By: Cordell Parvin
The 2003 final rule permits DOTs to continue the counting
provisions its DBE program adopted to comply with the 1999 final rule or adopt
the new option. On June 16, 2003, the U.S. DOT issued a final rule revising the
49 C.F.R. Part 26 Disadvantaged Business Enterprise (DBE) regulations. Prime
contractors will be particularly interested in the three changes involving
retainage payments, size standards and eligibility, and DBE credit for trucking
firms.
Retainage
In 1999, the U.S. DOT added a prompt payment provision,
currently incorporated in section 26.29, requiring prime contractors to pay
retainage to subcontractors promptly after the subcontractors satisfactorily
complete their work. Since 1999 prime contractors have complained that
requiring full payment to subcontractors before the DOT pays retainage creates
a financial hardship.
To address the prime contractors' concerns, without
diminishing the benefit of the existing provision to subcontractors, the 2003
final rule allows DOTs to choose from three approaches: (1) A DOT could
eliminate retainage entirely, neither retaining funds from prime contractors
nor permitting prime contractors to hold retainage from subcontractors; (2) a
DOT could decide not to retain funds from prime contractors, but give prime
contractors discretion to hold retainage from subcontractors (the DOT would
require prime contractors to pay subcontractors in full after satisfactory
completion of the subcontractor's work); or (3) the DOT could hold retainage
from prime contractors but make incremental inspections and approvals of the
prime contractor's work at various stages of the project and pay the prime
contractor the portion of the retainage based on these approvals, and require
the prime contractor to promptly pay all retainage owed to the subcontractor
for satisfactory completion of the approved work.
One of the issues that also has been a concern to prime
contractors was paying a subcontractor before its work is accepted by the DOT.
The U.S. DOT has attempted to address that concern by stating that 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.
Business size determinations
Without changing section
26.65(a), the U.S. DOT provided guidance stating that DOTs should not totally
decertify a firm because it exceeds the size standard for one or more of its
activities. If a firm meets the size standard for one type of work, it should
continue to be certified and receive DBE credit for that type of work. This
applies even if it has exceeded the size standard for another type of work. As
a result, it cannot receive DBE credit for specialty subcontracting, but will
retain its certification for its other areas that remain DBE eligible.
Credit for trucking firms
The U.S. DOT changed the 1999
final rule dealing with DBE credit for trucking operations currently
incorporated in section 26.55.
The department received
complaints that the 1999 rule reduced opportunities for DBE trucking companies
and did not take into account sufficiently the important role of leasing in the
trucking industry. Acknowledging this concern, the 2003 final rule allows DOTs
to count for DBE credit the dollar volume attributable to no more than twice
the number of trucks on a contract owned by a DBE firm or leased from another
DBE firm. The following is an example of how this would work:
DBE Firm X uses two of its own
trucks on a contract. It leases two trucks from DBE Firm Y and six trucks from
non-DBE Firm Z. DBE credit would be awarded for the total value of
transportation services provided by Firm X and Firm Y, and also may be awarded
for the total value of transportation services provided by four of the six
trucks provided by Firm Z. In all, full credit would be allowed for the
participation of eight trucks. With respect to the other two trucks provided by
Firm Z, DBE credit could be awarded only for the fees or commissions pertaining
to those trucks Firm X receives as a result of the lease with Firm Z.
The 2003 final rule permits DOTs
to continue the counting provisions its DBE program adopted to comply with the
1999 final rule or adopt the new option.
It appears that the provisions
will be helpful for prime contractors. Time will tell.