The following outline reflects the procedures that SDO applies to make certification determinations:
- Administrative Procedures
- UCP Manager will assign a certification specialist to cases on a weekly basis using a first in—first out methodology to ensure equity in the assignment process.
- Upon assignment of a case to the Certification Specialist, the UCP Manager will notify the applicant in writing of the assignment. The Certification specialist will conduct a desk audit of the application and its accompanying documents to determine the applicant’s eligibility.
- If Certification Specialist determines that any additional documentation is required or further information as to specific issues pertaining to certification, Certification Specialist will notify the applicant in writing of the specific documents needed and provide it two weeks to respond. Certification Specialist may grant a one-time extension to an applicant, if requested or necessary at its discretion.
- Certification Specialist will ensure the company:
- Has filed with the Massachusetts Secretary of the Commonwealth’s Office or its municipality.
- Has obtained all necessary licenses required by the state for its operation.
- Possesses the requisite insurance for its vehicles and personnel.
- Is in compliance with all state and federal laws.
- If Certification Specialist determines the desk audit is complete Certification Specialist will notify the client and arrange for a mutually convenient time to conduct a site visit. Whenever possible, Certification Specialist will schedule its visits so as to reduce travel costs and time out of the office. Certification Specialist will complete a Site Visit Questionnaire that will be included in the file.
- For Massachusetts companies, Certification Specialist will perform a site visit.
- Where applicable, Certification Specialist will visit a job site with the applicant as well as visit its principal place of business.
- Certification Specialist will interview all principals and any other person possessing relevant information as to the applicant’s operations, including, among possible others employees, subcontractors, consultants, legal counsel, accountants, and government personnel.
- Certification Specialist will record all its communications and interactions with the applicant in the Agency’s client database. Information to be recorded includes but is not limited to phone calls, meetings, emails, and letters sent to the company.
- After conducting the site visit, Certification Specialist will prepare a detailed forensic report on the applicant recommending to either certified on deny. The report is then submitted to the Executive Director and Certification Committee to either approve or deny the applicants request for certification. The report will detail how the company either did or did not comply with every regulatory requirement of 49 CFR Part 26, Subpart D. Executive Director will notify the applicant of its decision.
- Where an applicant withdraws its request or is non responsive, The Certification Specialist will prepare a brief report and close the file. Any firm that withdraws its application before the SDO has rendered its certification decision may reapply at any time. However, firms that have established a pattern of withdrawing its application before a certification decision is made may be required to wait up to 11 months. In either case, any firm reapplying that has previously withdrawn its application before a decision has been made will be placed at the “end-of-line”.
- Determination Procedures
Certification specialist will make determinations regarding the social and economic disadvantage, ownership, capital contribution and control of the eligible principal(s); and the ongoing and independent nature of the applicant.
- Social and Economic Disadvantage
- In reviewing an applicant for Social and Economic Disadvantage (“SED”), Case Auditor will analyze the Personal Financial Statement(s) and Affidavits of Certification for each individual relied upon to establish social and economic disadvantage.
- Certification Specialist will ensure that the individuals relied upon meet the requirements of social disadvantage as defined in 49 CFR §26.63. If Certification Specialist has a well-founded reason to question the applicant’s claim to group membership, Certification Specialist may request additional documentation justifying the individual’s inclusion.
- While 49 CFR §26.67 defines the classes presumed to be socially disadvantaged, an individual who is not presumed to be socially and economically disadvantaged may apply for DBE certification, provided s/he can establish a pattern and history of disenfranchisement, including but not limited to decreased access to education, employment, and business opportunities, and, with respect to economic disadvantage, limited access to capital and credit.16 Certification Specialist will make a case-by-case determination of whether each individual whose ownership and control is relied upon for DBE certification is socially and economically disadvantaged in accordance with 49 CFR Part 26 Appendix E. In such a proceeding, the applicant firm bears the burden of demonstrating by a preponderance of the evidence that the individuals who own and control it are socially and economically disadvantaged.
- In reviewing any Personal Financial Statements, Case Auditor will validate the statements against the individual’s business and personal tax returns. The UCP Supporting Documents Checklist requires submission of three years of individual and business tax returns.
- In determining that the individual(s)’s personal net worth does not exceed the $1,320,000.00 threshold, Case Auditor will exclude the eligible principal(s)’s share of the equity in his or her primary residence and in the applicant firm, but include the present value of assets, including retirement assets or investment programs.
- Case Auditor will review any transfers of assets to or from the applicant and/or to or from any of its owners over the past two years, including any marital transfer.
- Certification Specialist will evaluate ownership and capital contribution percentages for each individual involved in the company to ascertain that the SED principal(s) own the applicant in both substance as well as form.
- Certification Specialist must determine not only that the paper ownership of the company reflects a true and accurate statement of the eligible principal(s)’s ownership, but that the substance of the company reflects 51% or more of an ownership interest, including but not exclusively the salary disparities.
- In validating the SED(s)’s substantive ownership, Certification Specialist will analyze the capital contribution provided the company by each owner, including monetary payments, debt instruments, tangible assets, or services in lieu of payment.
- Where the eligible principal used marital assets to acquire ownership, verify that the assets belonged to the eligible principal or the ineligible spouse legally denounced any right to the assets.
- Where the SED alleges to have provided services in lieu of payment, Certification Specialist must determine that the services provided were (a) in a specialized field; (b) of outstanding quality; (c) in areas critical to the firm’s operations; (d) indispensible to the firms potential success; (e) specific to the type of work the firm performs; and (f) documented in the records of the firm, clearly showing the contribution and its value to the firm.
- Certification Specialist must also evaluate the transfer or general acquisition by the eligible principal(s) of any ownership interests from an ineligible individual, especially one who retains ownership or remains involved with the company.
- In analyzing any transfer of assets, Certification Specialist must pay careful attention to any inter-spousal transfer, even one for value, to ensure the SED spouse owns and controls the firm.
- In companies, securities, or any other assets held in trust, Certification Specialist will collect the entire trust instrument for review by SDO’s or Legal Counsel. Where the ownership is held in trust, Certification Specialist will request the applicant provide a notarized statement as to the trust’s (a) Settlor; (b) current Trustees; and (c) the current and expected beneficiaries.
- To verify that an applicant firm and its eligible principal(s) qualify as an independently-controlled DBE, Certification Specialist must evaluate the applicant’s relationship(s) with non-DBE firms regarding personnel, facilities, and equipment as compared to standard operating procedures within the applicable industry; review, the financial, bonding support, and resources, of the applicant, as well as its prime- and sub-contractor dealings; and if applicable, determine the binding effect of any franchise agreement on the applicant’s operations.
- In determining whether the eligible principal(s) control the applicant, Certification Specialist evaluate whether s/he has “power to direct or cause the direction of the management and policies of the firm and to make day to day as well as long term decisions on matters of management, policy, and operations.
- The eligible principal(s) must have sole discretion to make any business decision of the firm; hold the highest officer position; and control any board of directors, or be general partner with control over all decisions in a partnership.
- While delegation of some aspects of management, policymaking, or daily operations is permissible, the eligible principal(s) must retain the authority revoke the delegation and have power to fire the person to whom the delegation is made.
- Certification Specialist must determine that the eligible principal(s) have the technical expertise in the specific areas and directly related to the scope of business the company performs. Technical expertise does not require the principal actually perform the work of the company, rather that s/he has the ability to “intelligently and critically evaluate information presented” by the firm members and be able to “use this information to make independent decisions concerning the firm’s daily operations, management, and policymaking.” However, expertise limited to office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm is insufficient to demonstrate control.
- Certification Specialist must ensure that the eligible principal(s) hold any licenses required, by state or local law, to operate the company or perform its work. SDO may have to undertake research to determine whether or not state or local ordinances require the company or its employees to be licensed.
- Certification Specialist must evaluate the compensation paid to all officers and employees of the company as well as each individual scope of participation in the company’s operations (i.e., full-time or part-time employment with the applicant). While, the eligible principal(s) need not be the highest paid employees, discrepancies in compensation may indicate that the principal does not share in the risks and profits commensurate with his/her ownership interest.
- The participation by non-eligible family members, other non-eligible individuals, or prior owners in the business of the firm must be evaluated under 49 CFR § 26.71(k) (1)—(2), 49 CFR § 26.71(e) and 49 CFR § 26.71(l). Certification Specialist must pay careful attention to situations where non-eligible family members participate in the business, particularly if they used to own all or part of the business. If SDO cannot determine that the eligible individual controls the business separate and distinct from the non-eligible family members, the business has failed to carry its burden.
- Certification Specialist will determine the applicant’s independence and viability by comparing its relationships with other companies or individuals with normal industry practices in the acquisition of personnel, facilities or equipment;  financial and bonding support or resources; and whether the business actually exists and performs the functions in claims to perform based on interviews, site visits, and other information in the applicant’s file.
- A franchise agreement does not preclude a company’s inclusion into the DBE program but the franchise agreement cannot unduly bind the eligible principal’s ability to control the applicant’s daily and long-term operations.
- Social and Economic Disadvantage
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