DBE Subcontractor 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.

In essence, a DBE contract goal is a requirement that a certain percentage of work for the project be performed by certified DBEs. 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. Certain special rules apply for suppliers and for trucking firms.

More information on the ADOT DBE policy and how it is implemented can be found on the ADOT website.

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 projects 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, contact [email protected](link sends e-mail) or call 602-712-7761.

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 or no more than 30 percent of the DBE subcontract is second-tier subcontracted to a non-DBE.

Sometimes a bidder or 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 bidder can demonstrate it has made a good faith effort to do so. That is, the bidder has taken all reasonable steps to find certified DBEs for the contract but still has not been able to meet the contract goal.

Good faith efforts requirements exist to ensure that prime contractors take DBE goals seriously and make a real effort to satisfy them. If the prime contractor 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 contractor will not be awarded the contract.

Once selected to work on a project, each DBE subcontractor and supplier must submit to the Prime Contractor a DBE Intended Participation Affidavit Form specifying the work they are being contracted to do on the project. The form includes the North American Industry Classification System (NAICS) Code of the work that the DBE will be performing on the project, bid item number and the dollar amount to be paid to the DBE for work to be performed on the contract.  The form must be signed by the DBE and returned to the Prime contractor for submission to ADOT.

A Bidder’s list is a list of all subcontractors, suppliers, service providers and manufacturers bidding on each ADOT project. The apparent low bidders on ADOT projects must submit complete the online Bidder’s List Form by the seventh calendar day after the opening of bids. This requirement will change to five calendar days after January 1, 2017. It is important for DBEs and other subcontractors to be registered in AZ UTRACS to make it easier for prime contractors to include their firm on the required Bidder’s List.