The Specialist makes determinations about:
- Social and economic disadvantaged
- Ownership and capital contribution
- Control of the eligible principal(s) and their ongoing and independent nature
Determining Social and Economic Disadvantage ("SED")
- The Certification Specialist will ensure that individuals meet the requirements of social disadvantage. They may ask for more documentation justifying the individual's inclusion if there is a questionable claim for a person's group membership.
- The Certification Specialist will analyze the personal financial statement and affidavit of certification for each individual relied upon to establish social and economic disadvantage.
- If an individual is not considered as disadvantaged they may still apply for DBE certification. They must establish a pattern and history of disenfranchisement, including but not exclusive of:
- Business opportunities
- Capital and credit
The Specialist will make a determination about each person whose ownership and control we rely on for DBE certification. The applicant company must provide proof that the individuals who own and control it identify as disadvantaged. We use the following regulations to make decisions:
- 49 CFR §26.67
- 49 CFR Part 26 Appendix E
- The Certification Specialist will evaluate ownership and capital contribution percentages for each individual involved in the company. They will do this to find out if the SED principal(s) own the applicant firm in both substance as well as form.
- The Specialist must determine that the ownership of the company is an 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.
- The Specialist will analyze each owner's capital contribution to confirm the SED(s)'s substantive ownership. This includes:
- Monetary payments
- Debt instruments
- Tangible assets
- Services instead 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, the Specialist must determine that the services provided were:
- In a specialized field
- Of outstanding quality
- In areas critical to the firm's operations
- Indispensable to the firms potential success
- Specific to the type of work the firm performs
- Documented in the records of the firm, showing the contribution and its value to the firm
- The Specialist must 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, the Specialist must pay careful attention to any inter-spousal transfer, even one for value, to ensure the SED spouse owns and controls the firm.
- The Specialist will collect the entire trust instrument, for companies, securities, or any other assets held in trust, for review by Legal Counsel. If the ownership is held in trust, the Specialist will request that the applicant provide a notarized statement on the trust's:
- Current Trustees
- The current and expected beneficiaries
- The Auditor will compare personal financial statements to the individual's business and personal tax returns. We need three years of individual and business tax returns.
- The Auditor will calculate the individual(s)'s personal net worth. The net worth excludes the principal(s)'s equity share of their primary residence and in the applicant firm. But, it includes present value of assets, including retirement assets or investment programs. The net worth threshold is $1,320,000.00.
- The Auditor will review any transfer 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.
- To verify that an applicant firm and its eligible principal(s) qualify as an independently-controlled DBE, the Specialist will:
- 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
- Determine the binding effect of any franchise agreement on the applicant’s operations.
- The Specialist determines control by evaluating whether the eligible principal(s) has the power to direct or cause the direction of the management and policies of the firm and to make daily and 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
- Control any board of directors, or be general partner with control over all decisions in a partnership
While delegation of some aspects of management, policy making, or daily operations is permissible, the eligible principal(s) must keep the authority to revoke the delegation. They must also retain power to fire the delegate.
- The Specialist must determine that the eligible principal(s) have the technical expertise in the specific areas that relate to the scope of business the company performs. The principle does not need technical expertise to perform the work of the company. The principle(s) must be able to "intelligently and critically evaluate information presented" by the firm members and be able to "use this information to make independent decisions about the firm's daily operations, management, and policy making." Office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm are insufficient to demonstrate control.
- The 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. MassUCP may have to determine whether state or local ordinances require the company or its employees to be licensed.
- The Specialist must evaluate the compensation paid to all officers and employees of the company. They will also look at each individual scope of participation in the company's operations (e.g., full-time or part-time employment with the applicant). The eligible principal(s) do not need to be the highest paid employee(s). But, discrepancies in compensation may indicate that the principal does not share in the risks and profits commensurate with their ownership interest.
- We will evaluate participation by non-eligible family members, other non-eligible individuals, or prior owners in the business of the firm. The Specialist will pay careful attention to situations where non-eligible family members take part in the business, particularly if they used to own all or part of the business. If the Specialist 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.
- The Specialist will determine the applicant's independence and viability by comparing:
- 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 prevent 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.