May 4, 2023 | Business Organization and Corporate Law, The Practical Lawyer

The Certification Eligibility of Small Businesses: What Your Clients Need to Know (Part 2) - by Anita Ponder - Presented by ALI CLE

Government agencies and Fortune 500 companies nationwide have supplier diversity programs that are intended to facilitate the establishment, growth, and success of small businesses that are majority-owned, controlled, and operated by one or more persons who are deemed to be disadvantaged, minority, woman, veteran, disabled, and/or belonging to the LGBT community. Businesses that are owned by these individuals are commonly referred to as disadvantaged business enterprises (DBEs), minority business enterprises (MBEs), women business enterprises (WBEs), veteran-owned business enterprises (VBEs), business enterprises owned by people with disabilities (BEPD businesses) or LGBT-owned business enterprises (LGBT businesses). Small businesses obtain these designations after they apply for and receive certification from a certifying entity or certifier.

Supplier diversity programs help such certified small businesses become successful by offering them a variety of benefits and opportunities to compete for and secure contracts and subcontracts from government agencies, their prime contractors and consultants, and from many of the top corporations nationwide. The first article in our Government Contracts and Diversity series1 discussed: (i) the benefits that are available to small businesses after they obtain their certification eligibility; and (ii) how attorneys can help their small business clients navigate the certification process to achieve their business goals. This article will discuss: (i) common certification eligibility requirements; and (ii) how attorneys can help their small business clients obtain certification eligibility from governmental and not-for-profit certifying entities nationwide.

The certification application process is often extensive, document-intensive, time-consuming, and complex, as well as exhausting to applicants. Most applicants do not review the applicable certification requirements before they apply for certification eligibility. Among those applicants who do review them, they do not fully understand how certifiers apply the requirements to determine their certification eligibility. The more extensive or comprehensive the requirements are, the more likely they will not be reviewed or understood by certification applicants. However, comprehensive certification requirements are generally considered to be more credible because they are more effective at preventing unqualified applicant businesses, commonly referred to as “front companies,” from obtaining certification eligibility and contract opportunities that are specifically targeted or set aside for certified businesses.

Certification requirements often differ from certifier to certifier, although there are some common requirements that typically must be met by most certification applicants. This article will focus on the federal certification requirements of the United States Department of Transportation (DOT) which we believe are the most comprehensive certification regulations nationwide. These certification regulations are implemented by state transportation agencies that are funded by DOT, as well as many local and not-for-profit certifiers. If you have small business clients or seek to represent them, you should not only know the benefits of certification and how you can help small businesses receive them, but also the certification eligibility requirements of the certifier from which your clients seek certification eligibility.


As we discussed in Part 1, a certified business is at least 51 percent or more owned, controlled, and operated by one or more United States citizens who are: (i) women; (ii) Black, Asian Indian, Asian-Pacific,
Hispanic and/or Native American; (iii) veterans; (iv) persons with disabilities; or (v) persons who are LGBT. Whether a business is deemed to be majority- controlled by these individuals depends on its
management and daily operations. Most certifying agencies have certification requirements that specify the eligibility criteria and application process for businesses that are seeking certification. DBE, MBE, WBE, and VBE certifications are the most common types of certifications.

Before you complete and submit a certification application for your client or approve an application for submittal, you should conduct a comprehensive certification eligibility analysis to determine whether there are any eligibility issues that should be addressed before the application is filed. You should also review the applicable certification requirements of the entity from which your client is seeking certification, which may differ from some of the requirements that we discuss here. Subsequently, you should review a draft application and the required supporting documents from your client to identify certification eligibility issues; propose a legal strategy to address each issue; and develop an action plan with the client to execute the legal strategy to facilitate its certification.

The DBE Program of the DOT

A good place for attorneys to start to become familiar with certification eligibility requirements is with the DBE certification requirements of DOT. The DBE program is designed to remedy ongoing discrimination and the continuing effects of past discrimination in federally assisted highway, transit, airport, and highway safety financial assistance transportation contracting markets. The primary remedial goal and objective of the DBE program is to level the playing field by providing small businesses, owned and controlled by socially and economically disadvantaged individuals, a fair opportunity to compete for federally funded transportation contracts.

DOT’s operating administrations distribute substantial funds each year to finance construction projects initiated by state and local governments and public transit and airport agencies. DOT has the responsibility of ensuring that firms competing for DOTassisted contracts for these projects are not disadvantaged by unlawful discrimination. The DOT’s most important tool for meeting this requirement
has been its DBE program, which originally began in 1980 as a minority/women’s business enterprise program established by regulation under the authority of Title VI of the Civil Rights Act of 1964 and
other nondiscrimination statutes that apply to DOT financial assistance programs. The DBE program
was reauthorized by Congress several times since its inception, most recently in the Fixing America’s Surface Transportation Act or the FAST-ACT.2 Section 1101(b) of the Act describes Congress’s findings
regarding the continued need for the DBE program due to the discrimination and related barriers that
pose significant obstacles for minority- and women-owned businesses seeking federally-assisted surface transportation work.

To meet the objectives of the DBE program, recipients (i.e., state and local governments and public
transit and airport agencies) that receive funding from DOT for construction projects, must develop
and implement a DBE program that conforms to DOT standards.3 The DBE programs of funding recipients must include contract goals for DBEs to participate on their DOT-funded contracts. The integrity of DOT’s DBE program depends upon systematic certification procedures to ensure that only
bona fide DBEs are certified to participate on DOTfunded contracts nationwide. The DBE regulations
place the primary responsibility for the certification process upon state transportation agencies. We will
now provide an overview of the federal DBE certification standards which include many of the requirements of certifiers nationwide.

CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Lawyer.

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