2018 AASHTO Civil Rights Conference DBE Program National Areas of Focus and Concern FHWA Office of Civil Rights Martha Kenley National DBE Program Manger

DBE Area of National Focus Integrate Civil Rights Office with rest of agency Consider DBE as part of agency’s overall project delivery process Alternative Contracting Methods Other agency initiatives: project bundling

New Guidance issued 4-25-18 State or Local MBE/WBE goals on Federally-assisted contracts Prompt payment section template for DBE Program Plan Timely processing of DBE certification

Areas of National Concern CUF: Monitoring and Oversight—Written Certifications: 26.37(b) Good Faith Efforts: Responsiveness and Responsibility DBE and Alternative Contracting Methods Prompt Payment/Return of Retainage Potpourri

CUF Monitoring and Written Certification §26.37(b) What are a recipient’s responsibilities for monitoring work performed by DBEs? Recipients are required to monitor every contract on which DBE participation is claimed Prime is claiming credit toward contract goal Recipient is claiming credit for achievement of overall goal Includes Race-neutral participation

CUF Monitoring and Written Certification §26.37(b) What recipient actions constitute sufficient “monitoring” in the context of this requirement? Develop a process that ensures: (1) on every contract on which DBE participation is claimed, work committed to a DBE is actually performed by the DBE to which the work was committed; and (2) the monitoring includes a written certification that the recipient has reviewed contracting records and monitored work sites for this purpose

CUF Monitoring and Written Certification §26.37(b) What is meant by a “written certification?” Written certification requires that the recipient: Document, date, and sign a summary of its monitoring efforts May be in hard copy or electronic format Make available upon request to the relevant Operating Administration (OA) upon request Flexibility of format intentional

CUF Monitoring and Written Certification §26.37(b) Is the recipient allowed to monitor a sample or percentage of contracts on which DBEs participate? No. A recipient’s obligation to monitor work performed by DBEs on every contract on which DBE participation is claimed has always been a program requirement.

CUF Monitoring and Written Certification §26.37(b) Preamble to the 2011 rule revision: “This monitoring, and the recipient’s written certification that it took place, must occur with respect to every contract on which DBE participation is claimed, not just a sample or percentage of such contracts, to make sure that the program operates as it is intended.” It applies to contracts entered into prior to the effective date of this rule, since the obligation to monitor work performed by DBEs has always been a key feature of the DBE program.” (Emphasis added.)

CUF Monitoring and Written Certification §26.37(b) Must the monitoring consist of a “commercially useful function” review? Yes, but not exclusively. Before a recipient can count the dollar value of a DBE’s participation toward a contract goal or the recipient’s overall goal, the recipient must ensure that the DBE is performing a CUF Thus, the recipient must perform a CUF on every contract on which DBE participation is claimed to accurately credit the DBE’s services. A signed and documented CUF review would meet the monitoring requirement. See 49 CFR §26.55(c): “Count expenditures to a DBE contractor toward DBE goals only if the DBE is performing a commercially useful function on that contract.”

CUF Monitoring and Written Certification §26.37(b) In addition to a CUF review, a recipient’s field staff should, as part of their other on-site monitoring duties: (1) review the DBE’s subcontract to identify scope of work (2) take steps to observe the DBE on the job site to ensure that it is the same DBE that was committed to perform the subcontracted work and it is using its own resources to perform the scope of work (3) record the observations in a log book or other document (4) include a signature or email identification to meet the “written certification” requirement. If conducted as part of other on-site monitoring duties, the recipient should ensure that there is a specific section in the log book or other document dedicated to DBE on-site monitoring.

CUF Monitoring and Written Certification §26.37(b) Must all monitoring that a recipient performs be documented and signed? Yes. The purpose of the written certification is for the recipient to acknowledge that it has performed the required oversight and stands by its results. Therefore, all monitoring should be documented and include a signature or other identification of the person who performed the review, and the date.

CUF Monitoring and Written Certification §26.37(b) Is it sufficient for a recipient to perform the monitoring requirement at contract close-out? No. While it is important for a recipient to certify that it has provided the required monitoring and oversight of DBE participation during the contract close-out process, this may not be the sole occasion that a recipient monitors and documents its efforts to monitor a DBE’s performance as contemplated by § 26.37(b).

CUF Monitoring and Written Certification §26.37(b) Recipient must ensure a trained staff person monitors performance while the DBE is active on the jobsite and follow up by creating a written, signed document The Department recommends monitoring a DBE’s participation in the early stages of contract performance to provide time for the recipient to respond and correct any identified compliance issues

CUF Monitoring and Written Certification §26.37(b) Is a recipient required to provide a written certification for all DBEs, even those performing professional services?  Yes, the Department expects recipients to perform on-site monitoring of every contract on which DBE participation is claimed The only exception is for those DBEs performing outside the state

CUF Monitoring and Written Certification §26.37(b) Must a recipient document its monitoring and oversight processes and procedures in its DBE Program Plan? Yes. Each recipient is required to include in their DBE Program Plan details about its monitoring efforts, including contract reviews, on-site reviews, and its CUF process

Commercially Useful Function and Program Plans Overall Concerns Reproduce 26.55 on counting Lack description of process Does not identify who performs CUF Does not identify when CUF performed

Commercially Useful Function High Risk Areas Suppliers Regular Dealers (bulk items) Must be determined on a case-by-case basis What is the process? What documents are reviewed? Who is responsible for performing review? Trucking How are DBE trucks identified How are supplemental trucks identified Who is responsible for reviewing?

Prompt Payment 49 CFR §26.29(b) Recipients must have a contract provision that requires prime contractors and consultants to pay all subcontractors for satisfactory performance of their contract (completion and acceptance) no later than 30 days from the prime’s receipt of payment from the recipient for the work the subcontractor(s) completed. Recipients can require shorter timeframes

Prompt Payment Applies to Subcontractors as well For example, a 1st tier subcontractor must pay its 2nd tier subcontractor within 30 days of its payment from the prime 2nd tier subcontractor must pay 3rd tier subcontractor within 30 days of its payment from the 1st tier subcontractor

Return of Retainage Regulation 49 CFR §26.29(b)is intended to change normal business practices about when retainage is released Prime contractors are not permitted to hold retainage from subcontractors until the end of project when the recipient has made final payment to the prime Regulations provide three retainage models What is retainage? Withholding a certain percentage of payment that the recipient owes the prime (or the prime owes the subcontractor),typically until all the work of the prime contractor (or subcontractor) has been satisfactorily completed.

Prompt Payment Return of Retainage Overall Concerns Prompt payment No pro-active monitoring and enforcement process. Cannot rely on complaints Return of Retainage Which retainage option selected is not identified clearly—or sometimes conflicts with regulations Review subcontract between prime and sub

Good Faith Efforts When are DBE commitments/good faith efforts due? 2 options only ALL bidders must submit either: With bid as a matter of responsiveness Within 5 days after bid as a matter of responsibility If commitments are due at time of bid and GFE due within 5 days, this is responsibility

Good Faith Efforts Process for evaluating Good Faith Efforts DBE Liaison should be involved Evaluations of efforts must be made by program experts Decisions should not be made by committees that lack subject matter expertise Reconsideration by objective party with subject matter expertise

Good Faith Efforts—Determining Goal Attainment Pre-award Not Allowed: Efforts by prime to obtain additional DBE participation to meet goal after 5 days but before contract award Apparent low bidder should not be allowed to solicit additional DBEs to meet the goal after the 5 day deadline but before award If don’t meet goal within 5 days, good faith efforts must be evaluated Nothing prohibits low bidder to add DBE participation for race neutral participation at any time. This is in the context of goal attainment. Not termination and replacement

GFE Overall Concerns Program Plans Inconsistencies throughout the document—may reproduce regulations in one area—may include conflicting information elsewhere in the document Giving extensions to the 5 days, or additional days to second low bidder Only requiring apparent low bidder to submit commitments and/or GFE No process for reviewing GFE or listing of who is involved in review process

DBE and Alternative Contracting DBE regulations and guidance structured around Design Bid Build (DBB) model Methods of project delivery have DBB model DBE in some Alternative Contracting poses challenges to Ensuring regulatory requirements are met DBEs have meaningful opportunities to compete

DBE Challenges in Alternative Contracting In some alternative contracting methods, it can be challenging to: Identify specific DBEs prior to award when design may be only 30% complete Determine when Good Faith Effort determinations should be made Provide effective oversight and ensure compliance with multiple and non-traditional partners

RFP and DBE RFPs COMMUNICATE EXPECTATIONS Advise proposers in detail of the DBE goal and requirements Include DBE outreach requirements Require proposers to submit list of specific DBEs it will subcontract with Require proposers to submit a DBE Performance Plan

DBE Performance Plans (DBEPP) Submitted in response to RFP or prior to award Detailed plan of the efforts the design-builder/developer will use to achieve DBE goal; schedule for soliciting DBE and reporting Contractual obligation

DBE Performance Plans Recipients place more emphasis on DPPs in Alternative Contracting in Design Build because: DBE use could fluctuate as the project moves from design into construction—additional opportunities may arise Difficult to commit to specific DBEs when project only 30% designed Becomes roadmap for compliance Note Don’t use the complaint-based system! Hesitant to complain about employer. Interview. When I speak to DBEs this is their number one concern Applies to both primes and subs

DBE Performance Plans Include details on how proposer will: Achieve the goal Ensure compliance Conduct outreach Track and report DBE participation

DBE Performance Plan and Good Faith Efforts (GFE) Roadmap for ongoing monitoring and evaluation of good faith efforts throughout the life of the project Is the design-builder/developer meeting deadlines for commitments? Is design-builder soliciting and considering DBEs for work items according to plan/schedule? Is design builder self-performing work items for which it agreed to solicit DBEs?

Potpourri Running Tally Race/Ethnicity-Based Incentives Western States Paving Co. v. Washington State Department of Transportation, et. al., 407 F.3d 983 (9th Cir. 2005), applies to States in west only. Disparity studies not necessary in States in other circuits Meaning of “overconcentration”

Running Tally Overall Concerns Running Tallies must be kept and monitored to see if contractor on track to meet goal DBELO must be involved in all termination and replacement decisions Don’t wait until end to ask for “good faith efforts” when fall short of goal

Running Tally Program Plan State must describe its a process for capturing running tally on contract goal achievement Who is responsible? How often is process monitored?

Incentives No race-based incentives Includes: Paying contractors more for using DBEs owned by certain race/ethnicity Giving contractors more goal credit for using DBEs of a certain race Allowing contractors to meet a lower DBE goal if use DBEs of a certain race Using any of these methods would require a waiver by the Secretary of Transportation

Overconcentration 49 CFR 26.33 means DBEs in certain work categories are placing an undue burden on non-DBEs in those same work categories Does NOT mean: Primes are using too many DBEs in a particular work area, e.g., trucking Prime contractors are using too many DBEs owned by a certain race, ethnicity, gender, e.g., non-minority women