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.
