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Dive brief:
- The Department of Transportation’s new interim final rule for its Disadvantaged Business Enterprise program has galvanized the state DOT to halt workforce hiring targets as they review the certification status of approximately 41,000 companies nationwide, attorneys say.
- While all participating businesses must recertify under the new rule, the process affects women- and minority-owned businesses the most, attorneys say, because they used to automatically qualify based on gender or race, but no longer do.
- DBE targets on existing contracts executed before October 3 still apply and DBE companies that won work under previous rules cannot be removed from a contract only because the recertification process is underway. Companies can also appeal a decertification decision.
Diving knowledge:
On October 3, DOT’s new interim final rule, which no use of gender or race as the basis for certification, it was effective immediately and caused confusion among existing DBE companies who wondered if they would suddenly be dropped from the program. Follow DOT instructions published on October 24 made it clear that was not the case.
However, she also stressed that all participating businesses, including those owned by women and minorities, must apply for recertification and provide a personal narrative explaining what disadvantages the owners have experienced in their businesses. This narrative cannot cite gender or race as a reason for qualification. Along with the personal narrative, owners must also submit a personal statement of net worth, which was previously capped at $2.047 million.
In blog posts and interviews, attorneys explained how these changes are coming to fruition roughly six weeks into the process. The heaviest burden during recertification will fall on women- and minority-owned businesses, according to attorneys Robyn St. Hilaire and Natalie Nicole Mark of Offit Kurman Law Firm.
“Businesses owned by women and minorities will feel the most immediate impact,” St. Hilaire and Mark wrote in a recent blog post. “Owners must now prepare a detailed personal narrative and financial disclosure demonstrating disadvantages based on lived experience unrelated to race or gender.”
Although the DBE program is run at the national level, state DOTs manage certification through unified certification programs for agencies within their jurisdiction. DOT’s interim final rule directed all UCPs to reevaluate the eligibility of all existing DBEs. As this process occurs, which the DOT did not put a deadline on but indicated would happen “as soon as possible,” DBE’s future goals are effectively negated, at least temporarily.
“The DBE targets are only removed until all existing DBEs are recertified without using the rebuttable presumption of social disadvantage,” Chris Slottee, Schwabe’s attorney in Anchorage, Alaska, told Construction Dive.
While this is currently the case, companies would still need to seek recertification, as the goals for participation of disadvantaged companies in federal contracts would have to be reinstated.
“The goals will come back into play in future contracts once this reevaluation process is complete,” attorney Jacqueline Unger, a partner at PilieroMazza in Washington, DC, told Construction Dive. “Companies would need to recertify to be eligible to bid for this DBE work at a later date.”
Several states have already taken steps to implement the recertification process for their UCPs, according to the St. Hilaire and Mark. Advocates recommended that DBEs contact their state’s UCP as soon as possible for guidance and to begin the process.
For many current DBE firms, the program represents the lifeblood of their business, and recertification could become an existential necessity, Danielle Dietrich, partner at Potomac Law Group in DC, told Construction Dive.
“DBE certification is the only way for many of them to compete against the larger private equity-backed companies,” Dietrich said. “It’s worth the time and effort to put together your personal narrative and new personal net worth statement if it means a better chance of keeping your business alive.”
