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5 State DOTs and the Federal DBE Program Since 1983, state and local governments have been required to implement the federal DisÂ advantaged Business Enterprise (DBE) program if they receive U.S. DOT funds for transportaÂ tion projects. The DBE program and earlier versions of it (Minority Business Enterprise and Women Business Enterprise Program) have been in place since 1980. A DBE is a firm that is socially and economically disadvantaged as defined by program regulations. Most DBEs are minorityÂ or womenÂowned companies. State departments of transportation (DOTs), as recipients of U.S. DOT funds for transÂ portation projects, are required to establish a DBE program and to set overall goals for DBE participation on contracts assisted by the U.S. DOT. State DOTs meet the overall goals through DBE participation as subcontractors and as prime contractors. Objectives of the proÂ gram include facilitating DBE participation through supportive services, removing barriers to DBE participation in contracts assisted by U.S. DOT, establishing raceÂneutral measures, and creating a level playing field for DBEs. A further objective is âto assist the development of firms that can compete successfully in the marketplace outside the DBE Programâ (49 CFR Section 26.1 (g)). To be certified as a DBE, the firm and its principal minority and/or woman owner(s) must not exceed the stipulated personal net worth, as well as limits regarding the ownerâs ability to accumulate substantial wealth. The minority and/or woman owner(s) must own, control, manage, and direct the firm, and the firm must be a small business as defined by the Small BusiÂ ness Administration (SBA). Although âgraduationâ of DBEs from the program is not specifically mentioned in the federal regulations, eligibility requirements anticipate that some firms will develop to a point where assistance under the program is no longer needed. Graduated firms do not count toward meeting a state DOTâs overall annual DBE participation goal. Most state DOTs provide supportive services to DBEs to assist in their development. Budgets for those services are limited, and state DOTs seek a mix of technical assistance that has the greatest benefit to DBEs. More than 40 state DOTs also set raceÂconscious DBE contract goals in their implementation of the program. Prime contractors can only count certified DBEs toward contract goal attainment. When a firm that was used by prime contractors to meet DBE contract goals graduates from the program, more subcontracting opportunities open for other DBEs. Federal regulations also anticipate the possibility that DBEs might become overconcentrated in a certain type of work. If a state DOT observes such overconcentration, which might unfairly prevent nonÂDBEs from competing for subcontracts, it must assist DBEs in performing work in other fields (49 CFR Section 26.33). C H A P T E R 1 Background
6 Compendium of Successful Practices, Strategies, and Resources in the U.S. DOT Disadvantaged Business Enterprise Program Research Objectives The U.S. DOT and state DOTs need additional information about successful DBEs, the extent to which DBEs have graduated from the federal DBE program, and how state DOTs and their partners can improve efforts to help firms succeed in the marketplace outside the DBE program. Currently, state DOTs have little data about the transportation contracting firms that have been most successful and factors contributing to their success. In addition, trade associations and other providers of assistance to firms in the transportation contracting industry would benefit from evidenceÂbased direction on ways to help DBEs. The lack of sufficient information has been a source of criticism of the federal DBE program inside and outside of the federal government (U.S. Department of Transportation, Office of Inspector General 2013). This research has four primary objectives: 1. Identify good practices for state DOTs and their partners to promote âsuccessâ and selfÂ sufficiency of DBEs on contracts falling under the federal DBE program as well as stateÂ funded contracts and other work outside the program. 2. Add to knowledge concerning the characteristics, business practices, and behaviors of firms that have participated in the federal DBE program and are no longer DBE certified (they graduated, either voluntarily or perhaps involuntarily through a state DOT process of decertification). 3. Assess whether onceÂcertified DBEs that are no longer certified have been able to survive postÂgraduation, and, if so, assess the factors that contributed to postÂprogram sustainability. 4. Start to identify specific practices of state DOTs and their partners that have contributed to (or hindered) DBE success. Research conducted under TRBâs Cooperative Research Programs as well as other research efforts have contributed to advancing the research objectives listed above (see bibliography). State DOTs have also conducted disparity studies and other research examining experiences and barriers for DBEs. However, the research presented here is the first to focus on successful DBEs, including firms that have graduated.