Disadvantaged Business Enterprise (DBE) Program
Certification Standards
The complete
Federal Regulations, 49 Code of Federal Regulations, that govern the
Disadvantaged Business Enterprise (DBE) program, may be found at
http://osdbuweb.dot.gov/business/dbe/index.html
A firm seeking certification has the burden of demonstrating by a
preponderance of evidence, that it meets these requirements
concerning group membership or individual disadvantage, business
size, ownership, and control.
Group membership:
If there is
reason to question whether an individual is a member of a group that
is presumed to be socially and economically disadvantaged, that
individual must demonstrate that he or she is a member of the group.
Presumption of
disadvantage:
It must
be rebuttably presumed that citizens of the United States (or
lawfully admitted permanent residents) who are women, Black
Americans, Hispanic Americans, Native Americans, Asian-Pacific
Americans, Subcontinent Asian Americans, or other minorities found
to be disadvantaged by the Small Business Administration (SBA), are
socially and economically disadvantaged.
Applicants must submit a signed and notarized certification that
each presumptively disadvantaged owner is, in fact, socially and
economically disadvantaged.
Each
individual owner of a firm applying to participate as a DBE whose
ownership and control are relied upon for DBE certification, is
required to submit a signed and notarized statement of personal net
worth, with appropriate supporting documentation. (Appropriate
supporting documentation at this time is the last two years’ U.S.
Individual Income Tax Returns with W2s and all applicable schedules.) In determining net worth, an
individual’s ownership interest in the applicant firm and the
individual’s equity in his or her primary residence are excluded.
Firms owned and
controlled by individuals who are not presumed to be socially and
economically disadvantaged may apply for DBE certification. A
case-by-case determination will be made of whether each individual
whose ownership and control are relied upon for DBE certification is
socially and economically disadvantaged. In such a proceeding, the
applicant firm has the burden to establish that the individuals who
own and control it are socially and economically disadvantaged. An
individual whose personal net worth exceeds $750,000 shall not be
deemed to be economically disadvantaged.
Business size:
To be an
eligible DBE, a firm (including its affiliates) must be an existing
small business, as defined by SBA standards. Current business size
standard(s) found in 13 CFR Part 121 appropriate to the type(s) of
work the firms seeks to perform in U.S. DOT-assisted contracts will
be applied. A firm is not an eligible DBE in any fiscal year
if the firm (including its affiliates) has had average annual gross
receipts over the firm’s previous three fiscal years, in excess of
established size standards as described in 49 CFR 26.65. The Secretary of Transportation may
adjust this amount for inflation from time to time.
Ownership:
To be an
eligible DBE, a firm must be at least 51 percent owned by socially
and economically disadvantaged individuals. In the case of a
corporation, such individuals must own at least 51 percent of each
class of voting stock outstanding and 51 percent of the aggregate of
all stock outstanding. In the case of a partnership, socially and
economically disadvantaged individuals must own at least 51 percent
of each class of partnership interest, and this must be reflected in
the firm’s partnership agreement. In the case of a limited
liability company, socially and economically disadvantaged
individuals must own at least 51 percent of each class of member
interest.
The
firm’s ownership by socially and economically disadvantaged
individuals must be real, substantial, and continuing, going beyond
pro forma ownership of the firm as reflected in ownership
documents. The disadvantaged owners must enjoy the customary
incidents of ownership, and share in the risks and profits
commensurate with their ownership interests, as determined by the
substance, not merely the form, of arrangements.
Control:
The socially
and economically disadvantaged owners must possess the power to
direct or cause the direction of management and policies of the firm
and to make day-to-day as well as long-term decisions on matters of
management, policy, and operations. A disadvantaged owner must hold
the highest officer position in the company. In a corporation,
disadvantaged owners must control the board of directors. In a
partnership, one or more disadvantaged owners must serve as general
partners, with control over all partnership decisions.
Individuals who are not socially and economically disadvantaged may
be involved in a DBE firm as owners, managers, employees,
stockholders, officers, and/or directors. Such individuals must
not, however, possess or exercise the power to control the firm, or
be disproportionately responsible for the operation of the firm.
The
socially and economically disadvantaged owners of the firm may
delegate various areas of the management, policymaking, or daily
operations of the firm to other participants in the firm, regardless
of whether these participants are socially and economically
disadvantaged individuals. Such delegation must be revocable, and
the socially and economically disadvantaged owners must retain the
power to hire and fire any person to whom such authority is
delegated.
The
socially and economically disadvantaged owners must have an overall
understanding of, and managerial and technical competence and
experience directly related to the type of business in which the
firm is engaged and the firm’s operations.
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