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Responsiveness versus Responsibility: Effect Upon DBE Utilization

Description:

The United States Department of Transportation (USDOT) Disadvantaged Business Enterprise (DBE) affords small, for-profit businesses owned by socially and economically individuals with opportunities to participate on federally-assisted contracts let by state departments of transportation (state DOTs). This occurs primarily through a prime contractor’s obligation to meet a DBE contract goal, i.e. subcontract a certain percentage of the contract to certified DBE firms.

Once a state DOT advertises a transportation contract with a DBE goal, a bidder must submit the names of the specific DBEs it will use to fulfill the contract goal and what services they will perform (the DBE information). If a bidder is unable to acquire DBE participation sufficient to meet the goal, it must submit documented information on how it used sufficient good faith efforts to do so (Good Faith Efforts). In the context of a design-bid-build project in which the state DOT is obliged to award a contract to the lowest responsible bidder, the DBE regulations allow bidders to submit the DBE information and/or Good Faith Efforts either: (1) at the time the bid is submitted as a matter of “responsiveness,” or (2) within 5 days after the bid was submitted as a matter of “responsibility.”

Anecdotal evidence collected by state DOTs from information from DBEs that bidders are more apt to engage in “bid shopping” in States that use the “responsibility” approach than in States that use the “responsiveness” approach. The term “bid shopping” is widely understood in the construction industry and refers to certain actions taken by some prime contractors to the detriment of DBEs and the principles of fair competition. “Bid shopping” occurs when the apparent low bidder engages in unbalanced negotiations that strong arm the subcontractor into significantly lowering its price for an opportunity to participate on a federally-assisted contract. While, as stated above, most of the anecdotal information the committee receives supports the concern that DBEs are given fewer opportunities at lower profit margins when a State DOT uses the “responsibility” approach; however, some anecdotal information suggests the opposite.

Objective:

Given the dearth of actual data on this issue, we are requesting paper submissions that research and discuss whether DBEs have a higher rate of utilization and a higher profit margin when a State DOT requires bidders responding to federally-assisted construction-related contracting opportunities to submit their DBE information and or Good Faith Efforts at the time of bid, as a matter of “responsiveness,” rather than 5 days later as a matter of responsibility.

Benefits:

Would provide vital information to the United States Department of Transportation and to 52 state DOTs that administer DBE programs

Related Research:

This is unchartered territory. The submission date was changed to 5 days (as a maximum period of time for submissions) on January 1, 2017.

Tasks:

(1) To survey all 52 state DOTs during a defined study period.

(2) Assess how each state DOT receives DBE committments for bids involving the use of federally-assisted highway funds (responsiveness verus responsibility)he

(3 )Assess actual DBE utilization and attainment from bids

(4) Assess whether DBE submissions received at the time of bid as a matter of responsiveness result in statistically significant greater utlization as compared with those received within five days of bid opening as a matter of responsiblity.

(5) Provide case studies that originate from state DOTs that use responsiveness and from state DOTs that use the responsibility approach.

Relevance:

All receipients of federally-assisted highway programs that are required to administer a DBE program would benefit from this research.

Sponsoring Committee:AFH80, Disadvantaged Business Enterprises (DBE)
Research Period:6 - 12 months
Research Priority:High
RNS Developer:Martha Kenley (FHWA)/Joanne Lubart
Source Info:49 CFR Part 26 regulatory text and preamble
2014 DBE Final Rule regulatory text and preamble
Date Posted:10/13/2017
Date Modified:12/21/2017
Index Terms:Contract administration, Contracting, Disadvantaged business enterprises, Competitive bidding, Design bid build,
Cosponsoring Committees: 
Subjects    
Highways
Administration and Management
Construction
Law

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