In an earlier post, I talked about bid challenges and rejections being one of the “hidden dangers” of failing to understand and follow DBE regulations. I explained how strict minority set asides or quotas are almost always unconstitutional. In fact, the DOT DBE regulations explicitly state that the DBE goals are not quotas. Rather, they are goals that contractors must use “good-faith efforts” to achieve. A State Transportation agency cannot reject a bid because it fails to include a commitment to subcontract work that meets or exceeds the stated DBE goal. However, for its bid to be accepted, the contractor must be able to demonstrate “good faith efforts” in attempting to meet the stated DBE contracting goal.
A Maryland case shows how one contractors lack of understanding of DBE regulations likely resulted in it losing an airport contract. (For a detailed explanation of the case visit livingstonprocurment.com) In that case, the Maryland Aviation Administration issued an Invitation for Bids for fence installation and repair at two airports. The Invitation for Bids stated a DBE participation goal of 15%.
Fence Connection, Inc. was the apparent low-bidder and stated that 25% of its subcontracted work would be performed by a single DBE subcontractor. However, the because the DBE was a supplier only 60% of the value of the work subcontracted to the DBE could be counted towards Fence Connection, Inc.’s DBE goal. MAA rejected the bid believing that it was not possible for Fence Connection to meet the stated DBE goal using the fuel supplier because Fence Connection could not accurately state the amount of fuel it would purchase from the DBE supplier.
Fence Connection appealed to the Maryland Board of Contract Appeals. The Board of Appeals affirmed the MAA’s rejection of the bid Fence Connection “could not accurate calculate how much fuel it was use on the contract.”
Unfortunately for Fence Connection, its apparent lack of understanding of DBE regulations caused it to lose the bid. How could Fence Connection saved its bid? First, even if it could not exactly calculate the amount of fuel it intended to purchased it could have come close based upon past fuel usage and perhaps expert testimony.
Second, outside of that calculation Fence Connection could still have come away with the contract if it demonstrated it used “good-faith efforts” to meet the stated DBE 15% goal and the DBE fuel supplier was all was the only reasonable candidate for subcontracting. In order to do that, Fence Connection would need to have documented aggressive efforts to find DBE subcontractors to perform 15% of the work. If it did so, Fence Connection should have been awarded the contract even if its DBE goal came in below 15%. In other words, it could have argued that because it demonstrated good-faith efforts it is irrelevant if it met the 15% goal because under DBE regulations its bid cannot be rejected solely for failing to meet the goal.
Wally Zimolong
Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.
