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DOT LogoMemorandum
U.S. Department of Transportation
Federal Highway Administration

INFORMATION: Section 1101(b) of the Transportation Equity Act for the 21st Century (TEA-21) -- Disadvantaged Business Enterprise (DBE) Program September 16, 1998
Director, Office of Civil Rights
Associate Administrators
Staff Office Directors
Federal Lands Highway Program Administrator
Director, ITS Joint Program Office
Regional Administrators
Regional Directors of Motor Carriers
Division Administrators
State Directors of Motor Carriers

As you are aware, Section 1101(b) of the TEA-21 continues the DBE program, replacing Section 1003(b) of the 1991 Intermodal Surface Transportation Efficiency Act (ISTEA) as the statutory authority. A copy of Section 1101(b) is attached for your information.

The DBE program applies to the amounts made available for any program under Title I, III, and V of TEA-21. The TEA-21 requires significant changes to FHWA's programs and its stewardship role under Title 23, however, the agency's responsibility to oversee compliance with the DBE program has not changed. The legislation mandating the DBE program applies to FHWA, the Federal Transit Administration, and the U.S. Department of Transportation (DOT). The implementing regulations for the DBE program will be published by the Department in Title 49 Code of Federal Regulations (CFR) Part 26. Therefore, unless addressed by a United States Court decision finding a program or its implementation unconstitutional, all contracts funded by highway trust funds including advance construction and State Infrastructure Banks projects regardless of whether they are on or off the National Highway System, continue to be subject to the legislative and regulatory requirements of the DBE program. Similarly, FHWA must continue to approve each State's DBE program and its annual goals, and ensure compliance with all DBE program requirements.

Section 1101(b) retained all the basic DBE requirements of Section 1003(b) and added several new provisions. The retained and added provisions are summarized in the following paragraphs.

The existing provisions of 49 CFR 23 will be eliminated once 49 CFR 26 is published.

Significant provisions retained from the 1991 ISTEA include:

  • the requirement that not less than 10 percent of funds authorized in the act be expended with small business concerns owned and controlled by socially and economically disadvantaged individuals;

  • the inclusion of women in the presumptively disadvantaged category;

  • application of the DBE program to all categorical programs including demonstration projects;

  • application of the DBE program to all funds authorized by the 1991 ISTEA that were unobligated prior to the passage of the Act;

  • the requirement for an annual survey and listing by each State of the firms certified and their locations;

  • the requirement for minimum uniform certification criteria; and

  • a requirement that the States annually report to the Secretary a detailed percentage breakdown of the socially and economically disadvantaged businesses participating in the DBE program. The annual report must show the percentage and number of:

    (1) white women business enterprises;

    (2) minority women business enterprises; and

    (3) minority (male or male and female owned) business enterprises.

New/revised provisions of Section 1101(b) of the TEA-21 include:

  • the size limitation for qualifying as a small business for purposes of the DBE program was modified by raising the threshold to $16,600,000 average annual gross receipts over 3 years. This is the same size standard established by the DOT in the December 29, 1994, Federal Register notice;

  • funds expended for contracts under Title V (Transportation Research) are subject to the DBE requirement that not less than 10 percent of funds be expended with DBE firms. This Title includes the Intelligent Transportation Systems program. It is important to note that consistent with current FHWA policy, the DBE program requirements are applicable to all funds expended in contracts (e.g., technical, construction, assistance or support, professional, and management services) awarded by FHWA, States, or other federally funded recipients under these programs. We will be coordinating with each of the Associate Administrators to determine how this requirement will be implemented;

  • a provision that ensures a State’s continuing eligibility to receive Federal funds if a Federal court issues a final order determining the application of the State’s DBE program to be unconstitutional. It is important that you keep us abreast of any challenge to the implementation of the DBE program in your area of responsibility that might invoke this provision; and,

  • a requirement that the General Accounting Office (GAO), within 3 years of the enactment, conduct a nationwide study of the impacts of the DBE Program. This effort will require close coordination with DOT and the GAO. We believe that the burden for collecting and compiling the necessary information in response to this provision will fall upon the State Transportation Agencies. We are exploring information collection systems to assist in the collection and analysis of the necessary information. We are interested in learning of any systems that you might be aware of that may be helpful.

Should you require additional clarification of any of the DBE requirements of the TEA-21, please contact Mr. Charles Klemstine (HCR-20) at (202) 366-6753.

-Original Signed by-
George F. Duffy
Edward W. Morris, Jr.

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