Today’s guest post is from my good friend and law partner, Mark Leach, who focuses on health care law, construction disputes and public procurement matters.  Mark served as a panel member on DBE Compliance at the October 25, 2012, ARTBA Construction Law and Regulatory Forum. You can contact Mark at (502) 681-0583 or

Comment period.  Companies involved in federal-aid highway, airport, and other transit construction contracts will have more than visions of sugar plums on December 24, 2012, when comments are due on proposed Disadvantaged Business Enterprise (DBE) regulations. Due to their sweeping nature, interested contractors and industry representatives may find a lump of coal in their stocking.

The DBE program regulations require goals to be set for awarding a certain percentage of federally-aided contracts to DBEs. While laudable in intent, DBE goals can be challenging, risky and carry the possibility of severe criminal and civil penalties for the prime contractor for violations of the regulations.

On September 6, 2012, the United States Department of Transportation issued its notice of proposed rulemaking. The proposed changes affect the objectives of DBE programs, transit vehicle manufacturers, and the forms used in programs—and that’s not all. The proposed rules make several changes in contractor bidding requirements and to the consequences for making changes after bids have been submitted.

Responsiveness versus Responsibility. In support of the proposed rules, DOT explains that it “has noticed an unfortunate trend” in which contract awardees have a period after bid opening to provide DBE information. The proposed rules would eliminate the distinction for DBE compliance between “responsiveness” and “responsibility,” allowing only responsiveness. Bidders would instead have to submit all of their DBE information with the bids themselves (allowing for possible exceptions for negotiated procurements), and failure to do so could result in the bid being disqualified as non-responsive.

Additional Safeguards.  The proposed rules also “create additional safeguards for DBEs.” Payment for DBE-designated work will not be made unless the work or supplies are provided by the listed DBE. The one exception is where the prime contractor received prior written consent “for good cause” to use a replacement DBE. Failure to use the listed DBE without prior consent can constitute a “material breach” of the contract. Remedies for the breach include termination of the contract and imposition of liquidated damages.

Good Faith Efforts.  The proposed rules also impact prime contractors who cannot achieve the DBE goal. Currently, contractors are allowed to demonstrate “GFEs,” or “good faith efforts” in order to still be considered as complying with the DBE goal. The proposed rules would require either: [1] all bidders to submit their GFE documentation with their original bids; or, [2] the apparent successful bidder would have one day after notification to submit its documentation.

DOT justifies the new rule on GFEs because bidders “have to amass a great deal of information to compete for a contract (e.g., with respect to price, materials, schedules, etc.). DBE-related information is no different and no less an integral part of the bidding process. … Consequently, we believe that recipients can justifiably seek good faith efforts information at the same time they receive everything else concerning the competition for a contract.” DOT, though, does invite comments on whether one day is an appropriate time frame, or whether a longer period is needed; DOT suggests three days as an alternative.

DOT asserts that the proposed rules are “not a significant regulatory action” because they do “not create significant cost burdens [and] do[] not affect the economy adversely.” Rather, “the changes proposed … are primarily technical modifications … that will have little to no economic impact on program participants. Therefore, the proposed changes will not create significant economic effects on anyone.” (emphasis added).

DOT’s assertion that the proposed changes will not economically impact anyone might be informed by the process that generated the proposed changes. The Department received “significant input from state and local officials and agencies involved with the DBE program.” It is, therefore, unknown how much input was received from contractors and others involved in the transportation industry.

Comments on the proposed rules originally were due on November 5, 2012 (the day before Election Day). On the day the American Road and Transportation Builders Association’s (ARTBA) Construction Law and Regulatory Forum featured a panel on DBE compliance, the Department issued a correction extending the deadline for comments to December 24, 2012. This new deadline may pose the last real chance for contractors and others involved in the transportation industry to comment on the effects of the proposed rules.

Comments may be submitted through several channels detailed on the first page of the proposed rules. If interested in commenting, contractors may seek legal counsel or submit comments directly. To submit comments on-line, visit and search for OST-2012-0147, or simply click on this link.