DBE Good Faith Efforts
The Disadvantaged Business Enterprise Program (DBE) is administered through the United States Department of Transportation (US DOT). At least three major operations are included in the DBE program, and they are the Federal Highway Administration, the Federal Aviation Administration, and the Federal Transit Administration.
According to the US DOT website, the purpose of the program is to ensure nondiscrimination in the award and administration of DOT-assisted contracts, to remove barriers to the participation of DBEs in DOT-assisted contracts, and to assist the development of firms that can compete successfully in the marketplace outside of the DBE program.
Bidders for these federally assisted projects are required to either meet the DBE contract goal or demonstrate “good faith efforts to meet the goal.” 49 CFR § 26.53. If the bidder does not meet the DBE goal, then it must adequately document those good faith efforts. But what are good faith efforts?
The federal regulations provide guidance in a document entitled “Guidance Concerning Good Faith Efforts.” Appendix A to Part 26 (the “Guide”). Bidders are encouraged to read the whole Guide, which can be found on the internet on any number of websites. It is a relatively short document and it contains a lot of good information.
In general, the Guide indicates that bidders are required to work diligently to meet the DBE goal for the project. Bidders are required to show that they took all “necessary and reasonable steps” to achieve the DBE goal. The bidder’s efforts should demonstrate that they are “actively and aggressively” trying to meet the DBE contract goal. This means more than going through the motions. Bidders must reach out to DBEs well ahead of any required bid deadline. Mailing out solicitations, without more, is not enough. Bidders should determine with certainty if the DBEs are interested by taking appropriate steps to follow up on initial solicitations.
The Guide indicates good faith efforts may include:
- Selecting portions of the work to be performed by DBEs even though the prime contractor might otherwise prefer to perform these work items with its own forces.
- Using a DBE over a less expensive subcontractor that is not a DBE, especially if the quotes are close.
- Breaking out contract work items into smaller units and more economically feasible units.
- Establishing flexible timeframes for performance and delivery schedules.
If the DBE goal is not met by the apparent low bidder, but other bidders met the DBE goal, it raises serious questions about the effort of the bidder that did not. This can lead to a bid protest. If a bid protest ensues, the apparent low bidder’s bid will be scrutinized, pursuant to the requirements of 49 CFR § 26.53 and Appendix A to Part 26.
There are many legal decisions upholding the authority of federally assisted agencies to throw out bids that do not sufficiently demonstrate good faith efforts. Frequently, courts and agencies cite as evidence a bidder’s failure to provide all of the required documentation concerning its efforts, failure to follow upon on initial solicitations, failure to break out work into smaller units, and the fact that other bidders met the goal.
To avoid bid protests and possible bid rejection, bidders should start early to obtain maximum participation. Obtain DBE participant lists from the relevant agencies. Solicitations should be made early and often. DBEs need to be given clear instructions about how and when to participate. A firm deadline needs to be communicated. Bidders should make certain that DBEs are not interested in bidding well ahead of that deadline. Offering assistance to DBEs to put their quotes together can be helpful. It is up to the bidder to document these efforts.
If a bidder does not meet the goal, then the documents demonstrating good faith efforts will be critically examined. It may be necessary to explain why certain DBE quotes were not used if another subcontractor is to be used or if the work is to be self-performed. When it comes to meeting the DBE good faith requirements, an ounce of prevention is worth a pound of cure. This requires prior preparation, planning, and follow through.
Jason M. Smiley
Jason Smiley is a partner of Gunderson Palmer Nelson Ashmore, LLP in Rapid City, SD. He is a member of the firm’s Executive Committee. He practices in Construction Law, Real Estate, Personal Injury, Civil Litigation, and Insurance Defense. Jason understands that each client’s concerns and objectives are unique.