DBE trucking companies have special provision in the federal Department of Transportation (DOT) regulations, because of the unique features of that industry and some history of past abuse. The concerns are primarily control, independence, management, profits and whether the disadvantaged person truly owns, controls and manages the DBE business. The Environmental Protection Agency (EPA) has adopted commercially useful function trucking regulations that borrow to some extent from the DOT regulations.[1]
Historically, common violations have involved false or illegitimate DBE truckers set up or controlled by non-DBE truckers. Sometimes, the trucks used by the DBE are owned by the non-DBE truckers and “leased” to the DBE. Sometimes, the employees doing dispatch, supervising and performing work are former or current employees of the non-DBE trucker.
49 CFR 26.55 (d) of the DOT regulations state:
(d) Use the following factors in determining whether a DBE trucking company is performing a commercially useful function:
(1) The DBE must be responsible for the management and supervision of the entire trucking operation for which it is responsible on a particular contract, and there cannot be a contrived arrangement for the purpose of meeting DBE goals.
(2) The DBE must itself own and operate at least one fully licensed, insured, and operational truck used on the contract.
(3) The DBE receives credit for the total value of the transportation services it provides on the contract using trucks it owns, insures, and operates using drivers it employs.
(4) The DBE may lease trucks from another DBE firm, including an owner-operator who is certified as a DBE. The DBE who leases trucks from another DBE receives credit for the total value of the transportation services the lessee DBE provides on the contract.
(5) The DBE may also lease trucks from a non-DBE firm, including from an owner-operator. The DBE that leases trucks equipped with drivers from a non-DBE is entitled to credit for the total value of transportation services provided by non-DBE leased trucks equipped with drivers not to exceed the value of transportation services on the contract provided by DBE-owned trucks or leased trucks with DBE employee drivers. Additional participation by non-DBE owned trucks equipped with drivers receives credit only for the fee or commission it receives as a result of the lease arrangement. If a recipient chooses this approach, it must obtain written consent from the appropriate DOT operating administration.
Example to paragraph (d)(5): DBE Firm X uses two of its own trucks on a contract. It leases two trucks from DBE Firm Y and six trucks equipped with drivers from non-DBE Firm Z. DBE credit would be awarded for the total value of transportation services provided by Firm X and Firm Y, and may also be awarded for the total value of transportation services provided by four of the six trucks provided by Firm Z. In all, full credit would be allowed for the participation of eight trucks. DBE credit could be awarded only for the fees or commissions pertaining to the remaining trucks Firm X receives as a result of the lease with Firm Z.
(6) The DBE may lease trucks without drivers from a non-DBE truck leasing company. If the DBE leases trucks from a non-DBE truck leasing company and uses its own employees as drivers, it is entitled to credit for the total value of these hauling services.
Example to paragraph (d)(6): DBE Firm X uses two of its own trucks on a contract. It leases two additional trucks from non-DBE Firm Z. Firm X uses its own employees to drive the trucks leased from Firm Z. DBE credit would be awarded for the total value of the transportation services provided by all four trucks.
(7) For purposes of this paragraph (d), a lease must indicate that the DBE has exclusive use of and control over the truck. This does not preclude the leased truck from working for others during the term of the lease with the consent of the DBE, so long as the lease gives the DBE absolute priority for use of the leased truck. Leased trucks must display the name and identification number of the DBE.
Accordingly the DBE must be responsible for the management and supervision of the entire trucking operation and must itself own and operate at least one fully licensed, insured, and operational truck used on the contract.
The DBE and prime contractor also get full DBE participation credit for any trucks and drivers leased from another DBE firm.[2] The DBE and prime contractor also get full DBE participation credit for any trucks leased from a non-DBE firm, if the trucker driver operators are employees of the DBE.[3]
The DBE can lease trucks from other non-DBE firms, with drivers from the non-DBE firm.[4] However, as shown in the examples provided in the regulation, a “matching” rule applies. The DBE gets full credit for non-DBE leased trucks equipped with drivers, not to exceed the value of DBE-owned trucks or leased trucks with DBE employee drivers. As shown in the examples, if the DBE owns three (3) trucks that are used by DBE employee drivers and also leases three (3) trucks and drivers from a non-DBE firms, then the DBE and prime contractor get full DBE participation credit for all trucks and drivers (assuming the DBE is responsible for the management and supervision of the entire trucking operation). On the other hand, if the DBE leased four (4) trucks and drivers from a non-DBE firms on the same contract, then the DBE and prime contractor would still only receive full DBE participation credit for six (6) trucks and drivers total.[5]
In any event, all leases must indicate that the DBE has exclusive use of and control over the truck. Leased trucks must also display the name and identification number of the DBE.[6]
However, the DBE cannot lease trucks from the prime contractor or its affiliate in any event. Otherwise, these trucks cannot count towards DBE participation goals.[7]
The DOT regulations also state that
a person may be a regular dealer in such bulk items as petroleum products, steel, cement, gravel, stone, or asphalt without owning, operating, or maintaining a place of business as provided in this paragraph (e)(2)(ii) if the person both owns and operates distribution equipment for the products. Any supplementing of regular dealers' own distribution equipment shall be by a long-term lease agreement and not on an ad hoc or contract-by-contract basis.[8]
This is an opportunity for a DBE trucker that owns one of more of its own trucks. Legitimate DBE participation credit is available for the trucking services provided by a DBE trucker that owns its own truck. DBE participation credit is also available for sixty per cent (60%) of the cost of bulk items as petroleum products, steel, cement, gravel, stone, or asphalt delivered by that DBE trucker.
[1] 40 CFR (Code of Federal Regulations) 33.503.
[2] 49 CFR 26.55 (d)(4).
[3] 49 CFR 26.55 (d)(6).
[4] 49 CFR 26.55 (d)(5).
[5] 49 CFR 26.55 (d)(5). In this case, the DBE and prime contractor would receive DBE participation credit only for the fee or commission it receives on the seventh (7th) truck. However, the DBE must obtain written consent from DOT to get this credit.
[6] 49 CFR 26.55 (d)(7). The leased truck can work for others during the term of the lease with the consent of the DBE, so long as the lease gives the DBE absolute priority for use of the leased truck.
[7] 49 CFR 26.55 (a)(1)[Count the entire amount of that portion of a construction contract . . . that is performed by the DBE's own forces. Include the cost of supplies and materials obtained by the DBE for the work of the contract, including supplies purchased or equipment leased by the DBE (except supplies and equipment the DBE subcontractor purchases or leases from the prime contractor or its affiliate)].
[8] 49 CFR 26.55 (e)(2)(ii)(B).