DBENEWThe U.S. Department of Transportation’s Office of Inspector General completed its audit of the Disadvantaged Business Enterprise and found that the program is not working.  (Hat Tip to Wally Zimolong, Supplemental Conditions)  The scathing audit found that the entire DBE program is poorly run, which is not a surprise to contractors having to deal with the program.

The Inspector General’s Audit , consisting of 40 single spaced pages, finds failures at every turn with the DBE Program. The Department of Transportation has not issued comprehensive, standardized DBE guidance; the DBE program lacks adequate oversight; and it has had limited success in achieving its program objective of developing DBE firms that can succeed in the marketplace.

Ineffective Program Management

The Department of Transportation (“DOT”) has not issued comprehensive, standardized DBE guidance or provided sufficient training to the recipients responsible for implementing the program.  15 states were surveyed and 14 of them said they lacked clear DBE guidance from the DOT, and 12 said that the DOT did not provide adequate training.  The program also lacks a single line of accountability for the program making it difficult to account for the billions of dollars in annual DBE spending.

Failure in Purpose 

The purpose behind the DBE program was to help firms become established and then compete in the open marketplace.  But, very few firms that ultimately become eligible to participate ever receive work as a subcontractor or prime contractor of a federally funded project.  The audit also revealed that smaller DBE firms have difficulty competing for contracts and larger DBE firms win more contracts because they have developed a relationship with prime contractors after demonstrating that they can perform the work.  In light of the success that some companies are having in the program, there is little incentive for firms to grow beyond the DBE program. Some companies will even limit the amount of new contract dollars they receive in order to stay below the gross receipt cap required for DBE eligibility.

The DBE program appears to be in shambles, but those that work with the program are probably not surprised.  The lack of guidance has been a point of contention of contractors across the country since the program began.  Perhaps this audit will shed some light on the problems and the DOT can start working towards improving the program.