New Hampshire • • New Jersey • • New Mexico • • New York • • North Carolina • • North Dakota • • Ohio • • Oklahoma • Oregon • • Pennsylvania • • Puerto Rico • • Rhode Island • • South Carolina • • South Dakota • • Tennessee • • Texas • • Utah • • Vermont • • Virginia • • Washington • • West Virginia • • Wisconsin • • Wyoming • Total 48 4 33 8 7 TABLE 2 USE OF NEW OR TRADITIONAL METHODS FOR DESIGN- BUILD OR P3 PROJECTS States That Have Applied DBE Contract Goals to D-B or P3 Projects Use Same Methods as for Design-Bid- Build Projects Always or Sometimes Use New Methods Arizona • California • Colorado • Connecticut • Delaware • Georgia • Hawaii • Illinois • Indiana • Kansas • Kentucky • Louisiana • Maryland • Massachusetts • Michigan • Minnesota • Mississippi • Missouri • Nevada • New Mexico • New York • North Carolina • Ohio • Oregon • Pennsylvania • Rhode Island • South Carolina • Tennessee • Texas • Utah • Virginia • Washington • West Virginia • Total 5 28

14 The first P3 project in Pennsylvania is set to begin soon, and PennDOT has applied traditional DBE contract goals to this project. Staff at PennDOT reported that keeping the process sim- ple is a highly effective strategy for applying DBE goals to design-build projects. Delaware DOT Delaware is an example of a small state that has substantial design-build experience. The Delaware DOT (DelDOT) has legislative authority for both design-build and P3 projects. The legislature approved 12 design-build pilot projects in 2011, and the state has nearly reached the 12-project limit, including a vertical construction project (DMV facility). No P3 projects had been initiated at the time of the interview. DelDOT gives the apparent awardee 10 days after sub- mitting its proposal to provide a letter of commitment, which includes a list of the subcontractors and DBE firms it intends to use. A signed contract for all DBEs (which must include information on the value of the contract) must be submitted by the prime contractor before groundbreaking. The difficulty DelDOT reported concerning its design- build projects was that it has not been able to use its standard electronic tracking system to monitor payments. Instead, prime contractors must manually submit DBE invoice and payment information to the DBE program manager. Mississippi DOT Mississippi DOT (MDOT) has experience with three design-build projects. One is complete, and two are in pro- cess. Design-build projects are handled and monitored the same way as typical design-bid-build projects. A single goal is set for the entire project, and it can be achieved during the design or construction phase. The winning proposer is given 10 days after letting and award to provide a complete DBE list, which includes DBE names, work types, and work val- ues for the project. MDOT reports that it has not encountered any problems treating design-build like design-bid-build, and DBE contract goals have been achieved or are on track. Tennessee DOT Tennessee DOT (TDOT) completed one design-build proj- ect under the SEP-14 program and has had five design-build projects since authorizing legislation was passed in 2007. The state also has legislation allowing a two-project pilot program for P3 tollway projects, but no P3 projects have been initiated at this time. The TDOT civil rights/DBE program staff do not become involved in the design-build project until the design phase is complete. They do not take part in RFQ/ RFP development or the selection process. A single goal is set for the construction phase once the design phase is complete. At that point, the project is treated like a typical design-bid-build project. APPLYING DISADVANTAGED BUSINESS ENTERPRISE CONTRACT GOALS USING TRADITIONAL METHODS Starting with identification of the project, application of DBE contract goals using traditional methods can be broken into seven stages: 1. Identifying the design-build project as appropriate for DBE contract goals; 2. Incorporating DBE program language and related requirements in RFQ, RFP, and contract documents; 3. Communicating opportunities to DBEs and other small businesses; 4. Establishing a DBE goal for the project; 5. Reviewing DBE proposal submissions when deter- mining contract award; 6. Monitoring compliance; and 7. Remedying any noncompliance. The discussion of each stage includes an assessment in chapter four of whether a method is still used with the new approaches. 1. Identifying the Design-Build Project as Appropriate for DBE Contract Goals The first step in applying DBE contract goals is for engi- neering staff to inform DBE program staff about a planned project that will receive federal funding. DBE program staff in state transportation departments say that the earlier they learn of a project, the greater the opportunity to ensure that steps are properly followed. This is especially important for megaprojects or other unusual projects. This step is the same for states that are applying tra- ditional methods and new approaches to DBE contract goals on design-build projects, so some of the examples pertain to state DOTs beyond the five using traditional methods. Some state DOTs have early notification written into their design-build manuals. For example, the NYS- DOT design-build manual requires that “the Office of Civil Rights (OCR) must be consulted early in the process to create the goals for the project and on an on-going basis

15 during the project for oversight and monitoring of the design-builder’s MBE/WBE [minority business enter- prise/women’s business enterprise] or DBE program” (NYSDOT 2011). Sometimes there is not a close working relationship or substantial advance communication between staff plan- ning future projects and DBE program staff, who are most directly responsible for implementing the Federal DBE Pro- gram. Interviews with several state DOTs found that staff responsible for the DBE program learned of and became involved in projects relatively late in the process. They were frustrated that they were being left out of the loop. DBE program staff from some state DOTs reported the lack of an agency-wide understanding and commitment to effectively implement the Federal DBE Program. For example, some reported a just-check-the-box attitude in other divisions toward the DBE program. They noted that the commitment to effective use of the program must be in place from the beginning of a project, regardless of whether it is a design-bid-build or alternative delivery project. In some state DOTs, engineering staff responsible for plan- ning design-build projects are separate from staff handling design-bid-build projects. Additionally, alternative delivery projects are relatively new in some states. In these instances, the alternative project delivery staff and DBE program staff may need to build strong relationships from scratch. 2. Incorporating DBE Program Language in RFQ, RFP, and Contract Documents Step 2 in the DBE contract goals process applies regard- less of whether a state DOT applies a traditional or new approach. However, according to interviewees, it can be more challenging to incorporate appropriate contract lan- guage for states with new approaches, as these materials must be developed from scratch. Sample RFP Language States using a traditional approach use the same or very sim- ilar DBE program language in the RFQ, RFP, and contract documents as they use for design-bid-build projects. The traditional method for using DBE contract goals requires the proposer to meet a specific percentage DBE par- ticipation goal, or show good faith efforts to do so, at or near the time of proposal. For example, the RFP for a DelDOT design-build project contained the following paragraph: A DBE participation goal of seven percent (7%) has been established for this project. The design-builder is required to make good faith efforts to involve Department-certified DBE professional service and construction firms in the prosecution of the work. (DelDOT 2012, p. 27) When a DBE goal is set for a U.S.DOT-funded contract, federal regulations require that solicitations for that contract communicate that a bidder or proposer has an opportunity to comply with the program either through meeting the goal or showing good faith efforts to do so. These and other solicita- tion requirements for traditional design-bid-build contracts are listed in 49 CFR Section 26.53 (b). Contract Language Interviewees from states and FHWA were emphatic that DBE program requirements be clearly and comprehensively spelled out in all RFQ, RFP, and contract documents. Based on the review of documents in this study, states that imple- ment DBE contract goals in the same way as they do design- bid-build projects use the same or very similar contract language for both. Advice from Interviewees Concerning RFP, RFQ, and Other Contract Language Several of the interviewees advised state DOTs to develop all DBE language for the RFQ, RFP, and contracts at the outset of the design-build procurement process. For example, the NYSDOT civil rights director urged other DOTs to include clear DBE contract language to ensure contractor compli- ance, because dealing with contractors requires referring to the contract documents. An FHWA regional official with design-build experi- ence advised state DOTs to develop the contract document before the RFP goes out. He cautioned that the size and complexity of alternative delivery projects means that state DOT staff and the contractor are less likely to think about DBE issues. The official observed that vague or nonexistent contract language can lead to difficulties implementing the DBE program. He advised state DOTs to include monitoring requirements in the contract, including language related to reporting, deadlines, dedicated point of contact, and sanc- tions for noncompliance. Inclusion in contracts of requirements concerning DBE contract goals is also specified in the federal regulations (see, for example, 49 CFR Section 26.53). The federal regulations do not provide the specific DBE language for the solicitation but do include certain requirements. A related requirement is for state DOTs to include pro- cedures used for design-build projects in their overall DBE program plans (FHWA 2002). 3. Communicating Opportunities to DBEs and Other Small Businesses Especially for large projects, state transportation depart- ments begin outreach to the contracting community,

16 including DBEs, long before requests for qualifications or proposals are released. For megaprojects, outreach might be a year or more before contractors are developing proposals, according to state DOTs. This step in the process is the same for states using either traditional methods or new methods to apply DBE contract goals to design-build projects. Based on interviews across state departments of trans- portation setting DBE contract goals, state DOTs might start by holding a series of meetings explaining the project and contract opportunities (such as Minnesota DOT’s meet-and- greets for short-listed proposers and potential subs/DBEs). The Ohio DOT continues outreach in partnership with the design-build team through the design phase. Several interviewees noted that the need for advance outreach is one reason why it is important that DBE pro- gram staff learn about upcoming alternative delivery method projects, especially large ones, early in their plan- ning. One interviewee from a civil rights division reported that they have learned that more collaboration is needed between civil rights and other divisions at her state DOT. They could be partners in outreach activity and collaborate on monitoring. Communication issues exist for states with traditional approaches and those with new methods for applying DBE con- tract goals. Chapter four provides examples of new approaches. 4. Establishing a DBE Goal for the Project States set DBE contract goals using methods that are simi- lar to those used for design-bid-build contracts but with less information. As with other steps in the process, contract goal-setting did not vary between states that follow tradi- tional approaches to applying DBE contract goals and those with new approaches. Single Goal for Design-Build State transportation departments were asked whether they set a single DBE goal for the entire project or one goal for design and a separate goal for construction. Among the five states using traditional approaches— • One (Delaware) sets separate DBE contract goals for the design and construction portions of a design-build contract; • Three (Indiana, Mississippi, and Pennsylvania) set a single DBE contract goal that combines design and construction; and • One (Tennessee) sets a single DBE contract goal that pertains only to construction. Including state DOTs that use new methods for DBE con- tract goals, 21 of the 33 states that set DBE goals on design- build projects use a single DBE contract goal that combines design and construction. Information at Time of Goal-Setting Although information is limited, there are usually some planning-level cost estimates for the work when a goal for a design-build project needs to be established. For example, Caltrans staff reported that when setting a DBE contract goal on a design-build project, they might be working with only 30 general bid items, compared with 200 items on a typical design-bid-build project, which made goal-setting difficult. Nevertheless, state DOTs reported that they were able to set DBE contract goals on design-build projects. Only one state DOT interviewed reported that it did not apply DBE contract goals on design-build projects because of insuffi- cient information to calculate those goals. Methods for Calculating a DBE Contract Goal According to state DOTs, when they are determining the level of the goal, they typically consider the sizes and types of work involved, location within the state, and availability of DBEs (and sometimes other firms) to perform that work. State DOTs reported that they apply the same process for DBE goal-setting for design-build contracts as they do for design-bid-build projects, just with less refined information. No interviewees indicated that they had developed a sub- stantially different approach for these projects. Two general approaches were identified through interviews and review of available documentation. One approach, Virginia DOT’s goal-setting process, assesses whether there would be competition among DBEs (not just one DBE in the discipline) for each area of work. If there is competition, VDOT considers that item as “possible for DBEs.” It considers the number of projects going on in a particular area and whether DBEs would be able to work on an additional project. VDOT also examines past projects in that geographic area, the goals that were set, and whether they were reached. After developing a percentage figure through these methods, VDOT cuts the amount in half to set the proj- ect goal. VDOT then reviews the proposed goal internally. Revisions can occur at any stage before contract award. Caltrans uses a similar approach. According to interviews with Caltrans, the standard DBE goal-setting process applies when developing a DBE contract goal for design-build con- tracts, with certain constraints. In its standard process, Cal- trans identifies work items likely to be performed by the prime contractor and then reviews remaining items for sub- contractor work. It determines how many DBEs appear to match those items based on types of work and project loca- tion. If there are only a few DBEs available for an item, Cal-

17 trans does not count that work area in the DBE contract goal calculation. Caltrans then applies certain discounts (e.g., for supplies or trucking). It can set a goal of zero percent if the amount of work that can be subcontracted is negligible or the availability of DBEs for that work is minimal. Finally, Caltrans applies an overall discount factor adjusting the DBE contract goal. The major difference for design-build contracts is that Caltrans staff might be working with 30 general bid items for design-build, compared with 200 items on a typical design-bid-build contract. At the time of this report, Arizona DOT (ADOT) was an example of a state DOT that uses a somewhat different contract goal-setting system. Like other states, ADOT starts with dollar estimates by work areas. It also screens to ensure that a minimum number of DBEs (three) are available for a work item before that item can be counted toward a DBE contract goal. It then matches DBEs and other firms to each work item and develops a percentage of available firms that are DBEs for each item (by dividing DBEs by total firms available for that item). The percentage goal is determined by multiplying the DBE percentages for each work item by the dollars for the work item, totaling results, and dividing by the total contract value. (Although this study did not delve into the DBE goal-setting process of each state DOT, this approach appears to be uncommon and, according to an FHWA representative, is not endorsed by FHWA.) Challenges in Setting a DBE Contract Goal for a Design- Build Project Several state DOTs reported that there is much less information to set a DBE contract goal for a design-build contract than for a design-bid-build contract. For example, Caltrans reported that lack of complete information is a difficulty in setting DBE con- tract goals (estimates for 30 cost items rather than 200). Beyond challenges associated with less-detailed estimates, a few states noted difficulty in factoring in the effect of con- current projects in a region, especially given the length of a large design-build project For example, NYSDOT expressed concern over the lack of a mathematical formula to alter the goals based on other concurrent FTA, FAA, and FHWA proj- ects in the area. This was especially evident after Hurricane Sandy. This state DOT also reported that most design-build projects have a longer duration, which makes it more difficult to set a goal appropriate for future contracting work. Interviews with state DOTs indicated that they approach such challenges in the same way for design-build and design- bid-build projects. Review of Initial Calculations State DOTs that use formulas or programs to calculate an initial DBE goal usually have an opportunity to adjust the goal based on staff review. Often teams of staff members, including professionals outside a civil rights division, con- tribute to this goal-setting process. For example, Michigan DOT includes representatives from many different offices within the DOT that review individual project goals. A com- mittee chair has the authority to set the final contract goal (and to set a goal without committee review when there is a tight deadline). Range of Goals When asked about the range of goals on design-build proj- ects, state departments of transportation gave a wide range (2% to 15% or more). The Federal DBE Program does not require that a DBE contract goal be established for every U.S.DOT-funded contract. For example, on one design-build project, Utah DOT determined that the goal would be zero percent, so it did not set a DBE contract goal. This is allowed under the DBE program. A few interviewees from state DOTs reported community or political pressure to set a particularly high goal. A num- ber of interviewees reported that a standardized goal-setting process, with internal review mechanisms, helps to consis- tently set reasonable and achievable DBE contract goals. On some alternative delivery method projects, the state DOT refines the initial DBE contract goal as more informa- tion becomes available on the scope of the work, subcon- tracting opportunities, and types of supplies and materials needed for the project. • North Carolina DOT (NCDOT). NCDOT examines contractor feedback about excessive DBE contract goals. For example, if all four bidders say 14% is too high, NCDOT will reconvene the goals committee to review the goal. NCDOT has reexamined DBE con- tract goals on a few occasions but rarely found a need to change them. • Texas DOT (TxDOT). TxDOT can adjust a contract goal any time before the contract is signed if the goal was set long before the project was awarded. A goal is rarely adjusted once the project is awarded. • Caltrans. Caltrans may adjust a DBE contract before contract award. For example, Caltrans once increased the DBE contract goal from 10% to 13.5%. 5. Reviewing DBE Proposal Submissions to Determine Contract Award Evaluation of proposer DBE requirements can be conducted at the RFQ or RFP stage (RFP stage is more common). Under traditional methods, DBE program staff consider whether the proposer has met the DBE contract goal or shown good faith efforts to do so based on information submitted with or near the bid date for the proposal.

18 • Proposers submit dollar commitments to individually identified DBEs for specific work items; and/or • Proposers document their good faith efforts to achieve the DBE contract goal if they fall short of the goal. Either method is an approved way of complying with DBE contract goals under the Federal DBE Program. Pro- posers are evaluated on a pass-fail basis; they have either met the goal or shown good faith efforts to do so, or they have not. If the state transportation department determines that the proposer is not in compliance, its proposal is rejected. Federal regulations require that the state DOT provide an opportunity for a contractor to appeal this decision through the procedures established by that state DOT. If the proposal is initially found to be in compliance, other proposers have an opportunity to challenge this determination through bid protest procedures established by the agency. Typically, only those firms with valid DBE certification within that state can be counted toward meeting a DBE con- tract goal; however, cross-state projects (Kentucky’s Ohio River Bridges, for example) allow firms certified in either state to be counted. On the Tappan Zee Bridge project, FHWA granted NYSDOT special permission to allow DBEs certified in any state to be used to contribute toward the DBE goal. In the wake of Hurricane Sandy, with a number of fed- erally funded projects happening concurrently, the agency needed to consider outside DBEs to enable primes to achieve DBE goals. Required Information About DBEs Federal regulations provide the flexibility to agencies to allow bidders to submit such information after time of bid (but before contract execution). 49 CFR Section 26.53 (b) covers what the agency requires from the contractor at time of bid or before contract execution: • The names and addresses of DBE firms that will par- ticipate in the contract; • A description of the work that each DBE will perform; • The dollar amount for the participation of each DBE firm; • Written documentation of the bidder/offeror’s commit- ment to use a DBE subcontractor whose participation it submits to meet a contract goal; • Written confirmation from the DBE that it is partici- pating in the contract as provided in the prime contrac- tor’s commitment; and • If the contract goal is not met, evidence of good faith efforts. Federal regulations require a state DOT to make sure all information is “complete and accurate and adequately documents the bidder/offeror’s good faith efforts” before executing the contract. The DBE commitments are just that—the contractor must use the DBEs at the indicated dol- lar amounts unless it requests and receives permission from the state DOT to make changes. DBEs can be added to the contract, but no DBEs can be substituted without good cause and prior written approval from the agency [49 CFR Section 26.53 (f)(1)]. Timing of Required Information For traditional design-bid-build projects, some state DOTs require all the DBE participation information to be submit- ted with the bid, while others allow bidders a certain number of days after the bid date to provide the supporting informa- tion. Bidders on traditional design-bid-build contracts often complain that it is onerous to require DBE identification and prices at time of bid given the pressures of bid day, and many states give bidders time after the bid date to provide DBE commitments. For example, Mississippi DOT gives propos- ers 10 days between bid date and award to provide a com- plete DBE list that includes DBE names, work descriptions, and work values for the project. This requirement is the same as for MDOT’s design-bid-build projects. On the other hand, DBEs (and other subcontractors) sometimes complain of bid shopping or bid manipulation if some listing of DBEs (or all subcontractors) is not included with the bid. Good Faith Efforts Appendix A to 49 CFR Part 26—Guidance Concerning Good Faith Efforts—requires that a state DOT apply good faith efforts in any situation in which it has established a contract goal. The appendix provides eight general examples of what an agency might consider as part of a bidder’s good faith efforts to meet a DBE contract goal. Even with this guidance, the federal regulations recognize that assessment of whether a contractor has made good faith efforts to meet a contract goal is a judgment call based on the evaluation of objective criteria. As a recipient, it is up to you to make a fair and reasonable judgment [regarding] whether a bidder that did not meet the goal made adequate good faith efforts. It is important for you to consider the quality, quantity, and intensity of the different kinds of efforts that the bidder has made. The efforts employed by the bidder should be those that one could reasonably expect a bidder to take if the bidder were actively and aggressively trying to obtain DBE participation sufficient to meet the DBE contract goal. Mere pro forma efforts are not good faith efforts to meet the DBE contract requirements. We emphasize, however, that your determination concerning the sufficiency of the firm’s good faith efforts is a judgment call: meeting quantitative formulas is not required. Who Must Submit Information Requiring DBE information from all or a subset of contractors is useful for several reasons, including knowing whether other bidders had difficulty meeting the DBE contract goal when

19 evaluating the good faith efforts of the low bidder or highest rated proposer (49 CFR Part 26, Section V of Appendix A). Appeals Process Federal regulations in 49 CFR Section 26.53 (d) provide guidance on an agency’s appeals process: • The decision on reconsideration must be made by an official who did not take part in the original determi- nation that the bidder/offeror failed to meet the goal or make adequate good faith efforts to do so. • The bidder/offeror must have the opportunity to meet in person with the reconsideration official to discuss the issue of whether it met the goal or made adequate good faith efforts to do so. • The agency must send the bidder/offeror a written decision on reconsideration, explaining the basis for finding that the bidder did or did not meet the goal or make adequate good faith efforts to do so. The result of the reconsideration process is not adminis- tratively appealable to U.S.DOT. 6. Monitoring Compliance As with traditional design-bid-build projects, dollar com- mitments to specific DBEs are established as part of the contract. State DOT staff monitor whether those DBEs actu- ally receive that work and attain the stated dollar commit- ment (or evaluate prime contractors’ requests to substitute a DBE). After contract award, traditional monitoring methods focus on obtaining and approving subcontracts for DBEs, and monitoring and verifying payments to DBEs. The state transportation department ensures that the DBE goal is met or that the prime contractor has made good faith efforts to do so in performance of the contract. State DOTs also moni- tor compliance with other requirements, such as commer- cially useful function (CUF); prompt payment and return of retainage for all subcontractors, including DBEs; and no substitution of DBEs without good cause and written state DOT approval. The state transportation department will also respond to any complaints from DBEs during the course of the contract. The most common traditional monitoring methods include evaluation of payment forms or other information and conducting onsite visits. Several state DOTs mentioned that design-build projects can be large and involve DBEs as first- and second-tier subcontractors. Monitoring can be challenging. Civil rights staff typically have other monitor- ing responsibilities on a contract, including certified payroll and other equal employment opportunity (EEO) require- ments. Often, a manager in civil rights coordinates work performed by the state DOT’s field staff (either civil rights or project delivery staff) or staff of the sub-recipient involved with the project. Some states, such as Arizona and Utah, pro- vide the tracking tools to the prime contractor. 7. Remedying Any Noncompliance State DOTs typically use the same remedies for noncompliance in alternative delivery method projects and design-bid-build projects. Both types of projects have similar contract provi- sions in the event that a contractor fails to meet the DBE goal for the project or cannot show good faith efforts to do so. There are also remedies for other types of noncompliance, including for terminating a DBE subcontract without good cause and prior written approval from the state DOT. Federal regulations require that potential administrative remedies for noncompli- ance be included in the contract [see 49 CFR Section 26.53 (h)]. Differences in remedies for noncompliance between state DOTs that use traditional methods for DBE contract goals and those that use new methods were not identified. If the state transportation department concludes that the prime contractor is not making good faith efforts to meet the DBE goal, it may hold meetings with the contractor to address those concerns. Contracts include remedies for non- compliance such as these: • Withholding payment to the contractor until the situa- tion is resolved (Colorado DOT as one example); • Finding the contractor to be in breach of contract (a sanction that 49 CFR Section 26.13 requires to be in the contract); • Contract termination (Nevada DOT); or • Liquidated damages, often dollar-for-dollar for any unap- proved shortfall in the DBE participation (frequently included in contracts). There are variations of liquidated damages. For example, Arizona DOT may reduce the damages to 50 cents per dollar of unobtained DBE par- ticipation if it is a first offense and ADOT determines that the failure was an unintentional error or oversight. Some state transportation departments have remedies that extend beyond the life of the contract, including these: • Reducing the contract rating, limiting bonding, or reducing bid capacity (Ohio DOT and TxDOT); or • Probation or suspension from bidding (NCDOT and Virginia DOT). Florida DOT evaluates contractors on their cumulative efforts regarding DBE participation and, although it indi- cates that it operates a 100% neutral program, can penalize a contractor if it consistently falls short of the overall annual DBE goal for the state. The decision to impose sanctions typically involves lead- ership from civil rights, engineering, and legal divisions.

20 Note that 49 CFR Sections 26.101, 103, 105, 107, and 109 provide remedies for compliance and enforcement. CHAPTER SUMMARY Of the 48 state transportation departments that appear to have used alternative delivery methods, 33 have applied DBE contract goals to those types of projects. Many of the state DOTs that apply DBE contract goals to alternative delivery projects began by closely adhering to long-estab- lished methods used for their design-bid-build projects, but only five appear to have retained that approach. Chapter three described the seven stages of applying the DBE goals program to a contract using traditional methods. Some state DOTs advise closely adhering to as many of these steps as possible and only varying when necessary. Chapter four describes new approaches to cer- tain steps.