1. 2018 AASHTO Civil Rights Conference
DBE Program
National Areas of Focus and Concern
FHWA Office of Civil Rights
Martha Kenley
National DBE Program Manger

2. 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

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

4. 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

5. 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

6. 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

7. 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

8. 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.

9. 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.)

10. 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.”

11. 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 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.

12. 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.

13. 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).

14. 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

15. 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

16. 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

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

18. 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?

19. 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

20. 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

21. 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.

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

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

33. 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?

34. 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”

35. 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

36. 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?

37. 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

38. Overconcentration
49 CFR 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