On April 23, 2013, two years after initiation of its audit, the Office of the Inspector General (OIG) of the U.S. Department of Transportation (DOT) issued a final audit report on the administration of the DOT Disadvantaged Business Enterprise (DBE) Program.
In its audit, the OIG assessed whether (1) the DOT provides adequate DBE program management, (2) DOT’s Operating Administrations and recipients sufficiently oversee and implement the DBE program, and (3) the DOT achieves its program objective to help develop DBEs to succeed in the marketplace. The OIG’s audit concluded that the DOT does not provide effective program management for the DBE program.
The OIG audit focused, in part, on the utilization of DBEs by prime contractors on federally-funded projects. The dire statistics concerning use of DBEs in general and in Maryland are worth noting:
The Department has limited success in achieving its program objective to develop DBEs to succeed in the marketplace because recipients place more emphasis on getting firms certified as DBEs rather than assisting them to identify opportunities and to market themselves for DBE work on federally funded projects. As a result, the majority of certified DBE firms from the six States we visited—especially smaller firms—have been unsuccessful in obtaining federally funded contracts. For example, at the 6 States we visited, less than 20 percent of the 7,689 certified firms actually received work on federally funded projects.
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For example, of Maryland’s 560 DBEs that received awards through the DBE program, 4 firms consistently win the most contracts—over 100 contracts each, for a total of 609 contracts. In contrast, 202 of those 560 Maryland DBEs have won only 1 DBE contract since becoming certified.
The statistics concerning Maryland are troubling to say the least. Maryland has 4,863 DBE firms in its DBE directory. Of this number, only 560 DBE firms have ever obtained a contract. That is only a 12% participation. But of that number, four are consistent repeat recipients of contracts. That means only 0.1% of DBEs in Maryland are getting the lion’s share of the contracts! This would also seem to suggest that the remaining 4,859 DBEs are defunct, not capable of performing work, not interested in performing work, or simply certified firms with no interest in ever obtaining federally-funded work. If that is the case, why are these firms listed in the DBE directory and what use is the directory? These are troubling questions not answered by the OIG audit report.
Here is the conclusion from the OIG audit report:
DOT has spent billions of dollars through its DBE program to remedy past and current discrimination against socially and economically disadvantaged individuals competing for federally assisted projects. However, weaknesses in DBE program management and implementation have allowed ineligible firms to win DBE contracts and have left the majority of DBE firms without work. The Department’s fragmented DBE program management structure can only be effective if Operating Administrations and recipients are offered clear DBE guidance and training with which to implement the program. Because the Department’s DBE guidance and training is not sufficiently comprehensive, it must take a more proactive oversight approach to ensure that recipients comply with DBE regulations and make progress toward achieving DBE program goals. If the Department does not provide more comprehensive guidance and training or strengthen its program management, the DBE program may continue to be exposed to billions of dollars in fraud, waste, and abuse.
The OIG audit report will likely add fuel to the fire of long-time critics of the DBE program. A link to the OIG audit report can be found here.
Christopher I. McCabe, Esq.
