1995 Metric SPECIAL PROVISION 000---007 Disadvantaged Business Enterprise in Federal-Aid Construction The purpose of this Special Provision is to carry out the U. S. Department of Transportation's (DOT) policy of supporting the fullest possible participation of firms owned and controlled by minority or socially and economically disadvantaged individuals in DOT programs. If the Disadvantaged Business Enterprise (DBE) goal is greater than zero, Article A, "Disadvantaged Business Enterprise in Federal-Aid Construction," of this special provision shall apply to this contract. If the DBE goal is zero, Article B "Minority Business Enterprise Requirements," of this Special Provision shall apply to this contract. The percentage goal for DBE participation in the work to be performed under this contract will be shown on Form DBE. Article A: Disadvantaged Business Enterprise in Federal-Aid Construction 1. Purpose. The purpose of this Special Provision is to carry out the DOT's policy of supporting the fullest possible participation of firms owned and controlled by socially and economically disadvantaged individuals in DOT programs. 2. Policy. It is the policy of the DOT and the Texas Department of Transportation (henceforth the "Department") that DBEs, as defined in 49 CFR Part 23, Subpart D and the Department's DBE Program, shall have the maximum opportunity to participate in the performance of contracts financed in whole or in part with Federal funds. Consequently, the DBE requirements of 49 CFR Part 23, Subpart D and the Department's DBE Program, apply to this contract as follows. a. The Contractor agrees to insure that DBEs, as defined in 49 CFR Part 23, Subpart D and the Department's DBE Program, have the maximum opportunity to participate in the performance of contracts and subcontracts financed in whole or in part with Federal funds. In this regard, the Contractor shall take all necessary and reasonable steps to meet the DBE goal for this contract. b. The Contractor and any subcontractors shall not discriminate on the basis of race, color, national origin or sex in the award and performance of contracts in accordance with the Civil Rights Restoration Act of 1987. c. The requirements of this Special Provision shall be physically included in any subcontract. d. After a conditional award is made to the low bidder, the Department will determine the adequacy of a Contractor's efforts to meet the contract goal, as is outlined in this Special Provision under Section 5, "Contractor's Responsibilities." If the requirements of Section 5 are met, the conditional situation will be removed and the contract will be forwarded to the Contractor for execution. The Contractor's performance, during the 1-11 000---007
construction period of the contract, in meeting his approved goal will be monitored by the Department. e. Failure to carry out the requirements set forth above shall constitute a breach of contract and, after the notification of the DOT, may result in termination of the contract by the Department; a deduction from the money due or to become due to the Contractor, not as a penalty but as damages to the Department's DBE Program; or such other remedy or remedies as the Department deems appropriate. 3. Definitions. a. "Department" means the Texas Department of Transportation. b. "Federal-Aid Contract" is any contract between the Texas Department of Transportation and a Contractor which is paid for in whole or in part with DOT financial assistance. c. "Joint Venture" means an association of two or more businesses to carry out a single business enterprise for profit for which purpose they combine their property, capital, efforts, skills and knowledge. d. "Disadvantaged Business Enterprise" or "DBE" means a small business concern (1) which is at least 51 percent owned by one or more socially and economically disadvantaged individuals, or in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one or more socially and economically disadvantaged individuals; and, (2) whose management and daily business operations are controlled by one or more of the socially and economically disadvantaged individuals who own it. e. "Small business concern" means a small business as defined pursuant to Section 3 of the Small Business Act and relevant regulations promulgated pursuant thereto, except that a small business concern shall not include any concern or group of concerns owned or controlled by the same socially and economically disadvantaged individual or individuals which has annual average gross receipts in excess of $15,370,000 over the previous three fiscal years. The United States Secretary of Transportation shall adjust this figure from time to time for inflation. f. "Socially and economically disadvantaged individuals" means those individuals who are citizens of the United States (or lawfully admitted permanent residents), and who are Women, Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Asian-Indian Americans, and any other minorities or individuals found to be disadvantaged by the Small Business Administration pursuant to Section 8(a) of the Small Business Act. For convenience, these individuals and groups are referred to as "disadvantaged" in this subpart. The Department may make a reputable presumption that individuals in the following groups are socially and economically disadvantaged: (1) "Black Americans," which includes persons having origins in any of the Black racial groups of Africa; (2) "Hispanic Americans," which includes persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish or Portuguese culture or origin, regardless of race; 2-11 000---007
(3) "Native Americans," which includes persons who are American Indians, Eskimos, Aleuts, or Native Hawaiians; (4) "Asian-Pacific Americans," which includes persons whose origins are from Japan, China, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Samoa, Guam, the U. S. Trust Territories of the Pacific and the Northern Marianas; (5) "Asian-Indian Americans," which includes persons whose origins are from India, Pakistan, and Bangladesh; and (6) Women g. "Manufacturing Material Supplier" is a DBE firm that operates or maintains a factory or establishment that produces or significantly alters on the premises the materials or supplies obtained by the Contractor. Should the DBE firm obtain the final product(s) provided to the Contractor from a source other than its own factory or establishment, then the DBE firm, for that case, will not be considered to be a manufacturing material supplier and its supply work will be credited toward the DBE goal using an adjustment percentage no greater than that used for a non-manufacturing material supplier. Brokers and packagers shall not be regarded as manufacturers. h. "Non-manufacturing Material Supplier" is a DBE regular dealer that owns, operates, or maintains a store, warehouse, or other establishment in which the materials or supplies required for the performance of the contract are bought, kept in stock, and regularly sold to the public in the usual course of business. To be a regular dealer, the firm must engage in, as its principal business and in its own name, the purchase and sale of the products in question. A firm which performs supplier-like functions on an "ad hoc" basis, or for only one or two Contractors with whom it has a special relationship, is not regarded to be a regular dealer within the meaning of this provision. A regular dealer in such bulk items as steel, cement, gravel, stone, and petroleum asphalts need not keep such products in stock if it owns or operates distribution equipment. The term "or operates" is intended to cover a situation in which the supplier leases the equipment on a regular basis for its business operation. It is not intended to cover a situation in which the firm simply provides drivers for trucks owned or leased by another party, or leases such a party's trucks on an "ad hoc" basis for a specific project or job. Brokers and packagers shall not be regarded as regular dealers. i. "Broker" is an intermediary or middleman that does not take possession of a commodity or act as a regular dealer selling to the public. 4. Percentage Goal. The percentage goal for DBE participation in the work to be performed under this contract will be as shown on Form DBE contained in the proposal. 5. Contractor's Responsibilities. These requirements must be satisfied by the Contractor unless he/she is a DBE or in an approved Schedule B joint venture with a DBE. a. After conditional award of the contract, the Contractor shall furnish the following information so as to arrive in the Department's Business Opportunity Program Office in Austin, Texas not later than 5:00 p.m. on the fifteenth (15th) day after the conditional 3-11 000---007
award of the contract. When requested, additional time, not to exceed 15 days, may be granted based on documentation submitted by the Contractor. (1) The names and addresses of the DBE subcontractors he intends to use to satisfy the DBE goal, (2) An agreement for each proposed DBE containing: (a) The items of work to be performed (b) The quantities of work or materials (c) The unit of measure (d) The unit price (e) The total amount for each item (f) The total amount of the DBE commitment signed by an officer of the contractingfirm and the proposed DBE agreeing that if the contract is signed by the Contractor, the proposed DBE will be given the opportunity to do the respective subcontract work. Note: Only DBE firms meeting the eligibility requirements given in Section 6.d. below will be considered as DBE subcontractors. DBEs will only be allowed to perform work in the categories of work for which they are certified. b. A Contractor who cannot meet the contract goal, in whole or in part, shall document the steps taken to obtain DBE participation including, but not limited to, the following: (1) Attendance at a pre-bid meeting, if any, scheduled by the Department to inform DBEs of subcontracting opportunities under a given solicitation; (2) Timely advertisement of subcontracting opportunities in general circulation and minority-focus media at least 10 days prior to submission of information required under 5a. and b.; (3) Written notification to DBEs, located within the State of Texas and other States, as appropriate, of subcontracting opportunities soliciting their participation including documentation of follow-up efforts; (4) Efforts made to select work items that can be performed by DBEs in order to increase the likelihood of achieving the stated goal and explanations why other items typically performed by DBEs were not considered; (5) Efforts to negotiate with DBEs for specific sub-bids including, as a minimum: (a) The names, addresses, and telephone numbers of DBEs that were contacted; (b) A description of the information provided including but not limited to the availability of plans and specifications for the work selected for subcontracting; 4-11 000---007
(c) A statement of why additional agreements could not be reached for DBEs to perform the work. (6) Reasons for rejecting a DBE as unqualified; (7) Reasons for rejecting a DBE's bid; (Rejecting a DBE's bid because it was not the lowest quotation received will not be a satisfactory reason without an acceptable explanation of how it was determined to be unreasonable. A statement, by itself, that the DBE's quotation was more than the Contractor's bid price for an item or items will be unacceptable.) (8) Efforts made to assist the DBEs contacted in obtaining bonding and/or insurance if such was required by the Contractor, and if the DBE needed assistance in either area. c. Should the bidder to whom the contract is conditionally awarded refuse, neglect or fail to meet the DBE goal or furnish acceptable documentation, the proposal guaranty filed with the bid shall become the property of the State, not as a penalty, but as damages to the Department's DBE Program. d. The preceding information shall be submitted directly to the Business Opportunity Program Office; Texas Department of Transportation; 125 E. 11th Street; Austin, Texas 78701-2483. e. The Contractor shall make all reasonable efforts to honor commitments to DBE subcontractors named in the commitment submitted under Section 5.a. of this Special Provision. Prior to terminating or removing a DBE subcontractor named in the commitment, the Contractor must demonstrate to the satisfaction of the Business Opportunity Program Office in Austin that the originally designated DBE was not able or willing to perform. f. The Contractor shall also make reasonable effort to replace a DBE subcontractor that is unable to perform successfully with another DBE. Any substitution of DBEs shall be subject to approval by the Business Opportunity Program Office in Austin. Prior to approving the substitution, the Business Opportunity Program Office in Austin may request a statement from the DBE concerning it being replaced. g. The Contractor shall designate a DBE liaison officer who will administer the Contractor's DBE program and who will be responsible for maintenance of records of efforts and contacts made to subcontract with DBEs. h. Contractors are encouraged to investigate the services offered by banks owned and controlled by disadvantaged individuals and to make use of these banks where feasible. 6. Eligibility of DBEs. a. To ensure that the Department's DBE Program benefits only those firms owned and 5-11 000---007
controlled by socially and economically disadvantaged individuals, the Department will certify the eligibility of DBEs and joint ventures to perform subcontract work on DOT financially assisted contracts. b. This certification will be accomplished through the use of the appropriate certification schedule contained in this Department's DBE Program. c. The Department publishes quarterly a Directory of Disadvantaged Business Enterprises containing the names of firms that have been certified to be eligible to participate as DBEs on DOT financially assisted contracts. An addendum to this Directory is published each month in the Department's "Notice to Contractors of Forthcoming Texas Highway Construction." This Directory is available from the Department's Business Opportunity Program Office for Contractor's information. d. Only DBE firms certified at the time commitments are submitted are eligible to be used in the information furnished by the Contractor as required under Section 5.a. above. e. If, during the course of construction, it becomes necessary to substitute another DBE firm for a firm named in the information submitted by the Contractor, as required by Section 5.a. above, then only DBE firms certified at the time of the substitution will be considered eligible as a substitute firm. 7. Determination of DBE Participation. DBE participation shall be counted toward meeting the DBE goal in this contract in accordance with the following: a. Once a firm is determined to be an eligible DBE, the total eligible dollar amount paid on the contract or purchase order awarded to the DBE is counted toward the DBE goal. Proof of payment, such as copies of invoices and cancelled checks, may be required to substantiate the payment, as deemed necessary by the Department. Invoices and cancelled checks should specify the Department project number or control number so that proper crediting can be monitored. Invoices and cancelled checks that are not properly identified will not be counted toward the goal. b. A Contractor may count toward its DBE goal contract fees paid to disadvantaged truck owner-operators provided the following requirements are met: (1) Truck Owner-Operators must be certified as eligible to participate in this program through submitting a Schedule O to the Business Opportunity Program Office. (2) To receive credit toward the DBE goal for certified disadvantaged Truck-Owner Operators, the contractor must furnish the Engineer and the Business Opportunity Program Office the following information on each owner-operator to be used: (a) name of owner-operator (b) social security number (c) DBE vendor number (3) The record of payments to each disadvantaged Truck Owner-Operator, whether paid by the prime Contractor or one of his subcontractors, must be attached to the prime Contractor's monthly report for the respective month to receive credit toward the DBE goal for the earnings of disadvantaged Truck Owner-Operators. 6-11 000---007
c. A Contractor may count toward its DBE goal a portion of the dollar amount paid to a joint venture equal to the percentage of the ownership and control of the DBE partner in the joint venture. d. (1) A Contractor may count toward its DBE goal only expenditures to DBEs that perform a commercially useful function in the work of a contract or purchase order. A DBE is considered to perform a commercially useful function when it executes a distinct element of the work of a contract or purchase order and is responsible for the management, supervision, and control of the materials, equipment, employees, and all other business obligations attendant to the satisfactory completion of the contracted work or purchase order. (2) Consistent with industry practices and the Department's DBE Program, a DBE subcontractor may enter into second-tier subcontracts, amounting to up to 70 percent of their contract. Brokers and firms with brokerage-type operations will not be considered to be performing a commercially useful function and will only receive credit for their commission. (3) Following are two basic examples of a DBE not performing a commercially useful function, and the sanctions that may be levied by the Department: (a) In the event that the prime Contractor or his non-dbe subcontractor(s) is found to be involved in the actual execution of the DBE's subcontracted work function, the prime Contractor will be denied credit toward his goal for the amount of the dollar value of the work performed on the DBE's subcontract at the time that the DBE is discovered not to be performing a commercially useful function; or (b) In the event that the DBE subcontractor permits its work to be performed by another Contractor who is not a recognized second-tier subcontractor, he/she shall be considered not to be performing a commercially useful function, and the Department may suspend the DBE subcontractor's certification and will deny the prime Contractor credit toward its goal for the entire amount of the work subcontracted to the DBE. e. A Contractor may count toward its DBE goals expenditures for materials and supplies obtained from DBE suppliers and manufacturers, provided that the DBEs assume the actual and contractual responsibility for the provision of the materials, goods and services. (1) The Contractor may count its entire expenditure to a DBE manufacturing material supplier. In order to be considered a manufacturing firm, a DBE must conform to the definition given in Section 3.g. of this special provision. Should the DBE firm obtain the final product(s) provided to the Contractor from a source other than its own factory or establishment, then the DBE firm, for that case, will not be considered to be a manufacturing material supplier and its supply work will be credited toward the DBE goal using an adjustment percentage no greater than that used for a non-manufacturing material supplier. Brokers and firms with brokeragetype operations will not be considered to be performing a commercially useful function and will only receive credit for their commission. Joint checks to material 7-11 000---007
suppliers will not be allowed for DBE goal credit. If joint checks are required by the suppliers of raw materials to a DBE manufacturing material supplier which incorporates the raw materials into a finished product (e.g., cement, sand and gravel used to produce concrete), the Contract may issue joint checks in those instances and receive 100 percent credit for the manufactured product. However, the joint check arrangement must be included in the agreement submitted to the Business Opportunity Program Office pursuant to Section 5.a. (2) The Contractor may count 60 percent of its expenditures to DBE nonmanufacturing material suppliers provided that the DBE supplier performs a commercially useful function in the supply process. In order to be considered a non-manufacturing material supplier, a DBE must conform to the definition given in Section 3.h. of this special provision. Brokers and firms with brokerage-type operations will not be considered to be performing a commercially useful function and will only receive credit for their commission. Joint checks to suppliers of materials, good and services will not be allowed for DBE goal credit unless required by the manufacturers and approved by the Business Opportunity Program Office. (3) Material Suppliers listed on Contractor commitments must give an explanation of the function they will perform on each project. Details of any arrangements made with other material suppliers, manufacturers, distributors, hauling firms, freight companies, etc. must be submitted to the Business Opportunity Programs Office with the commitment. f. A Contractor may count toward its DBE goal the following expenditures to DBE firms that are not manufacturing material suppliers or non-manufacturing material suppliers: (1) The fees or commissions charged for providing a bona fide service, such as professional, technical, consultant, or managerial services, and assistance in the procurement of essential personnel, facilities, equipment, materials, or supplies required for performance of the contract, provided that the fee or commission is determined by the Department to be reasonable and not excessive as compared with fees customarily allowed for similar services. (2) The fees charged for delivery of materials and supplies required on a job site (but not the cost of the materials and supplies themselves) when the hauler, trucker, or delivery service is not also the manufacturer of or a regular dealer in the materials and supplies, provided that the fee is determined by the Department to be reasonable and not excessive as compared with fees customarily allowed for similar services. (3) The fees or commissions charged for providing any bonds or insurance specifically required for the performance of the contract, provided that the fee or commission is determined by the Department to be reasonable and not excessive as compared with fees customarily allowed for similar services. g. If a Contractor chooses to assist a DBE firm, other than a supplier of materials, goods or services, by assuring payment for the materials to be placed in the DBE's work and wants to receive credit toward the DBE goal for the cost of the material, then the 8-11 000---007
material supplier may invoice the DBE firm and be paid by remittance from the DBE firm or the material supplier may invoice the prime Contractor and the DBE firm jointly and be paid by the prime Contractor making remittance to the DBE firm and the material supplier jointly. No credit will be given toward the DBE goal for the cost of the DBE's required materials paid by the prime Contractor directly to the material supplier. h. No credit will be given toward the DBE goal for the cost of materials placed by a DBE firm or for the cost of equipment leased or rented and used in the DBE firm's work when payment for those costs is effected by making a deduction from the prime Contractor's payment(s) to the DBE firm. 8. Compliance of Contractor. To ensure that DBE requirements of this DOT assisted contract are complied with, the Department will monitor the Contractor's efforts to involve DBEs during the performance of this contract. This will be accomplished by a review of monthly reports submitted to the Business Opportunity Program Office by the Contractor indicating his progress in achieving the DBE contract goal, and by compliance reviews conducted on the project site by the Department. The Contractor shall receive credit toward the DBE goal based on actual payments to the DBE subcontractor. The Contractor shall notify the Business Opportunity Program Office if he/she withholds or reduces payment to any DBE subcontractor. The Contractor shall submit an affidavit detailing the DBE subcontract payments prior to receiving final payment for the contract. Contractors' requests for substitutions of DBE subcontractors shall be accompanied by a detailed explanation which should substantiate the need for a substitution. The Business Opportunity Program Office may verify the explanation with the DBE firm being replaced before giving approval of the substitution. The Contractor may not be allowed to count work on those items being substituted toward the DBE goal prior to approval of the substitution from the Business Opportunity Program Office. The Contractor's providing work crews and equipment to DBEs is prohibited. The occasional formal leasing of a major piece of equipment with or without operator by the prime Contractor to a DBE will be considered on a case-by-case basis by the Business Opportunity Program Office. A Contractor's failure to: Meet the DBE goal, honor his/her commitments and failure to demonstrate, to the Department's satisfaction, sufficient efforts on his/her part to obtain DBE participation, or failure to abide by the requirements of the contract calling for contractor enforcement of the commercially useful function provision, shall constitute a breach of contract. In such a case, the Department reserves the right to terminate the contract; to deduct the amount of DBE goal not accomplished by DBEs from the money due or to become due the Contractor, not as a penalty but as damages to the Department's DBE Program; or such other remedy or remedies as the Department deems appropriate. 9. Records and Reports. a. After submission of the initial report required by Section 5(a) of this Special Provision, 9-11 000---007
the Contractor shall submit monthly reports, after work begins, on DBE involvement. One copy of each monthly report is to be sent to the Business Opportunity Program Office of the Department, and one copy is to be sent to the Area Engineer. These reports will be due within fifteen (15) days after the end of a calendar month. These reports will be required until all DBE subcontracting or contracting or material supply activity is completed. Form No. SMS.4901, DBE Monthly Progress Report, and Form No. SMS.4902, Monthly Progress Report (for) Non-DBE Haulers, are to be used for monthly reporting. Form No. SMS.4903, DBE Final Report, is to be used as a final summary of DBE activity submitted upon completion of the project. These forms may be obtained from the Department or may be reproduced by the Contractor. The Department may verify the amounts being reported as paid to DBEs by requesting copies of cancelled checks paid to DBEs on a random basis. Cancelled checks and invoices should reference the Department's project number. b. If the DBE goal is not being met, the monthly report shall include a narrative description of the progress being made in involving DBEs in subcontract work and/or as material suppliers. If sufficient DBE subcontractors and/or material suppliers to meet the goals are being utilized, they should be identified on the monthly report by Vendor Number, name, and the amount of actual payment made to each during the monthly period. Negative reports are required when no activity has occurred in a monthly period. c. Monthly reports for Truck Owner-Operators should be in the form of a list of Truck Owner-Operators paid that month, including Vendor Number and the amount of payment made to each. d. All such records must be retained for a period of three years following completion of the contract work, and shall be available at reasonable times and places for inspection by authorized representatives of the Department or the DOT. e. Prior to receiving final payment, the Contractor shall submit an affidavit detailing the DBE subcontract payments. Form No. SMS.4903, DBE Final Report, is to be used for the Final Report. This form may be obtained from the Department or may be reproduced by the Contractor. If the DBE goal requirement is not met, documentation supporting Good Faith Efforts, as outlined in Section 5(b) of the Special Provision, must be submitted with the DBE Final Report. Article B: Minority Business Enterprise Requirements It is the policy of the DOT that Minority Business Enterprises as defined in 49 CFR Part 23, Subpart A, shall have the maximum opportunity to participate in the performance of contracts financed in whole or in part with Federal funds. Consequently, if the DBE goal is zero, the Minority Business Enterprise requirements of 49 CFR Part 23, exclusive of Subpart D, apply to this contract as follows: The Contractor agrees to insure that DBEs as defined in 49 CFR Part 23, Subpart A, have the maximum opportunity to participate in the performance of contracts and subcontracts financed in whole or in part with Federal funds. In this regard, the Contractor shall take all necessary and reasonable steps in accordance with 49 CFR Part 10-11 000---007
23, exclusive of Subpart D, to insure that Disadvantaged Business Enterprises have the maximum opportunity to compete for and perform contracts. The Contractor and any Subcontractors shall not discriminate on the basis of race, color, national origin or sex in the award and performance of contracts funded in whole or in part with Federal funds. These requirements shall be physically included in any subcontract. Failure to carry out the requirements set forth above shall constitute a breach of contract and, after the notification of the Department, may result in termination of the contract by the Department or other such remedy as the Department deems appropriate. 11-11 000---007