Disadvantaged Business Enterprises:

Critical Information Is Needed to Understand Program Impact

GAO-01-586: Published: Jun 1, 2001. Publicly Released: Jun 1, 2001.

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The Department of Transportation's (DOT) Disadvantaged Business Enterprise (DBE) program seeks to remedy the effects of current and past discrimination against small businesses owned and controlled by socially and economically disadvantaged persons and to foster equal opportunity in transportation contracting. This report provides information on (1) important changes made to the program since 1999; (2) characteristics of DBEs and non-DBEs that receive DOT-assisted highway and transit contracts; (3) evidence of discrimination and other factors that may limit DBEs' ability to compete for DOT-assisted contracts; and (4) the programs impact on costs, competition, and job creation and the impact of discontinuing the federal and nonfederal DBE programs. GAO found that the program has changed significantly since DOT issued new regulations in 1999 in response to a 1995 Supreme Court decision that heightened standards for federal programs that use race or ethnicity as a criterion in decision-making. The new regulations overhauled the DBE goal-setting process. For example, states and transit authorities are no longer required to justify goals lower than 10 percent--the amount identified in the statutory DBE provision. Rather, goals are to be based on the number of "ready, willing, and able" DBEs in local markets. GAO was unable to determine the characteristics of DBE participants because of a lack of information. Without this information, it is impossible to define the universe of DBEs, compare them with the transportation contracting community as a whole, or gain a clear understanding of the programs impact. DOT does not systematically track information on discrimination complaints filed by DBEs. Although DOT receives written discrimination complaints filed by DBEs, it could not provide the total number of such complaints, the total number of investigations launched, or the outcomes of the investigations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOT is currently focusing its efforts on a Supreme Court case that will determine whether the Department's DBE program is constitutional. Briefs have been filed and oral arguments were heard during the fall of 2001.

    Recommendation: To assist the DOT in administering the DBE program and to help inform Congress about the impact of the program, the Secretary of Transportation should periodically compile information on DBEs, through a survey or other appropriate mechanism, to better understand the types of programs needed to assist these firms.

    Agency Affected: Department of Transportation

  2. Status: Closed - Implemented

    Comments: DOT now tracks DBE complaints in an electronic database referred to as XTRAK. Each operating administration's Office of Civil Rights has access to complaints filed against its recipients, and is responsible for entering and maintaining current data. The Secretary of Transportation receives weekly reports on the number of complaints pending in the system, the mean and median age (days) of the complaints, the number filed during the reporting period and fiscal year, and the number closed during the reporting period and fiscal year. This information is broken out by different categories, including an DBE category. As of February 2006, DOT had three active DBE complaints in the system.

    Recommendation: To assist the DOT in administering the DBE program and to help inform Congress about the impact of the program, the Secretary of Transportation should compile and analyze data on written complaints of discrimination filed by DBEs with DOT in order to (1) determine trends in the number and type of complaints filed and (2) identify problem areas that require action.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: DOT is currently focusing its efforts on a Supreme Court case that will determine whether the Department's DBE program is constitutional. Briefs have been filed and oral arguments were heard during the fall of 2001.

    Recommendation: To assist DOT in administering the DBE program and to help inform Congress about the impact of the program, the Secretary of Transportation should amend the quarterly reporting requirements for states and transit authorities to include information on the annual gross receipts of DBEs and non-DBEs and the number and dollar amount of the subcontracts awarded to non-DBEs. This information could be used to gain a more complete understanding of the participation rate of DBEs in subcontracting and of their financial status compared with other transportation contracting firms. Furthermore, DOT should compile, analyze, and publish (in aggregate format) the information collected in the quarterly reports.

    Agency Affected: Department of Transportation

  4. Status: Closed - Not Implemented

    Comments: DOT is currently focusing its efforts on a Supreme Court case that will determine whether the Department's DBE program is constitutional. Briefs have been filed and oral arguments were heard during the fall of 2001.

    Recommendation: To assist the Department of Transportation (DOT) in administering the Disadvantaged Business Enterprise (DBE) program and to help inform Congress about the impact of the program, the Secretary of Transportation should develop a method for states and transit authorities to assign unique identification numbers to DBEs so that the total number of DBEs certified nationwide can be determined.

    Agency Affected: Department of Transportation

  5. Status: Closed - Not Implemented

    Comments: DOT is currently focusing its efforts on a Supreme Court case that will determine whether the Department's DBE program is constitutional. Briefs have been filed and oral arguments were heard during the fall of 2001.

    Recommendation: To better assist states and transit authorities in implementing the DBE program and help ensure that DBE participation goals reflect the availability of ready, willing, and able DBEs in the relevant market, the Secretary of Transportation should provide specific guidance to states and transit authorities on strategies to mitigate the potential problems associated with using Census Bureau data and DBE directories, disparity studies, and bidders lists to set their DBE goals.

    Agency Affected: Department of Transportation

 

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