DOT OIG Issues Report on Barriers Faced by DBEs and DBE Fraud Sentencing

On June 12, 2014 the Department of Transportation (DOT) Office of the Inspector General (OIG) issued a report, “New Disadvantaged Business Enterprise Firms Face Barriers To Obtaining Work At The Nation’s Largest Airports”. The report was done in compliance with the FAA Modernization and Reform Act of 2012, which directed the OIG “to report annually on new DBE participation at the Nation’s largest airports and to identify reasons why some airports have been more successful than others at hiring new DBEs.”

In brief, the report states:

  • For fiscal year 2012, 83 new DBE/ACDBE firms that were awarded contracts and leases at the Nation’s 64 largest airports were identified. However, the airports varied in the number of new DBE/ACDBE firms—with five airports accounting for nearly half of the new entrants. In addition, the 83 new firms represented only about 5 percent of the approximately 1,600 DBE/ACDBE firms doing business at the 64 airports.
  • Errors were found in over one-third of DBE/ACDBE reports that airports submit annually to FAA. These errors limit FAA’s ability to evaluate the effectiveness of the airports’ DBE/ACDBE programs.
  • Airports are taking steps to encourage awards to new DBE/ACDBE firms including: (1) unbundling major contracts and leases into smaller components, (2) entering into direct contracts or leases with DBE/ACDBE firms, (3) conducting outreach, and (4) providing financial assistance.
  • Despite these efforts, new DBE/ACDBEs face a number of major barriers to obtaining airport work, including: (1) limited opportunities for and infrequent turnover of disadvantaged firms, (2) access to capital and high entry costs, and (3) firms’ lack of experience with the airport bidding process.

There were three recommendations for FAA in the report:

  1. Require airports to annually report the number of new DBE/ACDBE participants as part of their existing data collection efforts.

  2. Ensure that the replacement system for DOORS provides improved data entry, processing, and validation capabilities.

  3. Provide airports with a list of best practices—including those identified in this report—for promoting the use of new DBE/ACDBE firms.

Gene Roth, FAA’s Regional DBE/ACDBE Program Compliance Team Specialist for the Southern Region, will be discussing this report, among other issue, during the ACI-NA Business Diversity Committee meeting on September 7 (3 PM to 5 PM) during the Annual Conference & Exhibition in Atlanta.

Sentence in Largest DBE Fraud Case Announced By FBI

On June 30, the U.S. District Attorney’s Office for the Middle District of Pennsylvania, announced the sentencing of individuals involved in the largest DBE fraud case in U.S. history. For more information, please see http://www.fbi.gov/philadelphia/press-releases/2014/former-president-and-owner-of-schuylkill-products-sentenced-in-largest-disadvantaged-business-enterprise-fraud-in-nations-history