Dive Brief:
- The Department of Transportation’s new interim final rule for its Disadvantaged Business Enterprise program has spurred state DOTs to pause workforce contracting goals as they review certification status of approximately 41,000 firms nationally, lawyers say.
- While all participating firms must be recertified under the new rule, the process impacts women- and minority-owned businesses the most, according to attorneys, since they previously qualified automatically on the basis of sex or race, but no longer do.
- DBE goals in existing contracts executed prior to Oct. 3 still apply and DBE firms who won work under prior rules can’t be removed from a contract just because the recertification process is taking place. Firms may also appeal a decision of decertification.
Dive Insight:
On Oct. 3, DOT’s new interim final rule, which barred the use of sex or race as a basis for certification, became effective immediately and caused confusion for existing DBE firms that questioned whether they would suddenly be terminated from the program. Follow up guidance from DOT issued Oct. 24 made clear that wasn’t the case.
However, it also emphasized that all participating firms, including those owned by women and minorities, would need to seek recertification and provide a personal narrative explaining what disadvantage owners had experienced in their businesses. That narrative cannot cite sex or race as a qualifying reason. Along with the personal narrative, owners must also submit a personal net worth statement, which was previously capped at $2.047 million.
In blog posts and interviews, attorneys spelled out how those changes are taking shape approximately six weeks into the process. The heaviest burden during recertification will fall on women- and minority-owned firms, according to attorneys Robyn St. Hilaire and Natalie Nicole Mark of law firm Offit Kurman.
“Female- and minority-owned businesses 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 not related to race or gender.”
While the DBE program runs nationally, state-level DOTs handle certification via unified certification programs for agencies across their jurisdiction. DOT’s interim final rule directed all UCPs to reevaluate the eligibility of all existing DBEs. As that process takes place, which DOT didn’t put a deadline on but directed to happen “as quickly as practicable,” DBE goals going forward are effectively negated, at least temporarily.
“The DBE goals are being removed only until all existing DBEs are recertified without using the rebuttable presumption of social disadvantage,” Chris Slottee, an attorney at Schwabe in Anchorage, Alaska, told Construction Dive.
Although that’s the case currently, firms should still seek recertification, since participation goals for disadvantaged businesses in federal contracts should eventually go back into effect.
“The goals will come back into play on future contracts once this reevaluation process is complete,” attorney Jacqueline Unger, a partner at PilieroMazza in Washington, D.C., told Construction Dive. “Firms should get recertified so that they’ll be eligible to bid on that DBE work down the line.”
Several states have already taken steps to roll out the recertification process for their UCPs, according to St. Hilaire’s and Mark’s blog post. Attorneys recommended DBE reach out to their state’s UCP as soon as possible for guidance and to start the process.
For many current DBE firms, the program represents the lifeblood of their business, and recertification could become an existential must, Danielle Dietrich, a partner at Potomac Law Group in D.C., told Construction Dive.
“The DBE certification is the only way for many of them to compete against the larger, private-equity backed firms,” Dietrich said. “It’s absolutely worth the time and effort for them to put together the personal narrative and new personal net worth statement if it means more of a chance of keeping their business alive.”
