The Infrastructure Investment and Jobs Act (the Bill)—which makes a portion of its $1.2 trillion available for surface transportation projects—currently awaits signature from President Biden and will have significant impacts for construction contractors participating in the Department of Transportation’s (DOT) Disadvantaged Business Enterprises (DBE) Program. The Bill addresses aid to federal highways, transit, highway safety, motor carrier, research, hazardous materials, and rail programs. DOT’s DBE Program permits states to set up DBE programs, in compliance with DOT standards, that promote contracting opportunities for DBE firms through infrastructure projects initiated by state and local governments and funded at least in part by DOT. To be certified as a DBE, a firm must be a for-profit small business and it must be majority-owned and controlled by socially and economically disadvantaged individuals. Below, PilieroMazza addresses three important aspects of the Bill that will impact contracting opportunities under the DOT’s DBE Program. Please register here for our upcoming webinar on this topic.
- Explosion in Funding
The Bill dedicates substantial amounts to be expended on DBE firms. In this regard, the Bill provides that not less than 10% of the amounts made available under Division A, Division C, and funds for highway safety R&D (Section 403 of Title 23 of the U.S.C.) shall be expended to DBEs, unless the Secretary of DOT (the Secretary) determines otherwise. Division A of the Bill deals with Surface Transportation funding, where appropriations for the Federal Aid Highway Program was increased to $52 billion for fiscal year 2022, with funding increasing by about $1 billion for each coming fiscal year until 2026. Some other important programs under Division A include:
- the Bridge Investment Program authorizing over $12 billion in new grants to replace and repair bridges,
- the Reconnecting Communities Pilot Program funding about $1 billion in new grants for low-income neighborhoods, and
- the Promoting Resilient Operations for Transformative, Efficient, and the Cost Savings Transportation (PROTECT) Grant Program addresses weather-related vulnerabilities receiving about $7 billion.
Division C entails Public Transportation Programs. The Bill appropriates $106.9 billion for Federal Transit Administration (FTA) programs over the next five years. Some of the major programs include roughly $85 billion for the Capital Investment Grant Program and $21 billion in supplemental appropriations for other transit programs. The Bill mostly reauthorizes FTA programs.
The amount of funding for various projects and the requirement that no less than 10% be awarded to DBEs should lead to an explosion in the number of contracting opportunities available to DBE firms in the coming years.
- Emphasis on Prompt Payment
Congress places an emphasis on prompt payment to DBE subcontractors. As a result, the Bill directs the Secretary to take additional steps to ensure recipients of DOT funding comply with DOT regulations concerning prompt payment to DBEs. The regulation (Section 26.29 of Title 49 of the Code of Federal Regulations) currently states that contract clauses are required to be incorporated in all contracts under the DBE Program to mandate prime contractor payment to subcontractors no later than thirty days from receipt of government payment to the prime contractor. Through this section of the Bill, Congress ensures the protection of DBEs by requiring the Secretary to take steps that guarantee they receive payments promptly and on time. Congress recognizes the dramatic impact a late or delayed payment can have on a DBE and is therefore trying to limit the frequency in which it happens.
- Compelling Reasons to Continue DOT’s DBE Program
Congress determined, after reviewing testimony from congressional hearings, roundtables, scientific reports, and reports issued by public and private agencies, that DOT’s DBE Program is an overall success. However, barriers still pose major obstacles for minority- and women-owned businesses seeking to do business in federally assisted surface transportation projects. Therefore, Congress finds there to be a compelling need to continue the DOT DBE Program. This is positive news since it demonstrates Congress’s commitment to helping small, disadvantaged businesses take a larger role in transportation-related projects at the federal, state, and local levels.
There will be a sharp increase in contracting opportunities for DBEs at the federal, state, and local levels in the next five years. Spending in transportation-related projects is undoubtedly at an all-time high. This, coupled with the emphasis Congress is placing on promoting minority- and women-owned businesses, will make the DBE arena more competitive than ever.
This is a great time for small, disadvantaged businesses to apply for DBE certification, and also for large business contractors to familiarize themselves with DBE Program requirements and to identify potential DBE teaming partners. The federal regulations regarding eligibility and ongoing performance requirements for DBE firms (as well as prime contractors subcontracting to DBE firms) can be complex and cumbersome. Contractors involved with the DBE Program should make sure they understand and are compliant with all federal and state DBE-related rules so that they don’t miss out on millions in potential contracts and subcontracts.
If you have questions about the Bill or DBE-related requirements, please register here for PilieroMazza’s upcoming webinar on this topic. You can also contact Jackie Unger, the author of this blog, or a member of the Firm’s Government Contracts Group or Construction Industry Team. Special recognition is given to Daniel Figuenick for his contributions to this blog.