USDOT Announces Changes To Facilitate Interstate Reciprocity For DBE Firms

In yesterday’s post,we informed you of two major changes to the United States Department of Transportation (USDOT) Disadvantaged Business Enterprise (DBE) certification process: (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. As promised, today’s post will cover interstate reciprocity.

For those of you that missed yesterday’s post, the DBE certification process aims to level the playing field for minority and women owned businesses by providing a vehicle for increasing the participation 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 (“woman and minority owned) firms.

Part II: Interstate Certification (49 C.F.R. § 26.85)

While the DBE program is a national program, current state specific administrative requirements tend to impair a participant’s ability to fully compete for business opportunities. In response, USDOT issued a proposed rule aimed at breaking down these barriers. USDOT received many comments relating to the proposed rule, many of which reflected the tension between the two fundamental objectives of the program. While USDOT aims to facilitate the entry of DBE firms into the national program, increasing access to contracting opportunities wherever the location, and reduce administrative burdens on firms who do work in multiple states, USDOT also strives to ensure that ineligible firms cannot take advantage of weaknesses in the program. Many view that one such weakness is that while their home state’s certification programs may do a good job, other states’ certification programs do not. Despite the concerns however, USDOT has decided to proceed, stating that it will continue to work with state and local partners to improve the certifications process.

The new rule allows a firm certified in its “home state,” where its principal place of business is located, to present its certification application package to State B. State B will then have 60 days to determine whether it has specific objections to the firm’s eligibility and to communicate those objections with particularity to the firm. If State B does have objections, the firm will have an opportunity—in person, writing, or both—to respond and present information/arguments to State B concerning the objections made. The firm, rather than State B, will have the burden of proof with respect to the issues raised by State B. Ultimately, all states will be required to accept DBE certifications from other states unless a state finds “good cause” to reject the home state’s certification. Grounds for rejection may include fraud, factual errors, or failure to meet the certification criteria.

Unlike the revision to PNW discussed yesterday, compliance with the new section 26.85 is not mandatory until January 1, 2012, in order to provide additional time for reviewing agencies to take advantage of training opportunities. Until that date, this expedited interstate certification process may not be available in all states.

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: http://edocket.access.gpo.gov/2011/pdf/2011-1531.pdf