9th Annual FAA National Civil Rights Training Conference for

Airports

July 17-19, 2018

Counting DBE Participation

&Assessing Commercially Useful Function (CUF)

Presented by: Eliz

Best Practices in DBE and ACDBE Contract Monitoring

Presented July 18, 2018 by:

Keturah Pristell & Thomas Knox

DBE/ACDBE Compliance Specialists (FAA)

Presentation Overview

• DBE Program Monitoring & Best Practices

• ACDBE Program Monitoring & Best Practices

• Questions and Answers

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(a) Ensure nondiscrimination in award and administration of contracts;

(b) Create level playing field;

(c) Ensure DOT's DBE program is narrowly tailored;

(d) Ensure only eligible firms participate as DBEs;

(e) Help remove barriers to participation of DBEs;

(f) Promote use of DBEs in all types of contracts;

(g) Assist firms ability to compete successfully outside DBE program; and

(h) Provide appropriate flexibility to recipients.

DBE Program Objectives:

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Regulatory Monitoring Requirements

49 CFR Part 26.37:• Implement Appropriate Mechanisms to Ensure Compliance

by All Program Participants• Ensure Work Committed to DBEs is Performed by DBEs as

indicated in DBE Participation Plan—via written certification

• Running Tally of DBE Participation

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Ensuring Work is Performed by DBE via Written Certification

Create DBE Program Plan Document to include Written Policies and Procedures for Contract and Worksite Reviews• Must Inspect Each DBE Contract Prior to Start of Work• Must Inspect Each DBE Worksite at Least Once Per Year• Must Create at Least One Document per Contract Certifying

Completed Reviews

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Ensuring Work is Performed by DBE via Written Certification

• Written Certification Documentation Standards: Document must detail what was reviewed, by whom, and when Must include a signature of airport recipient employee A single document may be completed at project closeout, but for

worksite reviews, monitoring of CUF should occur throughout the contract—always review before work begins

If you choose to create only one written certification document at the end of a project, create Worksite/CUF Review and Contract Review checklists/forms to supplement the written certification document. A checklist should be used for each individual review, and the name or initials of staff conducting the review and date must be included.

Ensuring DBE Contracts are Compliant Key Elements of Contract Review:• Ensure bid information including DBE name, compensation, and

scope of work matches contract language for DBE subcontracts• Verify Required DBE Contract Clauses in Prime and Sub

contracts• All firms must assure in contracts that they will comply with the

program regulations and all requests for related information Ensure lower-tier subcontracts are also compliant.

• Memorialize review in writing, sign, and dateMay combine contract and worksite reviews on same CUF

form to simplify process

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Ensuring DBE Contracts are Compliant First Confirm Scope of Value of Contract, then…

Verify Required Contract Clauses:1. Non-discrimination (copy 26.13, copy word-for-word) 2. Prompt payment & Retainage (26.29)3. Termination (26.53(f))4. Enforcement provisions (26.105 & 107)5. Other Supplemental Provisions (check with your local

Airports District Office (ADO) for contract requirements)6. Other applicable state or local provisions/laws

Assurance Language of Part 26.13

Part 26.13(b): Each contract you sign with a contractor (and each subcontract the prime contractor signs with a subcontractor) must include the following assurance: The contractor, sub recipient or subcontractor shall not discriminate on the basis of race, color, national origin, or sex in the performance of this contract. The contractor shall carry out applicable requirements of 49 CFR part 26 in the award and administration of DOT-assisted contracts. Failure by the contractor to carry out these requirements is a material breach of this contract, which may result in the termination of this contract or such other remedy as the recipient deems appropriate, which may include, but is not limited to:

(1) Withholding monthly progress payments;(2) Assessing sanctions;(3) Liquidated damages; and/or(4) Disqualifying the contractor from future bidding as non-responsible.

Ensuring Prompt Payment

• Applies to ALL Federal contracts and subcontractors (DBE & non-DBE alike)

• Payment required to subcontractor firms no later than 30 days after Airport pays Prime for satisfactory completion and acceptance of work.

“Satisfactory Completion” is defined in (26.29(c)) as “…all the tasks called for in the subcontract have been accomplished and documented as required by the recipient. When a recipient has made an incremental acceptance of a portion of a prime contract, the work of a subcontractor covered by that acceptance is deemed to be satisfactorily completed.”

Retainage Rules: Pick One of Three Options

Airport Prime DBE/Sub

Does not withhold from Prime

Does not withhold from sub

N/A

Does not withhold from Prime

Does withholdfrom subs

Prime must pay within 30 days of completion of subcontractor’s work

Withholds partial payments to prime upon completion of work

Does withholdfrom subs

Prime must pay all retainage to sub for completion of accepted work within 30 days of prime’s receipt of payment from Airport

Prompt Payment & Return of Retainage Compliance Mechanisms

Key Elements of Prompt Payment & Retainage Verification Process:• Request monthly payment reports from PrimesRequest Copies of Cancelled Checks as supporting

documentation• Use Lien Waivers, Emails, or IT System (i.e. B2GNow) to

confirm payments to DBEs• Compare Prime firm’s payment date to DBE firms payment

date to confirm promptness

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Termination Rules & Compliance Mechanisms

The Process: • Prime must notify the airport and DBE of request to

terminate and allow five days for the DBE firm to respond to allegations, if desired, or submit a withdrawal statement.

• Prime may terminate only after airport has reviewed the issue, evidence, and correspondence; the airport must provide a written decision allowing the termination for both firms’ review

• Process for terminating DBE subcontracts must be clearly defined in the airport’s DBE Program AND within each DBE subcontract

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Monitoring for CUF

Prime Contractor and Recipient only get credit for DBE participation when a DBE performs a Commercially Useful

Function (CUF) (See Part 26.55).

A DBE performs a CUF when it is:“Responsible for execution of the work of the contract [or a distinct element of the work]. . . by actually performing, managing, and supervising the work involved.” DBE must perform at least 30% of work with its own workforce DBE firms must own or lease trucks and equipment it uses; leases from

Primes are not countable unless the Prime firm is a DBE Involves Fraud Detection

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Ensuring DBE Performance on Worksite

Key Elements of Work-Site Monitoring:• Make sure subcontract matches what is happening on

worksite (verify DBE and scope of work is the same)• Produce Site-Visit Reports/CUF Forms/Checklists• Produce Follow-Up Reports (as needed)• Memorialize review in writing, sign, and dateMay combine contract and worksite reviews on same

CUF form to simplify process• Keep data on file for three years (after project end)

Running Tally of DBE Participation

• Helps Ensure Prime is Meeting DBE Commitments Identified on Participation Plan

• Tracks DBE Awards or “Commitments”

• Tracks Payments or “Attainments”

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Ensuring Compliance as a Team

DBE Project Oversight is a Team Effort! Involve Project Inspectors, Construction Managers, Project Engineers, Procurement/Finance Specialists, Attorneys, etc.

Often, local oversight is an essential job function of multiple airport staff offices; document individual responsibilities in writing on performance plansConsider training these monitors using CUF and

monitoring training videos found @ https://www.fhwa.dot.gov/federal-aidessentials/indexofvideos.cfm

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Program Fraud: If You See Something Say Something

DBE Fraud: A contractor or concessionaire misrepresents who performed work in order to increase profit while appearing to be in compliance with program and goal requirements.

• Fraud is much more likely to be detected by tips rather than by any other method.

Red Flag Indicators of DBE Fraud

USDOT/OIG has published an online informational pamphletwww.oig.dot.gov/sites/default/files/files/OIG_DB

E%20card.pdf

Online Complaint Form AvailableEmail: hotline@oig.dot.govHotline: (800) 424-9071

Red Flag Indicators of DBE/ACDBE Fraud

• Lack of expertise and technical ability• Employee shuttling between prime & sub• Vehicle(s) with magnetic signs or odd paintjobs• Payment by prime for necessary supplies• Prime facilitates purchase of DBE-owned business• Absentee owner Never at Worksite• Prime always uses same DBE• Odd Financial agreements between Prime and DBE• Joint bank accounts (Prime/DBE firm)• No written contracts

ACDBE Program Contract Monitoring

• ACDBE Program Objectives and Regulatory Monitoring Requirements

• ACDBE Contract Structures• Monitoring Participation by ACDBEs• Monitoring Participation by ACDBEs via Written

Certification• Car Rental Contract Monitoring

ACDBE Program Regulatory Monitoring Requirements

49 CFR 23.29:(a) Implement Appropriate Mechanisms to Ensure

Compliance by All Program Participants(b) Ensure Work Committed to ACDBEs is Performed

by ACDBEs(c) Written Certification and(d) Monitored the work on-site

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Verifying Contract Structures

• Review initial contract document and identify ACDBE participation

• Types of direct ownership arrangement:– joint venture, – partnership, – sublease, – licensee, – franchise– management contract, or other arrangement

in which a firm owns and controls a concession• Best Practice: ACDBELO should be involved in initial discussions on

concession venues and concession program.

Verifying Contract Structures

• Non-Car Rental Concessions – Recipients may have various types of direct ownership arrangements for

ACDBE firms:• joint venture, partnership, sublease, subcontractor, licensee,

franchise, or other arrangement – which require unique monitoring procedures

• Car Rental Concessions– Recipients rarely have direct ownership arrangements for ACDBE firms.

Instead, ACDBEs often act as suppliers:• National Company• Franchisee

• Regardless of the contract structure verity firms are certified as ACDBEs

CUF Monitoring of ACDBE Participation

Joint Ventures

– When an ACDBE performs as a participant in a joint venture, must ensure work is equal to the distinct, clearly defined portion of the work.

– Joint Venture Guidance, July 2008

CUF Monitoring of ACDBE Participation

• Partnerships, Sublease, Subconcessions Licensee, Franchisee– Periodic interviews with managers, participants and employees

• Who do the employees think they work for? Do they appear on ACDBE firms payroll?

• Does it appear that workers are controlled or supervised by another firm, potentially the prime?

• What company name appears on direct deposit pay stub?

– Site visits to the operation – scheduled and unscheduled (suggested at least biannually, more often if issues are identified)

– Review of any other documentation necessary to ensure compliance– Don’t forget: Annual verification of ACDBE certification eligibility

CUF Monitoring of ACDBE Participation

Goods and Services• Anything a Concessionaire purchases• Best Practice

– Validate ACDBE firm is providing a bona fide service (reasonable) related to the amount of fees or commissions charged for that service,

– Develop monitoring process to confirm goods & services purchased or obtained from ACDBE manufacturer or broker

ACDBE Monitoring via Written Certification

• The Department intentionally provided flexibility for recipients and requires only that the process is one that ensures: – (1) on every contract on which ACDBE participation is

claimed, work committed to a ACDBE is actually performed by the ACDBE to which the work was committed; and,

– (2) the monitoring includes a written certification that the recipient has reviewed contracting records and monitored work sites for this purpose.

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ACDBE Monitoring via Written Certification

• Create standardized forms for monitoring process• Develop a master calendar to track quarterly, semi-annual

and annual activities• Require signature from staff reviewer• Train staff to know what to look for in their supportive

role• Involving other staff, possibly Concessions Manager(s),

concessions team, etc.

Car Rental Goods and Services Monitoring

• ACDBE Participation by Goods & Services– Few recipients are using Gross Receipts

• Review car rental concessions contract– If available, specific ACDBE Participation Plan from Car Rental

Company

• Request Purchase Orders (PO)– Verify how money was spent and to which firms

• If PO not available create monitoring process directly with ACDBE firms, – e.g., Verification Form, – Have ACDBE firm confirm purchases and dollar amount and sign

Best Practice in Contract Monitoring

• Be Proactive• Schedule and Plan

– Master Calendar, additional support, standardize forms/checklist– Record keeping system

• Preliminary Review– Obtain or Request necessary documents

• Conduct Site Visits and Review on-site records– Scheduled and unscheduled site visits

• Document Review– Request additional documentation based on preliminary review and site

visits, confirm written certification• Follow-Up

– As necessary and REPEAT

Questions?

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