Requirements for Contracts with DBE Goals (Prime Consultant)

The Disadvantaged Business Enterprise (DBE) Program exists to create a level playing field on which DBEs can compete fairly for transportation contracts. The Program requires ADOT to set DBE contract goals if it determines that it cannot meet its overall goal for DBE participation in other ways.

Once your contract is executed, you are required to meet the DBE goals you committed to in the contract, and to do so with the DBE subconsultants listed in the contract. Furthermore, if contract modifications increase the value of the contract, you are still required to meet or make good faith efforts to meet the DBE goal percentages agreed to.

If DBEs cannot be found that would adequately satisfy the established DBE goals, you must prove that you have at least made a good faith effort to find such DBEs. See the Good Faith Efforts section below for more information on good faith efforts.

ADOT encourages prime consultants to secure DBE firms beyond meeting the DBE goal. This is good for two reasons.  First, it helps if circumstances occur during work on the project that results in loss of work for a DBE committed to meet the contract goal.  If the consultant has employed more DBEs than needed to meet the DBE goal, that consultant is still likely to meet the DBE goal with the remaining DBEs if for some reason the dollar value of the work of one DBE firm is reduced.  The second reason is that using more DBEs than needed to meet the DBE goal helps ADOT to meet or exceed the race and gender-neutral portion of this annual DBE goal, as well as its overall annual goal.  If ADOT is able to consistently meet or exceed its annual goal, DBE contract goals may not be necessary in the future.

When counting DBE participation, the DBE must be certified in the category of work it performs in order for that work to count towards DBE participation. Further, only the value of work actually performed by the DBE counts toward DBE participation, and it is only counted after the DBE has been paid for the work.

ADOT will monitor the consultant’s utilization of DBE firms listed on DBE Intended Participation Affidavits to ensure that the consultant's commitments to DBE firms and the DBE goals are met at the end of the contract.  Consultants should immediately notify ECS and the ADOT Business Engagement & Compliance Office if circumstances change that may affect commitments made to DBE firms working on the contract.  The consultant can be sanctioned monetarily at the end of the contract for not meeting the DBE goal on the contract.

If ADOT determines that the consultant has, without justification, not met the established DBE goal, ADOT will, at its discretion, deduct up to two times the amount of the unattained portion of the established DBE goal from monies due or becoming due the consultant as liquidated damages, based on the circumstances of the noncompliance. 

More information can be found in the ADOT Disadvantaged Business Enterprise (DBE) Program Plan on the BECO section of the ADOT website.

For a general outline of your DBE responsibilities throughout a project, see the DBE Responsibilities Matrix on the ECS DBE Program page.

Sometimes a situation will arise during the completion of a contract that requires additional DBE involvement. For instance, if a contract modification expands the scope of a project significantly, the amount of DBE involvement already planned may no longer be enough to meet DBE goals.

If you find that you are no longer meeting DBE goals during a contract, you must make good faith efforts to increase DBE involvement. That is, you must take all reasonable steps to find certified DBEs for the contract.

Although demonstrating good faith efforts is not a check list, examples of good faith efforts include

• soliciting DBEs with the ability to perform the necessary work and allowing for a reasonable response time.
• identifying specific portions of the contract that may be performed by available DBEs, even if your own company has the capability of performing that work itself.
• providing interested DBEs with adequate information about plans, specifications and requirements of a contract in a timely manner so that they have the necessary information and opportunity to respond.
• negotiating in good faith with interested DBEs, and documenting such negotiations. It should be noted that, while there may be some additional costs involved in finding and using DBEs, this is not sufficient reason for failing to meet DBE goals so long as such costs are reasonable.
• making efforts to assist interested DBEs in obtaining bonding, lines of credit, insurance, equipment, supplies, or materials.
• using the services of DBE and small business support organizations to locate appropriate certified DBE subcontractors.
• being open to proposals from any DBE without a sound and thoroughly investigated reason for disqualifying that DBE.

There is no single process for making good faith efforts. As such, evaluation of whether efforts to find DBE subcontractors were sufficient is made by ADOT on a case-to-case basis in accordance with federal regulations.

For step-by-step guidance on how to satisfy good faith efforts requirements for ADOT, see the Contract Specs and Forms page on the ADOT website.

More information about how good faith efforts are evaluated is available in this FHWA video. 

You may appeal a good faith efforts ruling by submitting a written appeal with the State Engineer's Office.

It is important to remember that DBE involvement only satisfies DBE goals if the DBE serves a commercially useful function. Generally, this means that the DBE must perform the whole of a task itself and the task must be necessary for the completion of the project. The specific rules vary by the task being performed, however. 

A DBE will not be considered to perform a commercially useful function if it acts only as an extra participant in a transaction or project to provide the appearance of DBE participation. If a DBE does not perform or exercise responsibility for at least 30 percent of the total cost of its contract with its own work force, or if the DBE subcontracts a greater portion of the work of a contract than would be expected on the basis of normal industry practice for the type of work involved, ADOT will presume that the DBE is not performing a commercially useful function.

When a DBE is presumed not to be performing a commercially useful function as provided above, the DBE may present evidence to rebut this presumption. Decisions on commercially useful function matters are subject to review by FHWA, but are not administratively appealable to U.S. DOT.

ADOT staff may conduct on-site visits to interview DBE firms, or request information in writing, to ensure that the firms are completing tasks for which they have been contracted. ADOT does this in order to verify that a commercially useful function is being performed by DBEs on contracts. 

See this video from the FHWA for more information on what qualifies as a Commercially Useful Function. 

For more information on good faith efforts, as well as information on what sort of work satisfies the commercially useful function requirement of DBE goals, read the FHWA Tips on Evaluating a CUF on the Guide and Resources. 

Only the value of work actually performed by the DBE is counted toward DBE goals. No credit toward the DBE goal is given for shipping, manufacturing, and supply costs. Neither will any credit be given if contracts are created to artificially create DBE participation – any DBE subconsultants must perform a commercially useful function.

Also, if a DBE subcontracts part of its work to another firm, the value of the subcontracted work only counts toward the DBE goal if the subcontracted firm is itself a DBE. Work subcontracted to a non-DBE does not count toward the DBE goal.

When counting DBE participation, the DBE must be certified in the category of work it performs in order for that work to count towards DBE participation. Further, only the value of work actually performed by the DBE counts toward DBE participation, and it is only counted after the work has been paid for.

The DBE Termination/Substitution Request Form of a DBE can generally be found in the BECO section of the ADOT website. Be sure to follow al requirements for substituting/terminating DBES listed to meet a contract goal outlined in the DBE EPRISE Contract Specifications.  Failure to follow procedures and secure ADOT approval before substituting/terminating a DBE committed to meet a contract goal is a material breach of contract and ADOT will deduct the dollar amount of the wrongfully substituted/replaced DBE subcontract plus 25 percent of the amount remaining to be paid to the DBE as liquidated damages.

If the termination of the DBE is approved, the contractor is still obligated to meet agreed-upon DBE goals and must make good faith efforts to find a DBE substitute for the terminated DBE.