Lamson, Dugan and Murray, LLP, Attorneys at Law

What is the Good Faith Requirement for DBE Contracts?

Posted in Disadvantaged Business Enterprises

In a post last week, we discussed an unfortunate situation in which a business owner was convicted of defrauding the disadvantaged business enterprise (DBE) program. Given that DBE participation is a goal, not a requirement, one may ask whether the business owner made a good faith effort to meet the DBE contract goal? And, whether there was ever an intention to meet the DBE contract goal?

In this post I’ll define the good faith requirement and what you can do to show you met it. 

What are the Good Faith Effort Requirements?

The US DOT regulations require that contractors make sincere, intensive and aggressive efforts to meet the DBE contract goal and you must submit a request for good faith effort (GFE) determination.  You can find a copy of the regulation here

How do you Show you Made a Good Faith Effort?

You must document every step taken to satisfy the State’s DOT’s specific project’s good faith efforts requirement to meet the contract DBE goal. The DOT’s regulations consider the following actions as evidence of a good faith effort:

  • Timely soliciting through all reasonable and available means (e.g. attendance at pre-bid meetings, advertising and/or written notices) the interest of all certified DBEs who have the capacity to perform the work of the contract.
  • Selecting portions of the work to be performed by DBEs in order to increase the likelihood that the DBE goals will be achieved.
  • Providing interested DBEs with adequate information about the plans, specifications, and requirements of the contract in a timely manner to assist them in responding to a solicitation.
  • Negotiating in good faith with interested DBEs and documenting the basis for rejecting a DBE as unqualified.
  • Assisting interested DBEs in obtaining bonding, lines of credit or insurance.
  • Assisting interested DBEs in obtaining necessary equipment, supplies or materials.

It is important to remember that local authorities will take into account the performance of other bidders in meeting the contract DBE percentages. So, if the successful bidder fails to meet the contract DBE percentages, but other contractors do meet it, the local authority may raise the question of whether the apparent successful bidder could have met the DBE goal.

Of course, documenting the steps your company has taken to fulfill your good faith efforts is extremely important. To that end, it may be of benefit to adopt a DBE participation plan. In a future post, we will discuss the best practices to establish a DBE participation plan.

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