Cummings Amendment To Conform DOT DBE Size Standard With SBA Standards

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  • The amendment is simple and straight-forward. It corrects and rectifies an anomaly in current law that discriminates against women and minority businesses by measuring the size of firms owned by them differently than businesses owned by others.
  • The amendment simply states that in determining whether a woman or minority-owned business is “small” for purposes of the transportation programs authorized by this bill that U.S. DOT should use the same SBA standards that are used in every other direct federal contracting or federally-assisted contracting program.
  • SBA is charged with determining what constitutes a “small business concern” for purposes of federal contracting. SBA defines “small” on an industry by industry/function by function basis, as defined under the North American Industry Classification System --referred to as “NAICS” and NAICS codes.  Generally, SBA sets an industry/function size standard with reference to annual revenue.
  • The bill reauthorizes the disadvantaged business enterprise (DBE) program to address documented barriers faced by women and minority business owners in transportation contracting. As under current law, for DBE certification purposes, the bill mandates that U.S. DOT use SBA standards/definitions for making small business size determinations.
  • However, the bill also restates a small business size provision from an unfortunate era long ago that applies only to firms that are women or minority-owned. The provision arbitrarily sets a revenue cap for DBE size determinations regardless of the standard established by SBA for all other federal contracting and federally assisted contracting programs.
  • For example, because of this provision, the revenue cap for a DBE construction firm is nearly 35% less than what SBA has determined the revenue cap should be for a small construction company ($12.5 million less).
  • My amendment would fix this unfair treatment of women and minority-owned firms. The current law differential has no policy basis--I have found almost no legislative history that explains why it was added to the law many years ago and moreover the current bill does not have an explanation or justification why women and minority owned firms who wish to become DBE certified and pursue contracting opportunities arising from this legislation should be singled out in such a discriminatory manner.
  • We all know that there is not rational basis for treating women and minority business owners in this way. So I ask my colleagues to join with me, and colleagues Jim Clyburn, Eddie Bernice Johnson, Corrine Brown, Donna Edwards, Andre Carson and the Ranking Member of the Highways and Transit Subcommittee Eleanor Holmes Norton in fixing this matter by fully conforming U.S. DOT’s size determination standard to those of the SBA.
  • As noted previously, the SBA size standard is used broadly throughout the federal government small business procurement and contracting programs, for government loan programs, and for all other federal programs.
  • A key premise in charging SBA with establishing small business size classification is to prevent arbitrary standards that my amendment corrects. While size should logically vary by industry/function, they should not vary by federal program without a cogent and rational policy justification.
  • The fact that the current anomaly is unique to only DOT-assisted contracting and to women and minority owned companies, is unfair and very burdensome for DBE’s, especially for those small firms that are seeking to grow their business via subcontracting with majority firms on various DOT-assisted modal projects.
  • The lack of conformity of the DOT size cap to the SBA standard stifles growth and inhibits a DBE firm’s ability to win work on more substantive and complex projects resulting from congressional reauthorization of DOT modal programs. It contributes to the disturbing practice of relegating women and minority owned firms to low value project work (e.g. materials suppliers, trucking, etc.), or to these firms losing their DBE certification altogether.
  • Prime contractors have reported that the lack of conformity also makes it much more difficult for them to find DBE partners and subcontractors who have the experience and wherewithal to work on significant projects.
  • DBEs that exceed the dramatically lower DOT size standard will lose DBE status and will be non-competitive against much larger majority-owned firms, resulting in zero incentive for large firms to do business with them since their participation on a project would not count toward DBE participation goals.
  • Realistically and practically, small minority and women-owned construction firms who lose DBE eligibility as a result of exceeding the current arbitrary revenue cap will be shut out of most contract opportunities and they will not be able to compete with non-DBE firms, which are much larger and have more resources.