The Department of Transportation (DOT) recently published a notice in the Federal Register of proposed rulemaking (NPRM) to amend the Disadvantaged Business Enterprise (DBE) and the Airport Concession Disadvantaged Business Enterprise (ACDBE) regulations. 87 Fed. Reg. 43620 (July 21, 2022). This proposal is the first NPRM update since 2014. While the DOT was originally scheduled to close the comment period on September 19, 2022, it agreed to extend the comment period until October 31, 2022, to provide sufficient time to prepare and submit comments to the docket.
The proposed revisions to the regulations were drafted by the DOT’s Office of Civil Rights, together with the Federal Aviation Administration (FAA), the Federal Highway Administration and the Federal Transit Administration, in an effort to help small businesses better compete for contracts on aviation, highway, and transit projects with federal funding. While some of the NPRM changes were minor, others would significantly expand program eligibility and modify airport sponsors’ regulatory duties. The bulk of the NPRM addresses the DBE program, which is regulated under Part 26 of Title 49 of the Code of Federal Regulations (CFR) and contains approximately 20 changes (found here.) Highlights of some significant changes are summarized below.
Personal Net Worth – Perhaps the most significant change is the proposal to increase the Personal Net Worth (PNW) cap for owners of both DBEs and ACDBEs from $1.32 million (last adjusted in 2011) to $1.6 million and exclude retirement assets from the calculation. Additionally, community property rules are excluded and while “household contents” of the primary residence are still divided equally, the NPRM is modified to clarify that motor vehicles of any type belong to the person who holds the title. Finally, the DOT may make future adjustments to this amount without the need for rulemaking by using Federal Reserve data. Such modifications should allow more owners to qualify as DBEs and permit existing DBEs to stay in the program longer.
Ownership Requirements – The NPRM replaces the “real, substantial, and continuing” capital contribution standard with a less-rigid standard of “reasonable economic sense.” Further, the NPRM clarifies that ownership investment includes purchases, capital infusions, gifts, and additional investments after initial ownership. Additionally, the marital property provision has been removed. These modifications that are no longer so narrowly construed provide owners with more flexibility for demonstrating contributions toward ownership.
Limits Total DBE supplier Goals – The NPRM reduces the allowable credit for a prime contractor’s expenditures with DBE suppliers (manufacturers, regular dealers, distributors, and transaction facilitators) from 60 percent to 50percent of the contract goal. However, exceptions may be granted by the DOT on a one-off basis, if prior approval is sought and obtained. This modification is intended to limit a contractor’s ability to receive substantial DBE credit for using DBEs that provide only a gratuitous, pass-through function. However, this modification may present difficulties for contractors in certain market areas where material resources and DBE participation are limited.
Reciprocity of DBE Certification – The NPRM proposes to establish interstate certification for DBEs. DBEs certified in one state (State A) will no longer have to resubmit entire applications to other states. Rather, a DBE seeking certification in State B need only provide evidence of certification and submit a declaration of eligibility. State B then has 10 business days to certify the firm. However, after certifying the firm, State B may conduct its own certification review and initiate decertification procedures if it finds “reasonable cause” for determining that the DBE is…
Read More: DBE and ACDBE Updates from the Department of Transportation