Now that the new highway-and-transit funding bill is finally signed into law, prime contractors that hate disadvantaged-business-enterprise, or DBE, goal programs shouldn't waste time hoping a potential President Romney will wipe them away in the same way he has pledged to nullify the 2010 health-care act just blessed by the Supreme Court. Not even the Tea Party has expressed interest in transportation DBEs. But it's a mistake
to believe that nothing needs to be fixed in DBE requirements, which have existed since 1983. This would be a good time to adjust the rules and clarify what constitutes compliance.
According to the U.S. Dept. of Transportation, the most common enforcement cases involve prime contractors that use firms with questionable DBE status to meet subcontracting goals or hire real DBEs that don't actually do the work. In fact, as far as DBE status, the onus is on the prime contractor to determine whether a company certified by a federal, state or local government entity is legitimate and "safe" to work with.
As for actually performing the work, the standard applied is that a DBE must serve a "commercially useful function," but the phrase itself has proved to be of limited usefulness.
For example, in many markets, prime contractors can't tell the difference between working with and mentoring their selected certified MBEs or WBEs (minority or women's business enterprises) and illegal control or manipulation. Of course, there have been cases of blatant fraud by the prime contractor, such as painting or pasting a different company name and logo on its vehicles to create the appearance of using a DBE. Some primes have just shuttled personnel between their payroll and the DBE's. The key question is whether the prime contractor's work with its DBE crosses the line between building an effective project team and misusing the DBE as a pass-through to meet the goal.
Other matters could be better delineated. Attorney Dean B. Thomson recently wrote in the Journal of the American College of Construction Lawyers that prime contractors must apply an "undefined, vague standard of reasonableness" to determine if a DBE's bid, when higher than the bid of a non-DBE contractor, may be used by a prime to meet goals. Thomson says that, as written, DBE rules promote bid-shopping, a practice that is considered unethical.
The DOT and President Obama or a President Romney could do much good by spelling out how to navigate these murky waters. As recent prosecutions for non-compliance have demonstrated, DBE requirements sometimes are fulfilled with a wink and a nod, suggesting that everyone involved in the process understands that compliance is a charade. If public works are to continue as a credible and respected instrument of economic justice, let's give the programs every possible chance of succeeding.
