TRB 90th Annual Meeting Session 264 USDOT 2010 NPRM

Issues and Impacts of 2010NPRM on USDOT DBE Program

State DOTs’ Legal Perspective on

Issues and Impact    

James S. Thiel, J.D.jim.thiel@dot.wi.gov

Chair, AASHTO Legal AffairsCounsel Wisconsin DOT

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TRB 90th Annual MeetingSession 264 USDOT 2010 NPRM

Original Key USDOT Provisions Good Faith Efforts of Recipient States to Meet

Overall Goals 26.47, 26.11

Certification Requirements 26.71, 26.73, 26.83, 26.85

Adjust Personal Net Worth 26.67

Expedite Interstate Certification 26.84

Foster Small Business Participation 26.39, 26.85

Improve Post-Award Oversight 26.37, 26.53

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TRB 90th Annual Meeting Session 264 USDOT 2010 NPRM

Good Faith & Race-Neutral Efforts 26.47(a) “You cannot be penalized, or treated by

the Department as being in noncompliance with this rule, because your DBE participation falls short of your overall goal, unless you have failed to administer your program in good faith.”

26.51(a) You must meet the maximum feasible portion of your overall goal by using race-neutral means of facilitating DBE participation.

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Proposed Rule Adds “Accountability”By Redefining “Good Faith” 26.47(c) Within 60 Days of “the end of the fiscal

year” [1 DEC] Must “Analyze In Detail” any Negative Gap Between Overall Goal and Uniform Report “of Awards and Commitments” in that Fiscal Year.

Must “Establish Specific Steps and Milestones” to Correct.

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Accountability -- Continued 26.11(a) “You must transmit the Uniform Report

of DBE Awards or Commitments and Payments, found in Appendix B to this part, at the intervals stated on the form.” JUN 1 and DEC 1

Analysis and Corrections Must Be Approved by Three Operating Administrations. Not Uniform.

Can Impose Any Conditions – Methodology, Split, New Measures

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Accountability -- Continued

Accountability -- Continued

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Good Faith Efforts - Continued

Rules Should Distinguish Standard Federal Methodology States from Availability and Disparity Study States.

Every State is Different Need to Recognize Aspirational Overall Goal’s

Have A Margin of Error. Estimate versus Precision

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Good Faith Efforts - Continued Need to Recognize Variable Overall Program

Size and Program Content Adjustments Are the New Annual Justification

[Analysis/Correction] Burdens Consistent with 3 Year Overall Goal Initiative?

Is New Burden Consistent with the Requirement to Achieve the “maximum feasible portion of your overall goal by using race-neutral means”?

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Good Faith Efforts - Continued Need to Reflect Uncertainty – Economy, Work

Available, Program Funding Does Analysis Paperwork Requirement

Encourage Lower Goals or Loose Reporting? 26.47 As Proposed is Very Problematic for

States, Unacceptable? Quota? Legally Suspect “On its Face” or “As Applied”?

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Good Faith Efforts - Continued New York DOT Response: New Rule Supports

the Notion that State DOTs Must Analyze Why Prime Contractors Cannot Meet Overall Goals.

May Result in Increased Burdens on Industry.

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Legal Consequences 9th Circuit Decision. US Agreed Washington DOT Responsible for Setting Goal. If Federal Government Is Now to Review, Approve and Modify. Must US Now Defend Federal Goal.

Other Circuits. Compliance with Federal Rule Methodology is Adequate. Need to Challenge Federal Rule. And Challenge Federal Goal?

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USDOT 2010 NPRM

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http://www.supremecourt.gov/about/Circuit%20Map.pdf

Legal Consequences -- Continued Increased Likelihood of Challenges Due to

Different Dates of Review and Methodology by Three Different Operating Administrations?

Application of Different Standards of Federal Review In Different States?

Timeliness of Federal Review? Foreshadows Required Availability and Disparity

Studies? Updated Every Year?

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1. Close Loophole. Appendix E allows individual E to transfer personal assets to DBE firm to reduce PNW and exempts personal residence.

2. FAA Legislation and Consistency -- PNW Cap to All Programs Covered by Part 26 and 23? $1.3M Same for All?

3. Retirement Savings Determinations. FASB Recognizes Retirement Savings in PNW.

Adjust Personal Net Worth

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Expedite Interstate CertificationPolicy Issues:

Federal Certification – Budget Issues?Easy Graders – Burden on State or DBE?Certifications Do Not Expire or Lapse

Legal Issues: Integrity Lots of Complex Issues. Impact on Overall Goal?

NAICS Codes Not Applicable in Both States Extent of Control – Licensing, Foreign Corp. DBE in One State May Not Be Disadvantaged Due

to Availability / Disparity Study in Another

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Foster Small Business Participation Agree, But 23 USC 304 [Since 1958]

“It is declared to be in the national interest to encourage and develop the actual and potential capacity of small business and to utilize this important segment of our economy to the fullest practicable extent in construction of the Federal-aid highway systems, including the Interstate System. In order to carry out that intent and encourage full and free competition, the Secretary should assist, insofar as feasible, small business enterprises in obtaining contracts in connection with the prosecution of the highway program.”

Impact on Precision of Overall DBE Goals

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Improve Post-award Oversight

26.37 Unnecessarily Burdensome - Contract Record and On Site Review Excessive.

Purpose Supported – Method Not. Unfunded Mandate

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TRB 90th Annual Meeting Session 264 USDOT 2010 NPRM

Terminations and Substitutions of DBE Subcontractors Should Same Rules Apply to Contracts Without

Mandatory Goals. Increase Likelihood of Legal Challenges?

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Counting Issues Consensus: Keep as Is.

Actual Payment Achievements Reported But Not Analyzed. Supposed to Count Only Federal Funds.

Question: Some States Can Only Apply Mandatory DBE Goals to Federally Funded Contracts. Others to All Contracts. To What Extent Should States Be Penalized for Such Differences In Legal Flexibility In Setting and Meeting Federal Overall Goals?

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