Contracts with DBE Requirements

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.

A DBE contract goal requires a proposer to include enough DBE participation on the contract to meet the goal, or to show good faith efforts to do so. For example, ADOT might set an 8 percent DBE goal on an engineering contract. Proposers are required to show that they have DBE participation that meets or exceeds 8 percent of their proposal or demonstrate that they have made good faith efforts to do so. If the proposed cost is $1 million, a proposer with $80,000 or more in DBE participation has complied with the contract goal. A proposer that only has 5 percent DBE participation but has shown good faith efforts to reach 8 percent participation has also complied with the DBE contract goal. DBE prime consultants may not count their own participation in complying with the contract 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.

See the DBE/SBC Database section below to learn how to search for DBE and SBC subcontractors.

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.

During the completion of a project, Prime Consultants must meet DBE goals for the project or make good faith efforts to do so.  Failure to do so will result in sanctions. If ADOT determines that the contractor 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 contractor as liquidated damages, based on the circumstances of the noncompliance.  

The specific clauses of a contract with ADOT which deal with DBE goals and requirements can be viewed in the BECO section of the ADOT website:

• For on-call contracts 
• For project-specific contracts

It is important to note 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.

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 Commercially Useful Function Checklist on the ADOT website. 

In some cases, not all of the money paid to a DBE can count toward the DBE goal.

A DBE subcontractor may enter into second-tier subcontracts that are consistent with normal industry practices. However, items that are second-tier subcontracted by a certified DBE subcontractor will not be counted toward the participation goal unless the work is subcontracted to another certified DBE.

One of the best ways of finding disadvantaged business enterprises (DBEs) and small business concerns (SBCs) is by using the Arizona Unified Certification Program’s DBE and SBC Directory. This is an online database of DBEs and SBCs licensed to do business in Arizona. The directory is searchable by offered services, business name, contact information, location, and certification type. The directory can also be downloaded to your computer in a variety of formats.

The directory can be found on the UTRACS website. 

Sometimes a proposer may not be able to find certified DBEs to meet a contract goal no matter how hard they try. It is acceptable to not to meet a DBE contract goal so long as the proposer can demonstrate it has made a good faith effort to do so. That is, the proposer has taken all reasonable steps to find certified DBEs for the contract but still has not been able to meet the contract goal.

Although demonstrating good faith efforts is not a checklist, 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 subconsultants.
• being open to proposals from any DBE without a sound and thoroughly investigated reason for disqualifying that DBE.

It is important to note that 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, and the ability of competing bidders to meet DBE goals may be taken into account. Regardless of other factors, a proposer must have reached out to the ADOT Business Engagement and Compliance Office for help meeting DBE goals or it will not be considered to have made good faith efforts. If the prime consultant is unable to meet the DBE goal on a contract or fails to make a good faith effort to meet the DBE goal, as determined by ADOT, the prime consultant will not be awarded the contract.

For step-by-step guidance on how to satisfy good faith efforts requirements for ADOT, see the Good Faith Efforts Guidance Appendix A on the ADOT website.

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

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

When submitting a proposal, you must submit an assurance that you have either met the DBE goals for the project or have made a good faith effort to do so. After submitting a bid, you must submit one of these two items:

• Detailed evidence of good faith efforts
• Detailed information on which DBEs you intend to employ and which tasks they will perform.

Once you have provided a list of DBE subconsultants you intend to use on a project and it has been approved by ADOT, you may not change subconsultants or their tasks without written consent from the Business Engagement and Compliance Office (BECO) unless the entity that awarded you the contract eliminates items of work subcontracted to the DBE.

Should a DBE subconsultant be unwilling or unable to complete its work, the prime consultant must notify BECO and the ADOT resident engineer immediately, and provide reasonable documentation that this is the case. The prime consultant may then request permission from BECO to replace the DBE subconsultant in question.

Prime consultants must notify DBE subconsultants of any intention to terminate or substitute them as well as the reasons for doing so (and send a copy of that notice to BECO) at least 5 days prior to making a formal request to BECO. This allows the DBE subconsultant time to respond or object.

Upon receiving a formal request to terminate or substitute a DBE subconsultant, BECO and ADOT may only approve the request if there is good cause to do so. Good cause includes

• the listed DBE fails or refuses to execute a written contract.
• the listed DBE fails or refuses to perform the work of its subcontract in a way consistent with normal industry standards. However, good cause does not exist if the failure or refusal results from the bad faith or discriminatory action of the prime consultant.
• the listed DBE fails or refuses to meet the prime consultant’s reasonable, nondiscriminatory bond requirements.
• the listed DBE becomes bankrupt, insolvent, or exhibits credit unworthiness.
• the listed DBE is ineligible to work on public works projects because of suspension and debarment proceedings.
• ADOT has determined that the listed DBE subconsultant is not a responsible consultant.
• the listed DBE voluntarily withdraws from the project and provides ADOT with written notice of its withdrawal.
• the listed DBE is ineligible to receive DBE credit for the type of work required.
• a DBE owner dies or becomes disabled with the result that the listed DBE subconsultant is unable to complete its work on the contract.
• other documented good cause that ADOT determines compels the termination of the DBE subconsultant.

If a DBE subconsultant is to be replaced, the prime consultant must either replace it with another DBE subconsultant or else provide documentation of good faith efforts. Failure to do so may result in financial sanctions, contract termination, or disqualification from participation in other ADOT projects.

DBE Commitment Affidavits are statements from the prime consultant and each DBE subconsultant that those DBEs will perform the specified work on the project, and that the work performed by DBEs sums to the specified DBE goal for the contract.

The Prime consultant must submit a summary of all DBE subconsultants that will work on the project by completing the DBE Intended Participation Affidavit Summary - (Form 206PS) (Rev 5/1/2019)

Each DBE subconsultant must also submit a DBE Intended Participation Affidavit specifying the work they intend to do on the project and submit the form to the Prime Consultant to submit to ADOT.

Sample Design contract templates for all types of contracts, as well as guidelines and other helpful documents can be found in the ECS section of the ADOT website.

If your firm is able to meet the DBE goal on a project, you must also complete and submit the necessary DBE Intended Participation Affidavits for each DBE firm that will be used to meet the DBE goal on a project along with the DBE Intended Participation Affidavits Summary Form with the Cost Proposal.  If your firm is unable able to meet the DBE goal on a project, you must complete the Good Faith Efforts form and submit documented evidence of good faith efforts. If the contract is project specific, you must submit these with your cost proposal. If the project is under an On-Call contract, these documents must be submitted with the Cost Proposal for each task assignment.  There is a comprehensive list of the DBE Pre-Award Forms listed on the DBE Contract Compliance page.