[Federal Register Volume 66, Number 89 (Tuesday, May 8, 2001)]
[Proposed Rules]
[Pages 23208-23227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11317]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
49 CFR Part 26
[Docket OST-2000-7639]
RIN 2105-AC88
Participation by Disadvantaged Business Enterprises in Department
of Transportation Financial Assistance Programs; Memorandum of
Understanding With the Small Business Administration; Uniform Forms and
Other Revisions
AGENCY: Office of the Secretary, DOT.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Department of Transportation (DOT or the Department) is
proposing revisions to the Department's regulations for its
Disadvantaged Business Enterprise (DBE) program (49 CFR part 26). In
its final DBE rule the Department reserved publication of a uniform
reporting form and a uniform certification application form for a later
date. This document proposes those forms. In addition, this document
proposes implementation procedures for a Memorandum of Understanding
(MOU) between DOT and the U.S. Small Business Administration (SBA). The
MOU streamlines certification procedures for participation in SBA's
8(a) Business Development (8(a) BD) and Small Disadvantaged Business
(SDB) programs, and DOT's DBE program for small and disadvantaged
businesses. Finally, this document proposes substantive changes to
several provisions, including: Personal net worth, retainage, the size
standard, proof of ethnicity, confidentiality, proof of economic
disadvantage, and DBE credit for trucking firms.
DATES: Comments should be received no later than June 7, 2001. Late-
filed comments will be considered to the extent practicable.
ADDRESSES: Interested persons should send comments to Docket Clerk,
Docket No. OST-2000-7639, Department of Transportation, 400 7th Street,
SW., Room PL-401, Washington, DC 20590. We request that, in order to
minimize burdens on the docket clerk's staff, commenters send three
copies of their comments to the docket. Commenters wishing to have
their submissions acknowledged should include a stamped, self-addressed
postcard with their comments. The docket clerk will date stamp the
postcard and return it to the commenter. Comments will be available for
inspection at the above address from 10:00 a.m. to 5:00 p.m., Monday
through Friday, except Federal holidays.
FOR FURTHER INFORMATION CONTACT: Laura A. Aguilar, Attorney, Office of
Environmental, Civil Rights, and General Law, Department of
Transportation, 400 7th Street, SW., Room 10102, Washington, DC 20590,
phone numbers (202) 366-0365 (voice), (202) 366-9170 (fax), (202) 755-
7687 (TDD), [email protected] (e-mail).
SUPPLEMENTARY INFORMATION:
Background
On February 2, 1999, the Department published a final rule revising
its Disadvantaged Business Enterprise (DBE) program. The new
regulations (49 CFR part 26) replaced 49 CFR part 23, except for the
airport concessions regulations. In shaping the final rule, the
Department responded to 600 comments on its December 1992 Notice of
Proposed Rulemaking (NPRM), and 300 comments on its May 1997
Supplemental Notice of Proposed Rulemaking (SNPRM). The Department also
participated in the Clinton Administration's review of affirmative
action programs and listened carefully to Congressional debate during
the reauthorization of the Department's DBE program in the
Transportation Equity for the 21st Century (TEA-21). The final rule
also incorporates requirements set forth in the Supreme Court's June
1995 decision in Adarand v. Pena. The result is a narrowly tailored
program that provides a ``level playing field'' for small socially and
economically disadvantaged businesses.
There are three different parts addressed in this document. The
first part addresses uniform forms. In the final rule, the Department
stated that it would develop a single reporting form and a standard DOT
application form for DBE eligibility. The Department did not want to
delay the issuance of the final rule, so it reserved the date on which
the uniform form requirements would go into effect. This document
addresses both of these forms. The second part addresses the
implementation of a Memorandum of Understanding (MOU) between the DOT
and the Small Business Administration (SBA). The MOU streamlines
certification procedures for participation in SBA's 8(a) Business
Development (8(a) BD) and Small Disadvantaged Business (SDB) programs
and DOT's DBE program. The final part proposes substantive changes to
several provisions, including: personal net worth, retainage, proof of
ethnicity,
[[Page 23209]]
confidentiality, proof of economic disadvantage, and DBE credit for
trucking firms.
A. Forms
1. Reporting Form
In the preamble to the February 2, 1999, final DBE rule, the
Department adopted the suggestion of having one standard reporting
form. We believe it will reduce administrative burdens for recipients,
particularly those who receive funds from more than one DOT operating
administration (OA). We are now addressing the format and substance of
the uniform reporting form. We are also proposing that recipients
report DBE program data to the concerned OA semi-annually. The
concerned OA is the DOT agency from which the recipient received
Federal funds. See Sec. 26.21(a). For example, a recipient of Federal
Highway funds must submit a report to the Federal Highway
Administration (FHWA). If a recipient receives funds from more than one
OA, it must submit a separate report to each OA. Finally, we are
proposing a three-year retention requirement for basic program data. We
are requesting comment on the content and format of the standard form.
To assist commenters in formulating responses, we are publishing a
proposed form in the NPRM that would become appendix B to 49 CFR part
26.
The proposed reporting form requires that information concerning
both awards or commitments and attainments of DBE participation be
reported. The rule requires recipients to have a mechanism to verify
that the work committed and awarded to DBEs is actually performed by
DBEs. See 49 CFR 26.37(b). The preamble to the final rule explains that
recipients should keep a running tally of the extent to which, on each
contract, performance matched promises. However, we recognize that in
many instances the awards and commitments reported will not correspond
to the attainments reported on the same form within a single fiscal
year. For example, if a contract is awarded to a DBE in January 2001,
the award would be reflected in the report for that period. However,
the contract would likely not be completed for many years. Therefore,
the actual achievement section in that report could not reflect the
achievements on that contract. Instead, the report will reflect
attainments on contracts completed during the reporting period. It is
essentially a ``snap-shot'' of a recipient's progress towards the
participation of DBEs in its DBE program and not a determinative factor
as to whether or not DBE goals are being met and programs are
successful.
In the attainments section, recipients would report the actual
number and dollar amounts of payments made to DBEs during the reporting
period. This section is also in keeping with the mandate of 49 CFR
26.55(a), which specifies ``(w)hen a DBE participates in a contract,
you count only the value of the work actually performed by the DBE
toward DBE goals.''
Currently, Federal Aviation Administration (FAA) recipients submit
annual reports while Federal Highway Administration (FHWA) and Federal
Transit Administration (FTA) recipients submit quarterly reports. The
December 1992 NPRM proposed that recipients report DBE program data
quarterly to the appropriate OA. Again, the appropriate OA is the DOT
agency (FAA, FHWA and/or FTA) from which the recipient receives Federal
funding. The OA's believe that quarterly reporting is often too
burdensome for recipients. This is especially true for smaller
recipients with only one contract over a long period of time. Requiring
quarterly reports in that instance would result in unnecessary
repetition of information. Therefore, we are proposing semi-annual
reporting. This will allow the Department to adequately monitor the
extent to which recipients are meeting DBE goals while not overly
burdening smaller recipients with redundant reporting requirements.
Reports would be due to a recipient's OA on June 1 and December 1
each year. The June 1 report would include information from October 1
through March 31. The December 1 report would include information from
April 1 through September 30. Since the majority of recipients set
goals based on a fiscal year, we believe that these dates will assist
them in setting their overall goals which must be submitted to the OA
by August 1 of each year.
In keeping within the parameters suggested by commentators during
the SNPRM, we are proposing that recipients retain information relating
to basic program data for three years.
2. Uniform Application Form
In the preamble to the final rule, the Department adopted a single,
uniform, nationwide form that all recipients must use without
modification for DBE eligibility. We are now addressing the substance
of the uniform application form and requirements. Although recipients
must use the uniform application form without modification, we
recognize that some States have additional statutory and/or regulatory
requirements. Therefore, recipients may supplement the uniform
application form with a one to two page attachment containing the
additional certification requirements. We are requesting comment on the
content of the standard form. To assist commenters in formulating
responses, we are publishing a proposed form in this NPRM that would
become appendix F to 49 CFR part 26.
In developing the proposed form, we started with FHWA's Region 5
Certification Application. We asked a few recipients who receive
financial assistance from FHWA, FAA, and FTA to comment on the content
and format of the application. We are attempting to balance the need
for a complete form and the desire to simplify the application. We urge
commenters to think about what must be contained in the application and
what may be reserved for an on-site review.
We are working closely with representatives from the SBA in
developing a uniform application form to be used by both agencies. The
MOU is designed to streamline the application process for SBA's 8(a) BD
and SDB programs and DOT's DBE program. We believe that having a joint
uniform application form will make it easier for small businesses to
apply for certification for programs from both agencies. It is our hope
that with the comments received on the proposed form in appendix F will
be able to issue the joint DOT/SBA certification application form in
the final rule.
B. Memorandum of Understanding
1. Background
The SBA's 8(a) BD and SDB programs and DOT's DBE program share many
common certification requirements. Therefore, on November 23, 1999, the
former Secretary of Transportation, Rodney Slater, signed a Memorandum
of Understanding (MOU) with Aida Alvarez, the former Administrator of
the SBA, the purpose of which is to develop common application
procedures that will streamline the certification process for the
respective programs. This streamlined process is designed to reduce
administrative costs and to provide more opportunities for small
businesses owned and controlled by socially and economically
disadvantaged individuals. It also establishes procedures for the
efficient transfer of information among SBA, DOT, and DOT recipients,
and for the consideration of certification appeals.
We are issuing this NPRM to amend 49 CFR part 26 to establish new
or revised responsibilities for DOT recipients created by the MOU. The
[[Page 23210]]
MOU and these proposed changes do not alter the program requirements.
For example, women are not presumed disadvantaged in SBA's programs.
Therefore a woman-owned DBE will still have to show disadvantage to
qualify for SBA's 8(a) BD and SDB programs. Similarly, an SBA-certified
firm must still undergo an on-site review before receiving DBE
certification.
The current DBE regulations allow recipients the flexibility to
accept certifications for 8(a) BD or SDB-certified firms in lieu of
conducting its own certification process or to require the firm to go
through part or all of its own application process. See 49 CFR 26.67
(c). Under the MOU, recipients would be required to accept and
recognize 8(a) BD and SDB certifications in lieu of requiring the
applicant firm to fill out the recipient's own application. However,
the applicant firm must still meet all the part 26 requirements. For
example, a firm must meet the DOT statutory gross receipts cap,
currently $17,420,000, see 65 FR 52470 (August 29, 2000). Based on the
information gained from the on-site review, including documentation
that the firm meets DOT eligibility criteria, a DOT recipient may deny
certification to a firm that the SBA certified.
As stated in the previous section, we are working with
representatives from the SBA in developing a joint certification
application form. We anticipate that the joint application form will
contain a main section with common requirements and have three
additional parts for 8(a) BD, SDB and DBE certification. The applicant
would need to complete the main section of the application only once.
Then the applicant would fill out the program specific part for each
program for which the applicant is applying. We believe that the joint
application form will simplify the application process for new
applicants.
For SBA-certified firms seeking DBE certification, we are proposing
the following procedures. An SBA-certified firm may submit its
certification package to the applicable DOT recipient or it may request
that the SBA forward the certification package to the DOT recipient.
Pursuant to the MOU, the SBA will forward the package to the DOT
recipient within thirty days after receipt of the firm's request. If
necessary, the recipient may request additional information from the
applicant or from the SBA. If requested from the SBA, the additional
information will be transferred within 45 days after receipt of the
request. The recipient will then make an independent certification
decision based on the SBA application package, any additional
information provided and an on-site review. If the SBA conducted an on-
site review, the DOT recipient may rely on SBA's report of the on-site
review in lieu of conducting its own on-site review. 49 CFR 26.83(k)
requires a recipient to make decisions on applications of certification
within 90 days of receiving from the applicant firm all information
required under part 26. If a firm applies for DBE certification
pursuant to the MOU, the recipient is required to make a decision
within 90 days of receiving all the required information, whether it is
from the applicant or the SBA.
Recipients are not required to process an application for
certification from an SBA-certified firm having its principal place of
business outside the state unless there is a report of a ``home state''
on-site review on which the recipient may rely. This helps the problem
of costly out-of-state visits.
If a recipient denies certification to a firm certified by the SBA,
it must notify the SBA in writing. The notification must include the
reason for denial. A recipient may simply send a copy of the denial
letter to the SBA. Similarly, when a recipient decertifies a firm
certified by the SBA, it must notify the SBA in writing. Again, the
notification must include the reason for denial. A copy of the denial
letter is sufficient notification.
An SBA-certified firm that is denied DBE certification or whose
eligibility is removed by a DOT recipient is entitled to the same
appeal rights as DBE firms. Such a firm may make an administrative
appeal to the Department pursuant to part 26. The Department will
notify the SBA, in writing, when DOT takes an action on an appeal that
results in or confirms a loss of DBE eligibility to any SBA-certified
firm. The notice will include the reasons for the Department's
decision, including specific references to the evidence in the record
that supports each reason for the decision.
If a DBE-certified firm is seeking SBA certification, it may
request, in writing, that the applicable DOT recipient forward a copy
of its application to the SBA. If a recipient receives such a request,
it must forward the application package to the SBA within 30 days of
receiving the request. Under the MOU, the recipient will be required to
pay the copying and transmittal fees. We are requesting comment on the
impact this will have on recipients. If the SBA requests additional
information, the recipient must forward the requested information
within 45 days of receiving the request.
Recipients would also be required to provide appropriate assistance
to SBA-certified firms, including information pertaining to the DBE
application process, filing locations, required information and status
of the application.
C. Additional Changes
1. Personal Net Worth
Section 26.67 requires each individual whose ownership and control
are relied upon for DBE certification to submit a signed, notarized
statement of personal net worth (PNW), with appropriate supporting
documentation. The Department received a number of questions about what
documentation is appropriate for recipients to require in ascertaining
the PNW of owners of DBE firms. In the preamble to the final rule
correction (see 49 FR 34569 (June 11, 1999)), the Department
recommended using the SBA's form as a model. SBA requires completion of
a two-page form, supported by two years of personal and business tax
returns. The Department wanted to remain flexible while encouraging
recipients to use forms that are not unduly lengthy, burdensome or
intrusive. The Department did not require recipients to use the SBA
form verbatim but encouraged them to use a form of similar length and
content, including collecting and retaining two years of an
individuals' personal and business tax returns.
The final rule explicitly requires that the personal financial
information be kept confidential. Nevertheless, the Department has
continued to receive comments concerning the intrusiveness of
collecting personal tax returns. We understand the justifiable privacy
concerns associated with collecting personal income tax information.
However, we must also ensure that the integrity of the program is
maintained. Recipients must have a tool to ensure that non-
disadvantaged persons do not participate in the program.
Therefore, we are proposing an alternative option with regard to
supporting documentation. Recipients must still require an individual
whose ownership and control are relied upon for DBE certification to
certify that he or she has a personal net worth that does not exceed
$750,000. Applicants could still submit a signed, notarized statement
of PNW, with appropriate documentation. Alternatively, the applicant
could submit a signed, notarized statement from a certified public
accountant (CPA) attesting that the CPA has examined his or her
personal net worth pursuant to
[[Page 23211]]
Sec. 26.67(a)(2)(iii) and determined that his or her personal net worth
does not exceed $750,000. This second option would eliminate the need
for the applicant to provide personal income tax information to the DOT
recipient for purposes of PNW.
Under either method, the determination of an individual's PNW
should follow certain requirements specified in the final rule. For
example, the rule requires that an individual's ownership in the
applicant firm be excluded. With the exception of one proposed change
discussed below, the requirements remain the same. However, we are
making the wording and format of the current language clearer and
easier to read.
We are proposing a change with respect to vested pension plans,
Individual Retirement Accounts, 401(k) accounts, and other retirement
savings or investment programs in which the assets cannot be
distributed to the individual at the present time without significant
adverse tax or interest consequences. We are proposing that PNW would
include only the present value of such assets, less the tax and
interest penalties that would accrue if the asset were distributed at
the present time. An alternative method would be to exclude such assets
from the personal net worth calculation. We are requesting comment on
this issue.
2. Retainage
As the Department noted in the preamble to the February 1999 final
rule, delays in payment have long been one of the most significant
barriers to the competitiveness, and in some cases the viability, of
small subcontractors. One of the delays in payment about which
subcontractors have been most concerned is payment of retainage. Often,
subcontractors have told us, they finish all their work on a contract
months or years before the end of the project on which the prime
contractor is working, but the prime contractor does not pay them fully
until after the recipient has paid retainage to them at the end of the
entire project. To help surmount this barrier, the final rule requires
prime contractors to pay retainage to subcontractors promptly after the
subcontractors satisfactorily complete their work.
Many states and other recipients have responded very creatively to
this provision, taking such steps as making incremental payments to
contractors or eliminating retainage altogether. Where recipients have
not taken such steps, however, prime contractors have complained that
the requirement to pay subcontractors fully before the recipient pays
retainage to the prime contractor is a financial hardship on prime
contractors.
In order to address the prime contractors' concerns, without
diminishing the benefit of the existing provision to subcontractors,
the Department is proposing to require recipients to take one of three
approaches. First, a recipient could eliminate retainage entirely,
neither retaining funds from prime contractors nor permitting prime
contractors to hold retainage from subcontractors. Second, a recipient
could decide not to retain funds from prime contractors, but give prime
contractors discretion to hold retainage from subcontractors. In this
case, the recipient would require prime contractors to pay
subcontractors in full after satisfactory completion of the
subcontractor's work. Third, the recipient could hold retainage from
prime contractors, but make incremental inspections and approvals of
the prime contractor's work at various stages of the project (sometimes
called ``mini-finals''). The recipient would pay the prime contractor
the portion of the retainage based on these approvals. The prime
contractor, in turn, would be required to promptly pay all retainage
owed to the subcontractor for satisfactory completion of the approved
work. None of these three approaches is new. All are being employed
successfully by DOT recipients today.
We are defining ``prompt'' as no later than thirty days. Based on
our experience in program review thirty days was the most common length
of time suggested by recipients. We think that this is a sensible
amount of time. We seek comment on these approaches and on any other
ideas commenters may have concerning this matter.
3. Size Standard
One of the purposes of the DBE rule is to make it possible for
small firms to grow. This includes the opportunity for subcontractors
to become able to compete as prime contractors. To be able to perform
prime contracts, companies often need to be larger and have more
resources than they had as subcontractors. Frequently, firms who are
attempting to grow will perform both prime contracts and subcontracts.
This may create a dilemma for DBE firms in some cases. In order to work
as prime contractors, firms may need to grow beyond the limits of the
SBA size standards applicable to their subcontracting field. If they
do, then recipients may decertify them because they are no longer small
businesses. A number of firms have expressed the concern that this
situation penalizes success and impedes achievement of an important
objective of the DBE program.
We emphasized in the preamble to the final rule and a recent
Question and Answer that recipients should not totally decertify a firm
because it exceeds the size standard for one or more of its activities.
Under Sec. 26.65(a), if a firm meets the size standard for one type of
work (e.g., as a general contractor), it should continue to be
certified and receive DBE credit for that type of work, even if it has
exceeded the size standard for another type of work (e.g., as a
specialty subcontractor). In that case, of course, the firm could not
remain eligible and receive DBE credit for this type of activity.
The Department seeks comment on whether we should make any
modifications of the rule to address further the situations of firms
that work as both prime contractors and subcontractors.
4. Proof of Ethnicity
We are proposing minor modifications to Sec. 26.61(c) and
Sec. 26.63(a) to address concerns raised by both DBEs and recipients
regarding issues related to group membership. There have been a few
documented instances of individuals attempting to fraudulently
participate in the DBE program by falsely asserting to be a member of
one of the groups benefiting from the rebuttable presumption of social
and economic disadvantage as outlined in Sec. 26.67(a). For this
reason, many recipients seek to obtain evidence of group membership
that goes beyond an oral statement or ``checking off a box on a form.''
At the same time, recipients are concerned that if they request
additional evidence from some individuals but not others, they could be
accused of discrimination in the certification process. In response to
both of these concerns, we are proposing that recipients obtain a
signed and notarized statement of group membership from all persons who
claim to own and control a firm applying for DBE certification and
whose ownership and control are relied upon for DBE certification.
A signed, notarized statement should be considered sufficient proof
of ethnicity. The recipient should not ask for additional evidence
unless it has a well founded reason to doubt the veracity of the owner.
We emphasize that great care must be taken in looking behind the
individual's assertion of membership in one of the groups designated in
Sec. 26.67(a). As a recipient, if you have reason to believe that the
owner of a firm seeking certification has misrepresented his/her group
membership, then further information
[[Page 23212]]
can and must be collected. However, you must inform that person, in
writing, of your reasons for doubting his or her statement and your
need for additional documentary evidence. Such instances should be the
exception, not the rule. It is our expectation that requiring a written
record justifying the need for additional information will help to
reduce the number of unnecessary requests.
Even where additional documentation is necessary, care should be
taken to ensure that particular ethnic group members are not forced to
meet a higher level of proof than members of other groups. For example,
many recipients accept a driver's license or a birth certificate as
adequate proof of group membership. These forms of identification
always indicate gender and sometimes indicate the race of the holder,
however they often do not designate whether or not an individual is
Hispanic or Native American. In some instances, members of these groups
have been required to provide not one, but several types of additional
proof of ethnicity simply because their driver's license did not
indicate their race. Such actions could constitute a violation of the
nondiscrimination provisions of 49 CFR parts 21 and 26 and of Title VI
of the Civil Rights Act of 1964.
A driver's license or a birth certificate may be adequate types of
proof of ethnicity. However, in cases where the required proof does not
indicate specific races, such as Hispanic or Native American, the
applicant should only be required to provide the same level of proof as
members of other groups. For example, if a birth certificate is
adequate for one group, then only a single piece of evidence may be
required from members of other groups. Such single piece of evidence
might include naturalization papers, Indian tribal roll, tribal voter
registration certificate, a letter from a community group, educational
institution, religious leader, or government agency stating that the
individual is a member of the claimed group, or a letter from the
individual setting forth specific reasons for believing himself/herself
to be a member of the designated group.
5. Confidentiality
A common complaint of DBEs is that there are insufficient
protections for the confidentiality of their business information. When
DBEs submit significant amounts of information to recipients for
certification purposes, firms are concerned that, through state Freedom
of Information Act (FOIA) requests or discovery in state or Federal
court proceedings, their confidential information will be released to
the public. We believe that this concern is justified, and we believe
that the concern that confidential documents may become public can act
as a deterrent to program participation by some potential DBEs. For
this reason, we are amending the confidentiality section of the
regulation to parallel the existing, tighter confidentiality provision
of Sec. 26.67 concerning personal net worth information. Under the
proposed provision, recipients would not be authorized to release
confidential business information in any circumstance without the
submitter's written consent.
6. Economic Disadvantage
In appendix E to part 26, ``Individual Determinations of Social and
Economic Disadvantage'', we are proposing to remove paragraph (B)(2)
under ``Economic Disadvantage''. This paragraph requires that in the
case of applications by individuals to be considered socially and
economically disadvantaged, the applicant submit personal financial
information for his or her spouse. This is inconsistent with the way
the Department's personal net worth provisions under Sec. 26.67 work in
the case of applicants who are members of a group presumed to be
economically and socially disadvantaged. In order to remove this
inconsistency, we are deleting the paragraph in question.
7. Credit for Trucking Firms
In the final rule, after reviewing comments and the contrasting
practices of a number of recipients, the Department decided to count
credit for the participation of DBE trucking companies only with
respect to trucks that DBEs themselves owned and operated. This was
intended to prevent a situation in which, for example, a DBE trucking
company owned only one truck or a few trucks and leased the services of
a larger number of non-DBE truckers, claiming credit for them as well.
The Department believed that this practice was contrary to the general
principle that DBE credit should be counted only for work that DBEs
themselves perform.
Since we issued the rule, a number of people have said to us that
this provision works an unnecessary hardship on DBE trucking companies
and is difficult for recipients to administer. Some have suggested, as
a middle ground, allowing credit for twice the number of trucks
actually owned by the DBE (i.e., if a DBE owned one truck, and leased
another from a non-DBEs, it could get credit for both). The Department
seeks comment on whether this provision should be modified and, if so,
how.
Regulatory Analyses and Notices
Executive Order 12866 and DOT Regulatory Policies and Provisions
This proposed rule is not a significant regulation under either
Executive Order 12866 and DOT Regulatory Policies and Provisions. The
proposal will not impose any new costs on recipients or contractors. It
simply would make administrative adjustments concerning existing
provisions and assist contractors by implementing the SBA-DOT MOU.
Regulatory Flexibility Act Analysis
The Department certifies that this proposed rule, if made final,
would not have significant economic effects on a substantial number of
small entities. While the proposal affects small entities, it does not
have a significant economic impact on anyone.
Paperwork Reduction Act
This proposed rule also contains information collection
requirements. As required by the Paperwork Reduction Act of 1995 (the
PRA, 44 U.S.C. 3507(d)), the Department will submit these requirements
to the Office of Information And Regulatory Affairs of the Office of
Management and Budget for review.
As noted elsewhere in this preamble, the Department adopted the
suggestion of having one standard reporting form in the February 2,
1999, final DBE rule. The proposed Uniform Semi-Annual Report of DBE
Awards or Commitments and Achievements form is contained in Appendix B
of this NPRM. At the present time, the Department has an information
collection item approved under the Paperwork Reduction Act. This is for
a quarterly DBE data report from recipients to DOT (OMB No. 2105-0510).
This approval expires July 31, 2001. Under the NPRM, the frequency of
reporting would change from four times a year to twice a year, which
would reduce the burden involved.
The February 2, 1999, final DBE rule also adopted a single,
uniform, nationwide certification application form. Part 26 requires
firms applying for DBE certification to provide information to
recipients to allow them to make eligibility decisions. Currently, an
applicant firm may be required to fill out different applications for
FAA, FHWA and FTA recipients. The Department believes that requiring
one uniform application will reduce the paperwork burden. The proposed
Uniform Certification Application form
[[Page 23213]]
is contained in appendix F of this NPRM.
Individuals and organizations may submit comments on the
information collection elements of this NPRM by September 5, 2001 and
should direct them to the DOT docket specified at the beginning of the
NPRM. According to OMB's regulations implementing the PRA (5 CFR
1320.8(b)(2)(vi)), an agency may not conduct or sponsor, and a person
need not respond to, a collection of information unless it displays a
currently valid OMB control number. The OMB control number for this
information will be published in the Federal Register after it is
approved by OMB.
Federalism
The Department has determined that this proposed rule, if made
final, would not have Federalism impacts sufficient to warrant
preparation of a Federalism assessment.
List of Subjects in 49 CFR Part 26
Administrative practice and procedure, Airports, Civil rights,
Government contracts, Grant-programs--transportation, Mass
transportation, Minority businesses, Reporting and record keeping
requirements.
Issued this 26th day of April, 2001, at Washington, DC.
Norman Y. Mineta,
Secretary of Transportation.
For the reasons set forth in the preamble, the Department proposes
to amend 49 CFR part 26 as follows:
PART 26--PARTICIPATION BY DISADVANTAGED BUSINESS ENTERPRISES IN
DEPARTMENT OF TRANSPORTATION FINANCIAL ASSISTANCE PROGRAMS
1. The authority citation for 49 CFR part 26 continues to read as
follows:
Authority: 23 U.S.C. 324; 41 U.S.C. 2000d, et seq.; 49 U.S.C.
1615, 47107, 47113, 47123; Pub. L. 105-178, sec. 1101(b), 112 Stat.
107, 113.
2. Amend Sec. 26.5 by adding a definition of ``DOT/SBA MOU
Memorandum of Understanding or MOU'' after ``DOT-assisted contract''
and by adding a definition of ``SBA certified firm'' after ``Small
Business Administration'' to read as follows:
Sec. 26.5 What do the terms in this part mean?
* * * * *
DOT/SBA Memorandum of Understanding or MOU, refers to the agreement
signed on November 23, 1999, between the Department of Transportation
(DOT) and the Small Business Administration (SBA) streamlining
certification procedures for participation in SBA's 8(a) Business
Development (8(a) BD) and Small Disadvantaged Business (SDB) programs,
and DOT's Disadvantaged Business Enterprise (DBE) program for small and
disadvantaged businesses.
* * * * *
SBA certified firm refers to firms that have a current, valid
certification from or recognized by the SBA under the 8(a) BD or SDB
programs.
* * * * *
3. Amend Sec. 26.11 by adding paragraph (a) to read as follows:
Sec. 26.11 What records to recipients keep and report?
(a) You must use the reporting form provided in Appendix B to this
part without change or revision.
* * * * *
4. Revise Sec. 26.29 to read as follows:
Sec. 26.29 What prompt payment mechanisms must recipients have?
(a) You must establish, as part of your DBE program, a contract
clause to require prime contractors to pay subcontractors for
satisfactory performance of their contracts no later than thirty days
from receipt of each payment you make to the prime contractor.
(b) You must ensure prompt and full payment of retainage from the
prime contractor to the subcontractor within thirty days after the
subcontractor's work is satisfactorily completed. You must use one of
the following methods to comply with this requirement:
(1) You may decline to hold retainage from prime contractors and
prohibit prime contractors from holding retainage from subcontractors.
(2) You may decline to hold retainage from prime contractors and
require a contract clause obligating prime contractors to make prompt
and full payment of any retainage kept by prime contractor to the
subcontractor within a specific number of days after the
subcontractor's work is satisfactorily completed.
(3) You may hold retainage from prime contractors and provide for
prompt and regular incremental acceptances of portions of the prime
contract, pay retainage to prime contractors based on these
acceptances, and require a contract clause obligating the prime
contractor to pay all retainage owed to the subcontractor for
satisfactory completion of the accepted work within a specific number
of days after your payment to the prime contractor.
(c) For purposes of this section, a subcontractor's work is
satisfactorily completed when all the tasks called for in the
subcontract have been accomplished and documented as required by the
recipient. When a recipient has made an incremental acceptance of a
portion of a prime contract, the work of a subcontractor covered by
that acceptance is deemed to be satisfactorily completed.
(d) Your DBE program must provide appropriate means to enforce the
requirements of this section. These means may include appropriate
penalties for failure to comply, the terms and conditions of which you
set. Your program may also provide that any delay or postponement of
payment among the parties may take place only for good cause, with your
prior written approval.
(e) You may also establish, as part of your DBE program, any of the
following additional mechanisms to ensure prompt payment:
(1) A contract clause that requires prime contractors to include in
their subcontracts language providing that prime contractors and
subcontractors will use appropriate alternative dispute resolution
mechanisms to resolve payment disputes. You may specify the nature of
such mechanisms.
(2) A contract clause providing that the prime contractor will not
be reimbursed for work performed by subcontractors unless and until the
prime contractor ensures that the subcontractors are promptly paid for
the work they have performed.
(3) Other mechanisms, consistent with this part and applicable
state and local law, to ensure that DBEs and other contractors are
fully and promptly paid.
5. Revise Sec. 26.61 (c) to read as follows:
Sec. 26.61 How are burdens of proof allocated in the certification
process?
* * * * *
(c) You must rebuttably presume that members of the designated
groups identified in Sec. 26.67(a) are socially and economically
disadvantaged. This means they do not have the burden of proving to you
that they are socially and economically disadvantaged. In order to
obtain the benefit of the rebuttable presumption, individuals must
submit a signed, notarized statement that they are a member of one of
the groups in Sec. 26.67(a). Applicants do have the obligation to
provide you information concerning their economic disadvantage (see
Sec. 26.67).
* * * * *
6. Revise Sec. 26.63(a) to read as follows:
[[Page 23214]]
Sec. 26.63 What rules govern group membership determinations?
(a)(1) If, after reviewing the signed notarized statement of
membership in a presumptively disadvantaged group (see Sec. 26.61(c)),
you have a well founded reason to question the individual's claim of
membership in that group, you must require the individual to present
additional evidence that he or she is a member of the group.
(2) You must provide the individual a written explanation of your
reasons for questioning his or her group membership and a written
request for additional evidence as outlined in paragraph (b) of this
section.
(3) In implementing this section, you must take special care to
ensure that you do not impose a disproportionate burden on members of
any particular designated group. Imposing a disproportionate burden on
members of a particular group could violate Sec. 26.7(b) of this part
and/or Title VI of the Civil Rights Act of 1964 and 49 CFR part 21.
* * * * *
7. Amend Sec. 26.67 as follows:
a. Revise paragraph (a)(2);
b. Remove and reserve paragraph (c), the revision reads as follows:
Sec. 26.67 What rules determine social and economic disadvantage?
(a) * * *
(1) * * *
(2)(i) You must require each individual owner of a firm applying to
participate as a DBE (except a firm applying to participate as a DBE
airport concessionaire) whose ownership and control are relied upon for
DBE certification to certify that he or she has a personal net worth
that does not exceed $750,000.
(ii) You must require each individual who makes this certification
to support it with the individual's choice of either of the following:
(A) A signed, notarized statement of personal net worth, with
appropriate supporting documentation. This statement and documentation
must not be unduly lengthy, burdensome, or intrusive; or
(B) A signed, notarized statement from a certified public
accountant (CPA) attesting that the CPA has examined the individual's
personal net worth and determined, consistent with the provisions of
this section and generally accepted accounting standards, that the
individual's personal net worth does not exceed $750,000.
(iii) In determining an individual's net worth, you or the
individual's CPA must observe the following requirements:
(A) Exclude an individual's ownership interest in the applicant
firm;
(B) Exclude the individual's equity in his or her primary residence
(except any portion of such equity that is attributable to excessive
withdrawals from the applicant firm).
(C) For an Alaska Native, include assets and income from sources
other than an Alaska Native Corporation but exclude any of the
following that the individual receives from any Alaska Native
Corporation: Cash (including cash dividends on stock received from an
ANC) to the extent that it does not, in the aggregate, exceed $2,000
per individual per annum; stock (including stock issued or distributed
by an ANC as a dividend or distribution on stock); a partnership
interest; land or an interest in land (including land or an interest in
land received from an ANC as a dividend or distribution on stock); and
an interest in a settlement trust.
(D) Do not use a contingent liability to reduce an individual's net
worth.
(E) With respect to assets held in vested pension plans, Individual
Retirement Accounts, 401(k) accounts, or other retirement savings or
investment programs in which the assets cannot be distributed to the
individual at the present time without significant adverse tax or
interest consequences, include only the present value of such assets,
less the tax and interest penalties that would accrue if the asset were
distributed at the present time.
(iv) Notwithstanding any provision of Federal or state law, you
must not release an individual's personal net worth statement nor any
documentation supporting it to any third party without the written
consent of the submitter. Provided, that you must transmit this
information to DOT in any certification appeal proceeding under
Sec. 26.89 in which the disadvantaged status of the individual is in
question.
* * * * *
8. Amend Sec. 26.83 by revising paragraph (c)(7)(i) to read as
follows:
Sec. 26.83 What procedures do recipients follow in making
certification decisions?
* * * * *
(c) * * *
(7) Require potential DBEs to complete and submit an appropriate
application form, unless the potential DBE is an SBA certified firm
applying pursuant to the DOT/SBA MOU.
(i) You must use the application form provided in Appendix F to
this part without change or revision. However, you may provide in your
DBE program, with the approval of the concerned operating
administration, for supplementing the form by requesting additional
information not inconsistent with this part.
* * * * *
9. Add a new Sec. 26.84 to read as follows:
Sec. 26.84 How do recipients process applications submitted pursuant
to the DOT/SBA MOU?
(a) When an SBA-certified firm applies for certification pursuant
to the DOT/SBA MOU, you must accept the certification applications,
forms and packages submitted by a firm to the SBA for either the 8(a)
BD or SDB programs, in lieu of requiring the applicant firm to complete
your own application forms and packages. The applicant may submit the
package directly, or may request that the SBA forward the package to
you. Pursuant to the MOU, the SBA will forward the package within
thirty days.
(b) If necessary, you may request additional relevant information
from the SBA. The SBA will provide this additional material within
forty-five days of your written request.
(c) Before certifying a firm based on its 8(a) BD or SDB
certification, you must conduct an on-site review of the firm (see
Sec. 26.83(c)(1)). If the SBA conducted an on-site review, you may rely
on the SBA's report of the on-site review. In connection with this
review, you may also request additional relevant information from the
firm.
(d) Unless you determine, based on the on-site review and
information obtained in connection with it, that the firm does not meet
the eligibility requirements of subpart D of this part, you must
certify the firm.
(e) You are not required to process an application for
certification from an SBA-certified firm having its principal place of
business outside the state(s) in which you operate unless there is a
report of a ``home state'' on-site review on which you may rely.
(f) You are not required to process an application for
certification from an SBA-certified firm if the firm does not provide
products or services that you use in your DOT-assisted programs or
airport concessions.
10. Redesignate Sec. 26.85 as Sec. 26.86. In newly redesignated
Sec. 26.86, redesignate paragraphs (b) and (c) as paragraphs (c) and
(d), respectively, and add a new paragraph (b) to read as follows:
Sec. 26.86 What rules govern recipients' denials of initial requests
for certification?
* * * * *
(b) When you deny DBE certification to a firm certified by the SBA,
you must notify the SBA in writing. The
[[Page 23215]]
notification must include the reason for denial.
* * * * *
11. Add a new Sec. 26.85 to read as follows:
Sec. 26.85 How do recipients respond to requests from DBE-certified
firms or the SBA made pursuant to the DOT/SBA MOU?
(a) Upon receipt of a signed, written request from a DBE-certified
firm, you must transfer to the SBA a copy of the firm's application
package. You must transfer this information within thirty days of
receipt of the request.
(b) If necessary, the SBA may make a written request to the
recipient for additional materials (e.g., the report of the on-site
review). You must provide a copy of this material to the SBA within
forty-five days of the additional request.
(c) You must provide appropriate assistance to SBA-certified firms,
including providing information pertaining to the DBE application
process, filing locations, required documentation and status of
applications.
12. Amend Sec. 26.87 by redesignating paragraphs (h) through (j) as
paragraphs (i) through (k) and by adding a new paragraph (h) to read as
follows:
Sec. 26.87 What procedure does a recipient use to remove a DBE's
eligibility?
* * * * *
(h) When you decertify a DBE firm certified by the SBA, you must
notify the SBA in writing. The notification must include the reason for
denial.
* * * * *
13. Amend Sec. 26.89 by revising paragraphs (a)(1) and (f)(7) to
read as follows:
Sec. 26.89 What is the process for certification appeals to the
Department of Transportation?
(a)(1) If you are a firm that is denied certification or whose
eligibility is removed by a recipient, including SBA-certified firms
applying pursuant to the DOT/SBA MOU, you may make an administrative
appeal to the Department.
* * * * *
(f) * * *
(7) The Department provides written notice of its decision to you,
the firm, and the complainant in an ineligibility complaint. A copy of
the notice is also sent to any other recipient whose administrative
record or decision has been involved in the proceeding (see paragraph
(d) of this section). The Department will also notify the SBA in
writing when DOT takes an action on an appeal that results in or
confirms a loss of eligibility to any SBA-certified firm. The notice
includes the reasons for the Department's decision, including specific
references to the evidence in the record that supports each reason for
the decision.
* * * * *
14. In Sec. 26.109, revise paragraph (a)(2) to read as follows:
Sec. 26.109 What are the rules governing information, confidentiality,
cooperation, and intimidation or retaliation?
(a) * * *
(1) * * *
(2) Notwithstanding any provision of Federal or state law, you must
not release information that may be reasonably be construed as
confidential business information to any third party without the
written consent of the firm that submitted the information. This
includes applications for DBE certification and supporting
documentation. However, you must transmit this information to DOT in
any certification appeal proceeding under Sec. 26.89 in which the
disadvantaged status of the individual is in question.
* * * * *
15. Add Appendix B to part 26 to read as follows:
BILLING CODE 4910-62-P
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Appendix B to Part 26--Uniform Reporting Requirements Form
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16. In Appendix E, under Economic Disadvantage, remove and reserve
section (B)(2).
17. Add a new Appendix F to read as follows:
Appendix F to Part 26--Uniform Certification Application Form
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[FR Doc. 01-11317 Filed 5-7-01; 8:45 am]
BILLING CODE 4910-62-C