Truckers who don’t understand how their DBE certification benefits the prime contractor or government agency who hires them are driving blind.
After suffering through the painstaking process of obtaining their DBE certification, and subjecting themselves to the audits and regulatory scrutiny that come with it, many truckers don’t know exactly how they’re helping meet the DBE contracting goals set for a construction project.
But you can’t blame them.
Applying the federal regulation (49 CFR § 26.55) can be tricky because the arrangements truckers make with respect to owning or leasing their vehicles vary.
We’re going to walk you through the requirements of this regulation, and describe for you, in plain English, what they mean for your business.
The first thing to understand is that before a trucker, or the prime contractor who hired her, even gets to the point of counting the trucker’s participation in the contract work toward the DBE goals established for the project, the trucker must satisfy some important prerequisites. The big one, the prerequisite that the USDOT uses to assess whether a trucker is actually working, really contributing its labor or materials to the project, truly performing with its own equipment and personnel a service that is required in order for the contract work to progress, is the requirement that the trucker perform a Commercially Useful Function, or “CUF,” a handy acronym that’s now become common parlance in the industry.
The regulations say what a CUF is, and what it is not. Pay attention to the CUF concept, because understanding it will help truckers avoid situation that may raise the red flags of DBE fraud—more on that in the next article. A trucker must manage and supervise her entire trucking operation, and there cannot be a contrived arrangement for the purpose of meeting DBE goals. Exactly what kinds of arrangements might appear to regulators to be “contrived,” would be good to know. We cover that in part 2 of this article.
Also, to be performing a CUF, a trucker must own and operate at least one fully licensed, insured and operational truck. Of course this implies that the trucker can lease other trucks to use on the contract, even when the drivers of those trucks are employed by another company. But be careful here because leasing affects how the DBE participation credit is counted, more on that below.
So if a trucker is performing a CUF, if she is responsible under a written contract to execute the work identified therein, if she is actually performing, managing and supervising that work, if she is deciding what materials, supplies and equipment are needed and negotiating their price, if the amount she’s being paid for her work is commensurate with industry standards, if she is not a “pass-through,” that is, not an extra participant in a transaction through which funds are passed, if she performs at least 30% of her contract with her own workforce (which means that she can subcontract 70% if her prime contract permits), if she does all of this, then she can claim DBE participation credit for work she actually performs.
Now let’s talk about how that credit is counted.
A DBE performing a CUF can claim credit for the total value of transportation services it provides on the contract when the DBE uses trucks that it owns and insures and employs the drivers. What about leasing arrangements? Well, if you lease trucks from another DBE, you get full credit for the total value of the transportation services provided with the leased trucks, as if they were your own.
Leasing trucks from a non-DBE is different, when the drivers of those leased trucks are not employed by your company. In that scenario, the DBE participation credit you claim for the non-DBE trucking services can’t exceed the credit you claim for your own trucking services. So let’s say you outsourced 70% of your trucking contract to a non-DBE firm, and are performing the other 30%, which you must, in order to be performing a CUF. You can only take DBE participation credit for 30% of the non-DBEs’ transportation services, because the non-DBE credit can’t exceed the DBE participation credit you get for your own services.
On the remaining 40% of the work performed by non-DBE truckers, you cannot take full DBE participation credit for the value of their work, but you can take DBE participation credit for any fees or commissions you earn under the leases.
And significantly, if you lease trucks from a non-DBE but employ your own drivers to operate them, you can take full DBE participation credit for the work performed with those trucks. Make sure that these leases give you exclusive use and control of the trucks, that they display the name and number of your DBE, that during the lease term, the trucks can only be used by others with your consent, and that you have first priority to use the trucks.
The regulation has its own hypothetical examples to guide you. The USDOT also has a helpful cheat sheet concerning how DBE participation credits should counted. If you’re still fuzzy on the details, it might be worth checking out these resources, because knowing how to maximize the value of your DBE certification is important not only to the success of your business, but also to the success of government programs designed to create opportunities for a demographic of business owners who have been historically excluded from participation in government contracts.
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