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FAA Civil Rights National Airport Civil Rights Training Conference DBE REGULATORY UPDATE Presented to: 2011 National Civil Rights Training Participants San Diego By: Elizabeth Newman FAA Office of Chief Counsel Date: March 2011 Federal Aviation Administration New Rule • Published January 28, 2011 • Effective February 28, 2011 • See: http://edocket.access.gpo.gov/2011/pdf/201 1-1531.pdf 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 2 Continuing Compelling Need for the DBE Program Confirms the continuing compelling need for race and gender conscious programs such as the DOT DBE program 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 3 New Rule Subjects Improves the administration of the DBE Program – – – – – – increases accountability for meeting overall goals modifies and updates certification requirements adjusts personal net worth (PNW) for inflation provides for expedited interstate certification adds provisions to foster small business participation improves post-award oversight 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 4 Counting Purchases From Prime Contractors No Change to general rule: DBE sub and its prime count for DBE credit for items that the DBE subcontractor purchases or leases from a third party Exception: DBE and its prime can’t count items DBE purchases or leases from its own prime 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 5 Termination of DBE Firms No Terminations for Convenience • Primes can’t terminate DBE sub without sponsor’s prior written consent • Termination requires good cause 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 6 Termination of DBE Firms (Cont.) Good Cause – 49 CFR 26.53(f)(3) • DBE sub fails/refuses – to execute contract – perform work consistent with normal industry standards – to meet reasonable bond requirements. • DBE sub ineligible – to work on public works projects – to receive DBE credit for the type of work • DBE firm unable to complete work • Other documented good cause • DBE sub not a responsible contractor • DBE sub voluntarily withdraws from the project 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 7 Termination of DBE Firms (Cont.) Good cause does not exist: • if the failure/refusal of DBE sub to perform work results from bad faith or discriminatory action of prime • if prime seeks to terminate DBE to selfperform the DBE’s portion of work, or to substitute another DBE or non-DBE after contract award 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 8 Personal Net Worth $1.32 million PNW – Inflationary adjustment simply keeps things as they were originally in real dollar terms Will examine other PNW issues in NPRM Will propose improved PNW form in NPRM 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 9 PNW Transition Guidance • Pending actions on date amendment is published, but before effective date – Use new standards, decisions should not take effect until effective date • All actions as of effective date must be based on the revised PNW standard, even if action pertaining to PNW began before this date 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 10 PNW Transition Guidance (cont.) • Appeals to UCP pending before publication date for PNW above $750,000 but not above $1.32 million, use new standard – Sponsors and UCPs may request updated information where relevant • Appeal pending before DOCR under section 26.89, DOCR will take the same approach or remand the matter 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 11 PNW Transition Guidance (cont.) • If firm decertified or application denied within a year before effective date for PNW above $750,000 but not above $1.32 million, the UCP should permit the firm to resubmit PNW information without waiting period • Firm recertified if PNW not over $1.32 million and otherwise eligible 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 12 Interstate Certification • Revised rule enhances ability of UCP to protect integrity of DBE program and affords DBE’s right to pursue business outside home state • January 1, 2012 - new section effective – provides sponsors and UCPs time to train and establish administrative mechanisms – provides DOCR time to make database for denials and decertifications operational • Will address improvements in certification application and PNW forms in NPRM 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 13 Interstate Certification (cont.) Process • Home State (State A) certified firm submits application to State B • State B has 60 days to raise specific objections to firm’s eligibility and advise firm • Firm may respond to State B concerning the specific objections in writing, at an in-person meeting, or both • Firm has burden of proof to issues raised by State B • State B must issue a written decision within 30 days of the receipt of written response or meeting 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 14 Interstate Certification (cont) • UCP deny, reject or decertify must make an entry in DOCR’s Ineligibility Determination Online Database • UCP must check DOCR Website at least monthly 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 15 Interstate Certification (cont.) Good Cause determination that State A’s certification is erroneous or should not apply if: • • • • • Evidence of fraud New information Factually erroneous or inconsistent with Part 26 State law requires different result Information did not meet 26.85(c) 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 16 Interstate Certification (cont.) On-Site Report: More than three years old, State B may require firm to affirm facts in on-site report Within 7 days of application, State B requests State A’s on-site report and any updates and evaluation of firm based on site visit State A must transmit information to State B within 7 days of request 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 17 Other Certification-Related Issues On-site reviews: • No mandated particular schedule • Sponsors and UCPs should conduct updated on-site reviews of certified firms on regular and reasonably frequent basis • Information sharing can be done electronically to reduce costs 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 18 Other Certification-Related Issues Withdrawals: • May apply waiting period if established pattern of frequently withdrawing before decision • May place reapplication behind other applications made since firm’s previous application was withdrawn 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 19 Other Certification-Related Issues REMINDER: • Firms remain certified until and unless removed certification through 26.87 procedures 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 20 Other Certification-Related Issues • Evaluate eligibility on basis of present circumstances • Firm eligible if meets disadvantaged, size, ownership, and control requirements • Must not refuse to certify based solely on historical information • Must not refuse to certify a firm solely on basis that it is newly formed firm, has not completed projects or contracts, has not realized profits, or has not demonstrated potential for success 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 21 Other Certification-Related Issues NAICS: • DBE work must be described in terms of most specific available NAICS code • UCP may not limit NAICS codes to a certain number • UCP may also apply a descriptor from a classification scheme • DBE Directory - list DBE work using most specific NAICS code available 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 22 Other Certification-Related Issues Licensing: • Inappropriate for a sponsor or UCP to insist on professional certification as per se condition where state law does not impose such a requirement Transfer of assets: • UCPs authorized to examine transfers from DBE personal assets to their companies 30 day review: • UCP must advise applicant within 30 days from receipt 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 23 Accountability and Goal Submissions • No Quotas - No sanction for failing to ‘‘hit the number’’ • If the awards and commitments are less than overall goal for that year, you must: – Analyze the reasons for difference – Establish specific steps and milestones to fully meet the goal for the new fiscal year – Operational Evolution Partnership Plan airport or other airport designated by the FAA • must submit, within 90 days of the end of the fiscal year, the analysis and corrective actions developed to FAA DBE Team – All other airports • must retain analysis and corrective actions in records for three years and make it available to FAA on request 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 24 Accountability and Goal Submissions • If analysis and corrective actions approved -- compliance with DBE requirements for remainder of fiscal year – FAA may impose conditions as part of its approval of analysis and corrective actions • Noncompliance with DBE requirements – Not submitting analysis and corrective actions to FAA – FAA disapproves of analysis or corrective actions – Not fully implementing corrective actions or conditions FAA imposed • If unlikely for sponsor to achieve DBE awards and commitments necessary to meet overall goal, FAA may require further good faith efforts – Modifying race-conscious/race-neutral split – Introducing additional race-neutral or race-conscious measures 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 25 Accountability and Goal Submissions Clarifications to three year goalsetting process: • Permits sponsor to make informational projections of expected DBE achievements during each year for three years covered by overall goal 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 26 Program Oversight Monitoring and enforcement mechanism: • Must include a written certification that sponsor reviewed contracting records and monitored work sites • May be conducted in conjunction with monitoring of contract performance for other purposes 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 27 Small Business Provisions DBE Program must include element to facilitate competition by small business concerns: • Take all reasonable steps to eliminate obstacles to participation • Must actively implement program elements to foster small business participation • Doing so is a requirement of good faith implementation of DBE program • Rule references these means as race-neutral measures 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 28 Small Business Provisions (cont.) Element must be submitted to FAA DBE Team for approval as part of DBE program by February 28, 2012, and may include: • • • • • Establishing race-neutral small business set-aside for prime contracts under a stated amount In large contracts requiring bidders to specify elements that are of a size that small businesses can reasonably perform On prime contracts with no DBE contract goals, require prime to provide subcontracting opportunities of a size that small businesses can reasonably perform Structuring procurements to facilitate joint ventures consisting of small businesses to compete for prime contracts For race-neutral portion of goal, ensuring that a reasonable number of prime contracts are of a size that small businesses can reasonably perform 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 29 Follow-on NPRM • Certification and PNW issues, including – forms, – duplicative and excessive bonding, and – joint check requirements • Part 23 NPRM 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 30 Questions 2011 ACR Program Training Conference March 2011 Federal Aviation Administration 31