|July 7, 2010
The Honorable Ray LaHood
Secretary of Transportation
U.S. Department of Transportation
1200 New Jersey Avenue, S. E.
Washington, DC 20590
RE: Department of Transportation (DOT) Docket No. OST – 2010 – 0118
Dear Secretary LaHood:
The National Association of Minority Contractors (NAMC) appreciates the opportunity to contribute to the constructive dialogue on modifications to the Disadvantaged Business Enterprise (DBE) Program via the comments period of the current Notice of Proposed Rulemaking (NPRM). NAMC's membership includes contractors (involved in vertical and horizontal construction), suppliers and manufacturers, industry-related professional service providers as well as local governmental entities. On behalf of our membership, we actively engage in professional enrichment training, legislative advocacy and partner with entities with similar missions.
NAMC's GENERAL POSITION ON DBE PROGRAM
The construction sector is one of the most competitive and precarious business environments in which to operate. It has historically been an economic indicator for disenfranchised sectors of the business community. Failure to establish and enforce a DBE Program with tangible goals and corrective abilities is counterproductive - in essence resulting in historically disadvantaged businesses continuing to absorb long-lasting operational burdens and financial hardships. Take, as an example, the existing statutes use of "aspirational goals" (CFR Title 49, Part 26.41) – while NAMC supports aspirational goals as a means for obtaining work opportunities, the fact that they need not be complied with locally remains counterproductive. As such, NAMC recommends that these aspirational goals are complied with locally.
GOOD FAITH EFFORTS
While NAMC recognizes the rationale and purpose for maintaining a methodology to capture sincere attempts, good faith efforts have been a consistently abused tool and an ineffective process to confirm legitimate efforts. As a result, it has been the experience of many NAMC members that disingenuous efforts prevail. One of the most egregious examples involves prime contractors committing to use DBEs (in good faith) but at their discretion terminating DBEs for convenience, as noted in this NPRM under Terminations and Substitutions of DBE Subcontractors (Pg. 25821). Under Improving Oversight (Pg 25817), this NPRM proposes means of improved oversight. NAMC recommends that these measures should be modified so that they incorporate the monitoring of good faith efforts such as those involving DBE substitutions and terminations, as well as when there exists documented data regarding diverse capacity in the respective market. Another example where expanded oversight of good faith efforts would be warranted is the issue of overconcentration of DBEs within a particular type of work (CFR Title 49, Part 26.33). This is an area where good faith efforts can be misrepresented. New methods of oversight should be developed that disallow reliance on unsubstantiated resources to calculate concentration verses overconcentration.
It is NAMC's position that effective compliance is based on the successful act of goal setting (proactive) and compliance monitoring (reactive). With regards to goal setting, under Accountability for Recipients With Respect to Overall Goals (Pg 25816), this NPRM proposes reactive methods (namely analyzing why the recipient fell short and establishing corrective actions after the fact). NAMC proposes that the NPRM modify the statutes allowance of recipients to demonstrate evidence of the availability of "ready, willing and able" DBEs. Suggested resources, such as census data (CFR Title 49, Part 26.45), do not reflect real-time availability or socio-economic circumstances, therefore making the definition of a reliable base figure for the relative availability of "ready, willing and able" DBEs questionable.
With regards to monitoring, under Goal Submission (Pg 25817), this NPRM proposes that recipients submit goals every three years instead of annually as a means to reduce administrative burden. While NAMC can appreciate the ill effect of a burdensome regulatory mandate, per this proposed modification, DBEs stand to incur the greater harm by virtue of lost opportunity. In order to reflect real-time conditions of the potentially erratic construction industry, NAMC recommends maintaining annual reporting of goals by recipients.
Furthermore, documented experiences of NAMC's membership across numerous states has revealed poorly developed if not intentionally misrepresented goals involving (1) the misidentification/counting by recipients of firms featuring inappropriate NAICS codes and (2) ownership misrepresentation (or "flipping" the majority ownership of a firm to a non-minority woman to qualify for DBE status). Those examples involve cases where architects have been counted as concrete workers or engineers counted toward carpentry or a husband runs a company's daily operation but on paper his percentage ownership reflects a minority interest in said company. In these all too common cases, the net result is that the recipient "meets its goals" but there remains 0% participation. To date, efforts to redress have been ineffective. Examples of such efforts include the Federal Highway Administration's (FHWA) recent admonishment recipients across many states for fraudulent counting via warning letters which featured the threat of repayment – an action, which if followed through on, could cripple a state financially; or, grandfathering as acceptable the results of past counts involving misidentified NAICS codes - under the auspices of training. The attempts appear disingenuous. Therefore, NAMC takes the position that while the NPRM speaks to enhanced compliance it fails to insert commensurate sanctions or substantial penalties for failure to meet goals or CUF violations (discussed below). The NPRM would be of greater value if it adopted the most effective federal compliance models (such as that applied by the Internal Revenue Service).
As reflected under Interstate Certification and Related Issues (Pgs 25917-20), NAMC supports stronger terms and conditions that result in expedited national reciprocity. Consequently, without definitive conditions, this modification could allow fraudulently qualified DBEs to work around the country while legitimately qualified DBEs in their own home state could see substantially less work or become closed out of the market. As such, NAMC supports using those firms from other states only in cases where capacity is not available (described as less than 3 available firms to perform a Commercially Useful Function (CUF) in the associated NAICS code/s). This would require that local DBEs be given priority in their specific state of longest term residence.
As reflected under Certification-Related Provisions (Pg. 25822), NAMC agrees with this NPRM's reinforcement of the statutes initial position that counting issues (how well a DBE satisfies the terms of an awarded contract) are separate from certification issues (a firms general eligibility to be classified a DBE). However, note that NAMC's agreement that firms should be evaluated based on their present circumstances, is predicated on the more reliable utilization of real-time circumstances faced by DBEs.
SMALL BUSINESS PARTICIPATION
As detailed under Fostering Small Business Participation (Pg 25820), the NPRM will require that small business elements be incorporated into DBE Programs. NAMC does not recommend requiring that DBE Programs add such an additional category. Current opportunities for minorities through DBE Programs are disproportionately low already; to add this as an additional category to the DBE Program will only serve to exacerbate this effect. NAMC supports "unbundling" contracts to meet the capacity of the diverse market, however it does not perceive the creation of small business elements as a means to resolve issues associated with "bundled" contracts. Other approaches should be examined such as teaming of like services as well as more direct/accessible lines of credit to fund larger projects. Offering minorities key opportunities and training on reliable long term contracts (such as roads and bridge repair or maintenance of highway-related structures on a five year program) would affirmatively build the capacity of minority owned firms.
PERSONAL NET WORTH
NAMC is encouraged that, as reflected under Personal Net Worth (Pg. 25817), the NPRM recognizes the need for adjustment. The increased net worth would expand the extent of participation, for example, allowing DBEs to further develop the capacities required to compete at a higher level. Having said that, please note that most diverse firms have not yet come within close proximity of the existing personal net worth parameters. As such, NAMC recommends that in addition to using the Consumer Price Index (CPI), additional economic factors should be factored into the analysis to better reflect and address the situation of minority businesses.
Given NAMC's positioning throughout the country via our various local chapters, the organization is a repository of information which reflects the position of many categories/segments impacted by the DBE Program. NAMC welcomes the opportunity to participate in on-going discussions with the intent to achieve a representative consensus along with implementation of initiatives that are intended to achieve equitable solutions.
Francis Onwualu, President
National Association of Minority Contractors
cc: Don O'Bannon, Chair/Airport Minority Advisory Council
Julie Cunningham, Conference of Minority Transportation Officials