Column: New Infrastructure Bill and its Impact on Disadvantaged Business Enterprises in the Construction Industry

By Jacqueline K. Unger, counsel, PilieroMazza PLLC

      The Infrastructure Investment and Jobs Act —which makes a portion of its $1.2 trillion available for surface transportation projects—was signed by President Joe Biden on Nov. 15.

      It addresses aid to federal highways, transit, highway safety, motor carrier, research, hazardous materials and rail programs.

      The new law will have significant impacts for construction contractors participating in the Dept. of Transportation’s (DOT) Disadvantaged Business Enterprises (DBE) Program.

DBE program

      DOT’s DBE Program permits states to set up DBE programs, in compliance with DOT standards, that promote contracting opportunities for DBE firms through infrastructure projects initiated by state and local governments and funded at least in part by DOT.

      To be certified as a DBE, a firm must be a for-profit small business and it must be majority-owned and controlled by socially and economically disadvantaged individuals. Below, PilieroMazza addresses three important aspects of the law that will impact contracting opportunities under the DOT’s DBE Program.

      PilieroMazza PLLC also is hosting a Webinar on the DBE program on Dec. 15. See details below.

Explosion in Funding

      The infrastructure package dedicates substantial amounts to be expended on DBE firms. In this regard, the law provides that not less than 10% of the amounts made available under Division A, Division C, and funds for highway safety research & development (Section 403 of Title 23 of the U.S.C.) shall be expended to DBEs, unless the Secretary of the DOT determines otherwise.

      Division A deals with Surface Transportation funding, in which appropriations for the Federal Aid Highway Program was increased to $52 billion for fiscal year 2022, with funding increasing by about $1 billion for each coming fiscal year until 2026.

     Other important programs under Division A include these items:

• Bridge Investment Program place and repair bridges;
• Reconnecting Communities Pilot Program of about $1 billion in new grants for low-income neighborhoods; and
• Promoting Resilient Operations for Transformative, Efficient, and Cost-Saving Transportation (PROTECT) Grant Program addresses weather-related vulnerabilities receiving about $7 billion.

      Division C entails Public Transportation Programs. The package appropriates $106.9 billion for Federal Transit Administration programs over the next five years. The programs include roughly $85 billion for the Capital Investment Grant Program and $21 billion in supplemental appropriations for other transit programs. The law mostly reauthorizes FTA programs.

      The amount of funding for various projects and the requirement that no less than 10% be awarded to DBEs should lead to an explosion in the number of contracting opportunities available to DBE firms in the coming years.

Emphasis on Prompt Payment

      Congress places an emphasis on prompt payment to DBE subcontractors. As a result, the law directs the Secretary to take additional steps to ensure recipients of DOT funding comply with DOT regulations concerning prompt payment to DBEs.

      The regulation (Section 26.29 of Title 49 of the Code of Federal Regulations) currently states that contract clauses are required to be incorporated in all contracts under the DBE Program to mandate prime contractor payment to subcontractors no later than 30 days from receipt of government payment to the prime contractor.

      Through this section of the law, Congress ensured the protection of DBEs by requiring the Secretary to take steps that guarantee they receive payments promptly and on time. Congress recognizes the dramatic impact a late or delayed payment can have on a DBE and is therefore trying to limit the frequency in which it happens.

Continuing DOT’s DBE Program

      Congress determined, after reviewing testimony from congressional hearings, roundtables, scientific reports, and reports issued by public and private agencies, that DOT’s DBE Program is an overall success.

      However, barriers still pose major obstacles for minority- and women-owned businesses seeking to do business in federally-assisted surface transportation projects. Therefore, Congress finds there to be a compelling need to continue the DOT DBE Program.

      This is positive news since it demonstrates Congress’s commitment to helping small, disadvantaged businesses take a larger role in transportation-related projects at the federal, state, and local levels.

What’s Next?

      There will be a sharp increase in contracting opportunities for DBEs at the federal, state, and local levels in the next five years. Spending in transportation-related projects is undoubtedly at an all-time high. This, coupled with the emphasis Congress is placing on promoting minority- and women-owned businesses, will make the DBE arena more competitive than ever.

      This is a great time for small, disadvantaged businesses to apply for DBE certification, and also for large business contractors to familiarize themselves with DBE requirements and to identify potential DBE teaming partners.

      The federal regulations regarding eligibility and ongoing performance requirements for DBE firms (as well as prime contractors subcontracting to DBE firms) can be complex and cumbersome. Contractors involved with the DBE Program should make sure they understand and are compliant with all federal and state DBE-related rules so that they don’t miss out on millions in potential contracts and subcontracts.

If you have questions, please register for PilieroMazza’s upcoming webinar on this topic on Dec. 15 at https://bit.ly/3FXQMg9. You can also contact Jackie Unger or a member of the firm’s Government Contracts or Construction Industry groups. Special recognition is given to Daniel Figuenick for his contributions to this blog. This blog was reprinted with permission. http://www.pilieromazza.com.

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