Government Contracting Advantage: Unlock Success with DBE Certification for Small Biz

 

If you are a minority or women owned small business and are looking to gain an advantage for government contracting, there is certification you might be interested in. A DBE Certification is one focused on California businesses that gives construction firms an edge in public contracts. So in this video, I’ll explain how the DBE certification works, including eligibility, required documents and how to apply for one to grow your business in government contracting.

About the Certification

The DBE or Disadvantaged Business Enterprise program, began in 1980 as a minority/women's business enterprise program established by regulation under the authority of Title VI of the Civil Rights Act of 1964.

Its main purpose was “to ensure nondiscrimination in the award and administration of DOT-assisted contracts in the Department's highway, transit, and airport financial assistance programs; To create a level playing field on which DBEs can compete fairly for DOT-assisted contracts.

The Act further provides that, except to the extent the Secretary of Transportation determines otherwise, not less than 10% of the amounts made available for any program shall be expended with DBEs. This means that 10% of highway and other construction projects will have DBE set aside. 

Eligibility

Who can become a DBE? The eligibility for Disadvantaged Business enterprise is:

• The firm must be a for-profit small business where socially and economically disadvantaged DBE owner(s) own at least a 51% interest, and have managerial and operational control of the business operations; the firm must not be tied to another firm in such a way as to compromise its independence and control.

• That's fairly straightforward but what is a socially disadvantaged population? The Federal Code tells us: women, Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, or other minorities. 

• The other requirement is economically disadvantaged, so how do we figure that out? Well the Caltrans rules are clear: the disadvantaged individual applying must have a personal net-worth (PNW) of less than $1,320,000. 

• Items excluded from personal net worth calculation include an individual's ownership interest in the applicant firm and his or her equity in their primary. Also, if an individual demonstrates that he/she is able to accumulate substantial wealth, the individual's claim of economic disadvantage may be denied, even though the individual's PNW is less than $1.32 million.

• Finally the business must be a small business according to SBAs size standards. You can check that under government contracting on the SBA.gov website and take the quick test to determine that.

Required Documents

Now that you have determined your eligibility for your business and good to apply, there are some required documents you will need to gather for reference or to submit in your application. So, let's talk about those.

• Résumés (that include places of employment with corresponding dates), for all owners, officers, and key personnel of the applicant firm

• Personal Net Worth Statement for each socially and economically disadvantaged owners who the applicant firm relies upon to satisfy the Regulation’s 51% ownership Requirement.

• Personal Federal tax returns for the past 3 years, if applicable, for each disadvantaged owner Federal tax returns (and requests for extensions) filed by the firm and its affiliates with related schedules, for the past 3 years.

• Documented proof of contributions used to acquire ownership for each owner (e.g., both sides of cancelled checks)

• Signed loan and security agreements, and bonding forms

• List of equipment and/or vehicles owned and leased including VIN numbers, copy of titles, proof of ownership, insurance cards for each vehicle.

• Title(s), registration certificate(s), and U.S. DOT numbers for each truck owned or operated by your firm

• Licenses, license renewal forms, permits, and haul authority forms

• Descriptions of all real estate (including office/storage space, etc.) owned/leased by your firm and documented proof of ownership/signed leases

• Documented proof of any transfers of assets to/from your firm and/or to/from any of its owners over the past 2 years DBE/ACDBE and SBA 8(a), SDB, MBE/WBE certifications, denials, and/or decertification’s, if applicable; and any U.S. DOT appeal decisions on these actions.

• Bank authorization and signatory cards

• Schedule of salaries (or other remuneration) paid to all officers, managers, owners, and/or directors of the firm

• List of all employees, job titles, and dates of employment.

• Proof of warehouse/storage facility ownership or lease arrangements

• If you are involved in a partnership or Joint venture: the original or amended partnership or joint venture agreements.

Application

Now that we have everything we need for the application, lets apply. There are several certifying organizations under California Unified Certification Program like LA Metro, Caltrans Bart. You can use this website to find the nearest certifying agency for your business.

We can stick with Caltrans and use their DBE System to apply. If you have never done it before then you will apply and then register an account. To register you will need to put in EIN, then business information, followed by business contact information then a point of contact for your business. Once you register you will gain access to the system.

Now unfortunately I don't have an account and can't show you exactly what the application looks like online, but luckily we have a paper version that will ask the same questions, so let review that. You can review this video from the Norcal PTAC.

The application has 4 distinct sections that we will cover:

Section 1. Certification information

Here is where you will put in some basic information about your business like the legal name, address and contact. You will also be put in if you have been certified before in another state or decertified by other programs like MBE, WBE or DBE before. If so, you may be ineligible for certification.

Section 2. General Information

In this section, you will describe what your business does, the NAICS codes associated with your business when you started the business or how long you have owned and how you acquired the business. You will need to enter your EIN and be a for-profit company according to the eligibility requirement we talked about earlier.

You will also need to specify what structure your business is and how many employees you currently have, including a list of names, job titles and dates of employment. You will need to enter the last 3 years of gross receipts from your taxes or from however long the business is less than 3 years old. Finally, you will need to explain if your business is co-located with another business owned or a subsidiary of another business.

Section 3. Majority Owner Information

For this section you will need to name the majority owner and their contact information. You will also need to mark the gender, disadvantage group membership and citizenship status. You will also need to put in the percentage of business this individual owns, how they own it and several questions on what the relation to the business is. The second form below will ask for information on owners who own less than 51% if applicable.

Section 4. Control

In the final section we need to list who controls the company and makes decisions. We need to list the officers or board of directors, their ownership stake, when they were added to the company, along with ethnicity and gender. You will need to list if any of these people have management or supervisory role in any other company and where.

You will need to mark for the owner with at least 51%, what functions they participate or have control over and the same for owners with less than 51% ownership. After that you will need to list inventory, real estate (storage / office), banking information and what your 3 largest projects were.

Congratulations the application is complete but the process isn't complete yet. Once you finish the online application, you will be assigned an analyst to review your application and request additional or missing documents or information. The analyst will conduct a site review of your business location, and after final review to ensure eligibility then a determination is complete.

Conclusion

So let’s recap, a DBE certification is primarily for for-profit construction businesses who work on highways, transit or airport projects. You have to be a member of a socially or economically disadvantaged group with at least 51% ownership of the business. This is a more intense certification, so you need to make sure your business participates in this sector and to have the research to justify applying for this certification.

Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.