Are we living the moment of the DBE? | Schoonover & Moriarty LLC

For many years, when clients asked me what the federal Disadvantaged Business program was, I would say something like, “It’s kind of like the 8(a) program, but it’s not because it’s a sort of state, but each state has its own curriculum and other certifications on top of that. Does that help?”

It was rarely the case.

The fact is, in the world of federal government contracting, the programs that tend to take up the most space are the ones with caveats. Your 8(a), HUBZone, Disabled Veteran-Owned Small Business, and Woman-Owned Small Business (sometimes with the addition of an economically disadvantaged person). But with the Infrastructure Act and the Inflation Reduction Act both seeking to take advantage of the DBE program, we may be living in the era of the DBE.

The federal DBE program dates back to the early 1980s and is administered by the US Department of Transportation. It applies when federal highway assistance is used by other recipients (individual state transportation departments, cities, other eligible development groups). The objective of the program is to ensure non-discrimination in the awarding of federally funded road projects.

To qualify as a DBE, according to the federal government (we’ll soon see why this distinction matters), the first step is to be a small business, as defined by the Small Business Act with one important caveat: there is has an average of $26.29 million. annual gross revenue cap over three years.

The second stage is to be socially and economically disadvantaged. This means that 51% belong unconditionally to one or more socially and economically disadvantaged people. Social disadvantage is subject to racial or ethnic bias or cultural bias due to belonging to a certain group (there is a long list). Women are presumed to be socially disadvantaged. An economic disadvantage is a person whose ability to compete in the free enterprise system has been impaired. Indian tribes and Native Hawaiian organizations may be economically disadvantaged.

Now, because of the Constitution (oh, that old duck again), states control their own DBE programs. Most states mirror the federal curriculum, but there could be significant differences. For example, most states, but not all, require a city visit to certify a business as a DBE.

In Kansas, where our company is located (just outside of Kansas City if you want to stop by), the state recognizes companies like DBE, Airport Concession DBE (ACDBE), Minority-owned Business Enterprises (MBE), and Woman -owned Business Enterprise (WBE). (This is not the place to discuss ACDBEs, but they are fascinating. I mean, a bank can be an ACDBE if it has less than $1 billion in assets.) Due to the nature of MBEs and WBEs, there’s a ton of overlap between them and DBE status.

Kansas regulations incorporate federal DBE regulations by reference for convenience, but the Kansas definition of DBE is still broader than the federal definition. It requires that the business be owned and controlled by a disadvantaged person. The owner must be a US citizen or lawful permanent resident. Ownership must be real, substantial and continuous, “exceeding pro forma ownership of the business”. Control, on the other hand, means the power to direct or cause to be directed the management and policies of the business both on a day-to-day and long-term basis.

Why are DBEs important to the $1.2 trillion infrastructure act?

One of the reasons being a DBE has been a hot topic lately is, as it often is, money.

The Infrastructure Investment and Jobs Act, better known as the $1.2 Trillion Infrastructure Act, includes a 10% DBE target for any surface transportation program (at the exception of certain tribal transportation funds), any public transportation program and any road safety research and development project. .

Obviously that’s not 10% of the whole $1.2 trillion, but even if it was only half, I’m not a math expert, but I think that leaves about $60 billion dollars for DBEs.

So that’s a lofty goal. But what happens if it is not achieved? Well, the infrastructure bill requires every state to list all DBEs in the state, notify the Secretary of Transportation of the percentage controlled by women, socially and economically disadvantaged people who are not women, and others. It also calls for the creation of minimum reporting requirements, including DBE awards, commitments, achievements and “[a]nothing else that helps the Secretary of Transport oversee the disadvantaged business program.

It’s not like the states are going to get in trouble, but at least they need to explain themselves to the principal’s office.

Why are DBEs important to the Inflation Reduction Act?

The subject of Subtitle E of the Inflation Reduction Act 2022 – which is expected to pass and become law – is transport and infrastructure.

Section 60501, which begins on page 704 (!), amends the Neighborhood Access and Equity Grant Program to explain that over $3 billion is to remain earmarked through 2026 to provide underprivileged communities or underserved with competitive grants to improve walking, safety, affordable access to transportation, and more.

That might not be a huge amount compared to the Infrastructure Act’s $60 billion, but it’s no small feat and all the more reason for eligible companies to consider the status of DBE.

About Myra R.

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