Fans of ESPN’s iconic program College GameDay are probably familiar with host Lee Corso’s catchphrase “No So Fast My Friend.” For the uninitiated, the phrase is usually used to preface Mr. Corso’s disagreement directed towards another host’s seemingly obvious prediction about a game. The phrase is also an apt preface to describe what transportation contractors should do before terminating a DBE subcontractor.
Like any other non-performing subcontractor, you may need to terminate or replace a non-performing DBE subcontractor. However, on transportation projects receiving federal funding, Department of Transportation regulations state that you cannot terminate a DBE subcontractor without prior consent of your state transportation agency and you must give notice to the effected DBE of your intent to terminate.
First and foremost you need to give the DBE subcontractor that you intend to terminate written notice setting forth the reason for the termination. You must copy your state transportation agency with the termination notice and the DBE has five days to respond to the notice.
Second, you must get consent of your state agency by demonstrating good cause for the termination. According to the DOT, examples of good cause are:
- The listed DBE subcontractor fails or refuses to execute a written contract;
- The listed DBE subcontractor fails or refuses to perform the work of its subcontract in a way consistent with normal industry standards. Provided, however, that good cause does not exist if the failure or refusal of the DBE subcontractor to perform its work on the subcontract results from the bad faith or discriminatory action of the prime contractor;
- The listed DBE subcontractor fails or refuses to meet the prime contractor’s reasonable, nondisrciminatory bond requirements;
- The listed DBE subcontractor becomes bankrupt, insolvent, or exhibits credit unworthiness;
- The listed DBE subcontractor is ineligible to work on public works projects because of suspension and debarment proceedings pursuant to 2 CFR Parts 180, 215 and 1,200 or applicable state law;
- You have determined that the listed DBE subcontractor is not a responsible contractor;
- The listed DBE subcontractor voluntarily withdraws from the project and provides to you written notice of its withdrawal;
- The listed DBE is ineligible to receive DBE credit for the type of work required;
- A DBE owner dies or becomes disabled with the result that the listed DBE contractor is unable to complete its work on the contract;
- Other documented good cause that you determine compels the termination of the DBE subcontractor. Provided, that good cause does not exist if the prime contractor seeks to terminate a DBE it relied upon to obtain the contract so that the prime contractor can self-perform the work for which the DBE contractor was engaged or so that the prime contractor can substitute another DBE or non–DBE contractor after contract award.
Finally, DOT guidelines require you to utilize the same good-faith efforts in replacing the terminated DBE with another DBE as you did when you solicited DBE bids.
What does this all mean? Document, document, document. Document the reasons that giving rise to the need to terminate the DBE. Document the notices you gave to the DBE and the state agency of your intention to terminate (while the regulations only require one notice, several notices is recommended. We also recommend that you involve your state agency early if it appears that terminating a DBE will become necessary). Document your good faith efforts in trying to obtain a replacement DBE to complete the terminated DBE’s work.