A prime contractor can subcontract work to
Disadvantaged Business Enterprises or DBEs
to meet an agency's goal of DBE participation on federally funded
contracts.
For the contractor to count the DBE firm's work toward the goal,
the DBE firm must serve what's called a commercially useful function
or CUF. This means that the DBE firm has a necessary and useful role
in the project. For example, the firm must manage
and perform the work, supervise the employees, and supply the equipment
and materials. If the firm serves only to provide the appearance of DBE
participation,
the work is not a commercially useful function and cannot count toward a DBE
goal. Agencies that receive federal funds are required to ensure that DBEs
are performing a CUF
through evaluation activities. Let's look at the three primary activities
in every evaluation.
The first activity is a review of the agreements between the agency and the
prime contractor,
and between the prime contractor and any DBE subcontractor.
An agency employee reviews these agreements to identify the DBE
firms the contractor has committed to use and to become familiar with each
DBE firm's scope of work.
Next an agency employees inspects the job site to check that the DBE
firm is performing and managing the work. The inspector's activities include
making general observations and interviewing DBE personnel.
For example, the agency employee might ask the DBE's supervisors,
workers, and equipment operators: "who do you report to?"
and "who signs your paychecks?" They might also confirm that the DBE firms logo
is on the equipment. Lastly, an agency employee reviews project related
documents
such as payroll, invoices, and delivery tickets.
This verifies who is paying employees as well as ordering and paying for
materials.
In practice DBEs are classified as: contractors,
truckers, regular dealers, or manufacturers.
Let's follow along as an agency employee evaluates a CUF for contractor.
In our example, the DBE firm, Quality Curbs,
is charged with constructing curb and gutter.
Early in the project the agency's project manager reviews the prime
contract and the subcontract
and verifies that Quality Curbs appears in the prime contractor's DBE list
and will be paid $200,000 to construct curb and gutter.
According to the agreement, Quality Curbs will provide
all equipment and personnel and a supervisor will be present on site.
While at the job site, the project manager talks with the Quality Curb
supervisor
and records in the project diary that the supervisor is knowledgeable about
the project and schedule.
The project manager observes that a piece of equipment used to construct the
curbs and gutters does not belong to Quality Curbs.
He notes this in his diary for follow-up.
The project manager does a field records review, inspecting invoices and
delivery tickets
and verifying that Quality Curbs bought the concrete
and other materials. The project manager documents these results
in the project diary. Additionally, the project manager inspects the payrolls
of the prime
and all subcontractors to identify employee names
and to verify that employees constructing the curbs
are on Quality Curbs' payroll. During this activity,
the project manager finds one worker who appears on
two payrolls both the prime's and Quality Curbs'.
He notes in his diary to follow up on this discrepancy.
Before confirming that Quality Curbs
is performing a CUF, the project manager needs to check
why he observed the equipment of another company on the job site
and why one worker appears on the payroll of both the prime
and the DBE firm.
In a follow-up discussion with the Quality Curb supervisor
the project manager learns that the equipment he saw was leased
while Quality Curbs' equipment underwent repairs.
He also learns that the prime contractor's worker was on loan for two
days to cover for a sick employee
and that agency personnel had approved this temporary arrangement.
With all the question satisfied, the project manager certifies in writing
that Quality Curbs
manages and performs the work using its own employees,
provides all necessary equipment, and supplies the materials.
Had the agency determined the DBE was not providing a CUF,
corrective action would be necessary to meet contract requirements and maintain
federal funding. As our example
illustrates, agencies must regularly monitor contract activity,
follow up when questions arise, and certify in writing
that DBE firms are performing a commercially useful function.
The documents your agency gathers during your review
are used to support the required written certification
and any necessary compliance and enforcement actions.
You can find links to additional tips and checklists for evaluating a CUF on
the Federal-aid Essentials website.