DBE Goal Setting

The Federal Aviation Administration (FAA), Federal Highway Administration (FHWA), and Federal Transit Administration (FTA) each operate a Disadvantaged Business Enterprise (DBE) program. These Operating Administrations (OAs) give authorized funds to recipients at State and local levels. Congress established an aspirational nationwide goal for recipients to collectively spend at least 10 percent of those funds on small, disadvantaged businesses through specified DOT assisted aviation, highway, and transit contracting projects. The term “collectively” means that each recipient is not required to separately spend at least 10 percent. Rather, the total nationwide expenditure among all recipients should be at least 10 percent.

The DBE program regulation at 49 CFR Part 26 addresses two types of goals – overall goals that are set triennially, and individual contract goals. Section 26.41(c) states that recipients are neither authorized nor required to set overall or contract goals at the 10 percent level, or any other particular level, or to take any special administrative steps if their goals are above or below 10 percent. The regulation also specifies the scope of DOT’s role regarding overall and contract goals.

Overall/Triennial Goals

• Recipients set their overall goals by evaluating their local market conditions. Congress’s aspirational overall 10 percent goal does not factor into recipients’ goal setting methodology.
• Recipients triennially, i.e., every three years, calculate an overall goal that represents a percentage of projected total Federal transportation dollars that they anticipate expending on contracts they will award during the period covered by the goal. Recipients submit their overall goals to their relevant OA triennially.
• Recipients seek to meet their goals every year during the three-year period.
• The DBE program regulation prohibits recipients from relying on the 10 percent aspirational national goal, a previous overall goal, or past DBE participation rates in their program. Instead, they must rely on local market conditions, evidence of past discrimination, and demonstrable evidence of the availability of ready, willing, and able DBEs relative to all businesses that are ready, willing, and able to participate in DOT assisted contracts.
• Overall goals must provide for participation by all certified DBEs. The goals must not be subdivided into group-specific goals. For example, a recipient may not set a different goal for Native American-owned firms than it does for Hispanic American-owned firms.
• Recipients must meet the maximum feasible portion of their overall goal by using race-neutral means of facilitating race-neutral DBE participation through activities that assist all small businesses. Those activities might include providing supportive services and trainings, waiving bonding requirements, and organizing “meet and greet” events to connect with prime contractors.
• Recipients may adjust their overall goal if they can demonstrate why an adjustment is necessary. 
• Any recipient may apply for a waiver from specific provisions of DBE program including, but not limited to, provisions regarding administrative requirements, overall goals, contract goals, and good faith efforts.
• A recipient whose DBE participation falls short of its overall goal must analyze the reasons for the shortfall and the measures it intends to take to improve its efforts.
• Recipients do not directly award Federal funds to contractors.

Contract Goals

• If – and only if – a recipient cannot meet its overall DBE goal through race neutral means alone, does the recipient have the option to set goals on individual DBE contracts. Those contracts must be DOT assisted and have subcontracting possibilities for DBEs.
• If a recipient expects that race neutral means will be insufficient to meet its overall goal, the recipient must use contract goals to the extent necessary.
• Recipients are not required to set a contract goal on every DOT assisted contract.
• The goal for a specific contract may be higher or lower than the percentage level of the recipient’s overall goal, depending on such factors as the type of work involved, the location of the work, and the availability of DBEs for the work of the particular contract.
• Recipients fulfill a contract goal by requiring prime contractors to submit contract bids that either meet the contract goal by using DBE subcontractors, or demonstrate that they tried to hire DBE subcontractors, but were unable to, despite undertaking good faith efforts to do so.
• If a recipient determines that it will likely exceed its overall goal, the recipient must reduce or eliminate the use of race conscious contract goals. Otherwise, its DBE program will no longer be narrowly tailored. Similarly, if a recipient determines that it will fall short of meeting its overall goal, the recipient must adjust the use of race neutral and/or race conscious measures to enable the overall goal to be met.
• Subcontractors know whether a contract includes a race conscious DBE goal because this language is included in the contract announcement. Typically, all subcontractors provide quotes to multiple prime contractors. Then, prime contractors submit bids to the recipient, and the recipient chooses a winning bid based on standard contracting principles, such as the lowest bid or the bid providing the best value.
• If an advertised contract includes a race conscious DBE goal, a recipient may award it only to a prime contractor that has met the goal by hiring a DBE subcontractor(s) or to a prime contractor that demonstrably used good faith efforts to meet the goal. A prime contractor submits to the recipient written documentation describing the good faith efforts it used. Examples of good faith efforts are advertising to DBEs, providing interested DBEs with adequate information, and not rejecting DBEs without a sound reason. The recipient reviews the documented good faith efforts. If the recipient deems them sufficient, it may not deny the prime contractor the award based on the prime contractor’s failure to meet the DBE contract goal.

DOT’s Role

• The OAs review the adequacy and soundness of recipients’ goal setting methodology. They do not approve the specific goal itself.
• DOT’s assessment of whether a recipient is fulfilling its overall DBE goal is limited to whether the recipient has an approved DBE program and is implementing it in “good faith.”
• DOT has authority to review a recipient’s shortfall analysis and corrective action plan.
• Overall goals are not among the criteria DOT uses to determine how much funding to give recipients under the Infrastructure Investment and Jobs Act. FAA, FHWA, and FTA award additional funds according to specific criteria unrelated to DBE goals. Recipients can apply for those funds through a competitive application and evaluation process.