What Happens When a Disadvantaged Business Enterprise (DBE) Loses Its Certification?

By: Danielle Dietrich

If you are a business owner who is certified as a Disadvantaged Business Enterprise (DBE) or an Airport Concession Disadvantaged Business Enterprise (ACDBE), you may be wondering what happens to your DBE status and participation if you lose your certification. Decertification means that you no longer meet the eligibility criteria for the DBE or ACDBE program, such as personal net worth, business size, ownership, or control. Decertification can happen for various reasons, such as exceeding the program limits, failing to submit required information, or undergoing a change in ownership or structure. In this blog post, we will explain how the DOT's final rule on DBE and ACDBE programs, issued earlier this year, affects the counting of DBE participation after decertification.

When an ACDBE is decertified because the firm exceeded the business size limits or one or more of its owners exceeded the personal net worth limitation, the company may continue to have their participation counted towards ACDBE goals for the remainder of a concession agreement, as long as they remain eligible in all other respects. This means that if you are an ACDBE who operates a retail, food and beverage, or other concession at an airport, and you are decertified during the term of your agreement, you can still contribute to the airport's ACDBE goal until the agreement expires or is terminated. However, you must still comply with the program requirements regarding control, ownership, and independence of your business. If you lose eligibility for any other reason than decertification, such as fraud, suspension, or debarment, your participation will not count towards the ACDBE goal.

The final rule also provides some exceptions for decertified DBEs who participate in federally funded contracts, depending on the timing and the reason for decertification. If you are a DBE who is decertified solely because you exceed the business size standard for your industry, the recipient (the state or local agency that receives federal funds) may continue to count the remaining portion of your performance towards the overall DBE goal. This means that if you are a DBE who performs work on a highway, transit, or airport project, and you grow beyond the size limit for your industry, you can still help the recipient meet its DBE goal for the rest of the contract. However, if you are decertified for any other reason, such as exceeding the personal net worth limit, failing to maintain control or ownership, or being acquired or merged with a non-DBE, the recipient may not count the remaining portion of your performance towards the overall DBE goal.

The final rule also addresses the situation where you are a prime contractor who is decertified after being awarded a contract with a DBE goal. In this case, the remaining portion of your performance may not count towards the overall DBE goal but can count towards satisfying the contract goal. This means that if you are a DBE who bids on and wins a contract with a DBE goal, and you are decertified during the contract, you can still fulfill the DBE commitment for that contract. However, the recipient will not count your performance towards its overall DBE goal for the year. The exception to this rule is if you are decertified due to exceeding the business size standard or being acquired by a non-DBE, and the recipient determines that removing your participation would make it impossible or impractical for the prime contractor to meet the contract goal. In this case, the recipient may allow your participation to count towards both the contract and the overall goal.

Finally, the final rule also affects the counting of DBE participation for subcontractors who are decertified. If you are a prime contractor who has a subcontract with a DBE, and the DBE is decertified after the subcontract is executed, you may continue to use the DBE and receive credit towards the DBE goal for the contract. This means that if you are a non-DBE who hires a DBE to perform work on a contract with a DBE goal, and the DBE is decertified during the contract, you can still count the DBE's work towards the goal. However, you may not extend or add work to the subcontract with the decertified DBE after you are notified of the decertification, unless you obtain prior written consent from the recipient. If the recipient executed the prime contract with a decertified DBE, the recipient must direct you to subcontract to an eligible DBE or demonstrate good faith efforts to meet the contract goal.

If your company needs help with DBE or ACDBE certification, please contact Danielle Dietrich, Esq. at ddietrich@potomaclaw.com or 412-449-9141.

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