Personal Net Worth Cap Increased for DBE Entities Working With USDOT

Today, February 28, 2011, two major changes to the United States Department of Transportation (USDOT) Disadvantaged Business Enterprise (DBE) certification process go into effect: (1) the Personal Net Worth (“PNW“) cap is increased from $750,000 to $1.32 million for individuals with a 51% or more interest in a DBE certified company, and (2) companies already certified may now obtain certification in other states on an expedited basis through interstate reciprocity. Today’s post will focus on the Personal Net Worth increase but stay tuned for a post tomorrow on interstate reciprocity.

The DBE certification process aims to level the playing field for minority and women-owned businesses by providing a vehicle for increasing participation by these firms in state and local contracts. These recent changes will increase both the pool of eligible DBE owners as well as increase the opportunities for DBE firms in neighboring states. In Washington, the Office of Minority and Women’s Business Enterprises (“OMWBE”) is responsible for certifying local disadvantaged (women and minority-owned) firms.

Part I: Personal Net Worth Limit Increased From $750,000 to $1.32 Million

(49 C.F.R. § 26.67)

To qualify as a “socially and economically disadvantaged individual” for DBE purposes, an individual owner must fall below the PNW standard. Since 1989, this amount was capped at $750,000. Thus, any individual owner whose ownership and control was relied upon for DBE certification had to have a personal net worth less than $750,000. The final rule, however, adjusts this long-standing PNW cap to $1.32 million (almost double) to account for inflation over the past 21 years. According to USDOT, the inflationary adjustment, which is based on the Department of Labor’s consumer price index, “simply maintains the status quo in real dollar terms.” It is USDOT’s position that it simply takes $1.32 million today to buy the same amount of goods and services that $750,000 bought in 1989.

USDOT also provides the following guidance for recipients and firms applying (or who may have recently applied) for DBE certification:

  • For applications or decertification actions pending on January 28, 2011 (the date the amendment was published), but before February 28, 2011 (the amendment’s effective date), reviewing agencies should make decisions based on the new $1.32 million standard, though these decisions should not take effect until February 28, 2011.
  • Beginning February 28, 2011, all new certification decisions must be based on the $1.32 million standard, even if the application was filed or a decertification action pertaining to PNW began before this date.
  • For companies whose application was denied before January 28, 2011, because the owner’s PNW was above $750,000 but below $1.32 million and the matter is now being appealed, the reviewing agency should resolve the appeal using the $1.32 million standard.
  • If a firm was decertified or its application denied within a year before February 28, 2011, because the owner’s PNW was above $750,000 but below $1.32 million, the reviewing agency should permit the firm to resubmit PNW information without any further waiting period, and the firm should be recertified if the owner’s PNW is less than $1.32 million and the firm is otherwise eligible.

This represents a much needed change for women and minority-owned businesses in our area. Individual owners that have a personal net worth of over $750,000.00 but under $1.32 million may now be able to apply (or re-apply if decertified as a result of exceeding the PNW cap) to become DBE certified, opening his or her firm up to new opportunities. Further, current DBE owners will have a little more breathing room under the PNW standard and can continue to grow their business without risk of no longer qualifying as an economically disadvantaged individual. Finally, non-DBE entities striving to meet DBE Utilization goals in their federal contracts will now have a larger pool of qualified DBE candidates to choose from.

Ahlers & Cressman PLLC’s lawyers have been assisting numerous small women and minority-owned firms with OMWBE certification issues and questions over the last twenty-five years. We are conversant with the regulations and available to address any questions these new revisions may raise.

A copy of the entire rule is available here:

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