Meeting Contract Requirements - Guide to Successfully Completing ADOT Projects

Supplier

DBE Supplier Requirements 

It is important for DBE suppliers to understand DBE program requirements. The sections below discuss DBEs in the context of meeting contract requirements as a DBE supplier. For a fuller picture of how contract requirements work with DBEs, see the prime contractor section on Requirements for Contracts with DBE Goals.

DBE Goals

DBE goals require that that a predetermined percentage of the total cost of a project must be paid to DBEs for eligible work performing commercially useful functions. Proper work and payment records from subcontractors and suppliers are therefore necessary in order for the Prime Contractor to prove that goals were met. 

Commercially Useful Function

It is important to note that DBE involvement only satisfies DBE goals if the DBE serves a commercially useful function. Generally, this means that the DBE must perform the whole of a task itself and the task must be necessary for the completion of the project. The specific rules vary by the task being performed, however. 

As a DBE, you will not be considered to perform a commercially useful function if you act only as an extra participant in a transaction or project to provide the appearance of DBE participation. If you do not perform or exercise responsibility for at least 30 percent of the total cost of your contract with your own work force, or if you subcontract a greater portion of the work of a contract than would be expected on the basis of normal industry practice for the type of work involved, ADOT will presume that you are not performing a commercially useful function.

If you are presumed not to be performing a commercially useful function as provided above, you may present evidence to rebut this presumption. Decisions on commercially useful function matters are subject to review by FHWA, but are not administratively appealable to U.S. DOT.

ADOT BECO staff and/or Construction Inspectors will visit construction work sites to conduct Commercially Useful Function reviews to ensure that this requirement is being met.  Contractors and DBE firms must cooperate and participate in interviews by ADOT staff that will make every effort not to disrupt workflow on the project.  

Information on questions asked in the interview is available from BECO.  

See this video from the FHWA for more information on what qualifies as a Commercially Useful Function. 

For more information on good faith efforts, as well as information on what sort of work satisfies the commercially useful function requirement of DBE goals, read the Commercially Useful Function Checklist on the ADOT website. 

DBE Goal Credit

In some cases, not all of the money paid to a DBE can count toward the DBE goal.

For suppliers, 100 percent of the cost of materials and supplies is credited toward the DBE goal if they are obtained from a DBE manufacturer. However, if the materials are purchased from a DBE regular dealer (essentially a firm which regularly buys, stores, and sells supplies but does not manufacture them), only 60 percent of the cost of materials and supplies is credited. The cost of materials purchased from a DBE that is neither a manufacturer nor a regular dealer does not count toward the DBE goal, although the fees and commissions charged by the DBE to procure and supply those materials do count.

Whether your company is considered a manufacturer, regular dealer, or something else is decided by ADOT on a contract-by-contract basis, and designation may change from one contract to another.

DBE credit for supplying paving grade asphalt and other asphalt products is permitted for standard industry hauling costs, and only if the DBE is owner or lessee of the equipment and trucks. Leases for trucks must be long term (extending for a fixed time period and not related to the time necessary for performance of the contract) and must include all attendant responsibilities such as insurance, titling, hazardous waste requirements, and payment of drivers.

If, as a DBE supplier, your certification as a DBE changes (either you become certified or are decertified) during the term of a contract, you must immediately notify the contractor you are working with in writing, including the date of the change.

If you are decertified as a DBE during the term of an executed contract, your work may still be considered in assessing DBE goal credit. However, if you are decertified before the contract is executed, your contribution cannot be counted toward DBE goal credit.

Certification of Payment to DBE Suppliers

By law, contractors are required to pay any subcontractors and suppliers within 7 days of receiving payment themselves. ADOT monitors prompt payment.  It is important for subcontractors and suppliers to report to ADOT in the DBE System and to the Resident Engineer or Field Office if they have not been paid promptly.  This reporting must be done in a timely manner so that prompt action can be taken.

ADOT pays contractors based on quantities determined by ADOT Inspectors for work completed during a specific time period. There are certain monthly cutoff dates for contractor’s work to be evaluated so that payment for work can be issued by ADOT each month.  See Contractor Cycle Dates section of the ADOT website for a list of cutoff dates for the current year.

BECO has provided a video to guide you through this process.

Once a project is complete and all payments have been made and confirmed, each utilized DBE subcontractor and supplier must sign a certification payment form for the prime contractor to submit to ADOT. This form certifies that all payments have been made to the DBE subcontractor. The Certification of Payments form can be found in the BECO section of the ADOT Website. 

Joint Checks

Joint check agreements are arrangements where the prime contractor agrees to pay both the subcontractor and the supplier at the same time. This differs from the standard arrangement where the prime contractor pays the subcontractor, and then the subcontractor pays the supplier. They are most often requested by suppliers as a way to ensure payment.

Join check agreements are subject to a number of rules, and are only allowed for DBE subcontractors if the following conditions are met:

  • The DBE subcontractor must be independent from the prime contractor and the supplier, and must perform a commercially useful function.  The DBE subcontractor must be responsible for negotiating the price of the material, determining quality and quantity, ordering the materials, installing (where applicable), and paying for the material.  The DBE subcontractor may not be utilized as an extra participant in a transaction, contract, or project in order to obtain the appearance of DBE participation.
  • The use of joint checks will be allowed only if the prime contractor, DBE subcontractor, and material supplier establish that the use of joint checks in similar transactions is a commonly recognized business practice in the industry, particularly with respect to similar transactions in which DBE’s do not participate.
  • A material or supply contract may not bear an excessive ratio relative to the DBE subcontractor’s normal capacity.
  • There may not be any exclusive arrangement between one prime and one DBE in the use of joint checks that may bring into question whether the DBE is independent of the prime contractor.
  • Any arrangement for joint checks must be in writing, and for a specific term (for example, one year, or a specified number of months) that does not exceed a reasonable time to establish a suitable credit line with the supplier.
  • The prime contractor may act solely as the payer of the joint check, and may not have responsibility for establishing the terms of the agreement between the DBE subcontractor and the supplier.
  • The DBE must be responsible for receiving the check from the prime contractor and delivering the check to the supplier.
  • The prime contractor cannot require the DBE subcontractor to use a specific supplier, and the prime contractor may not participate in the negotiation of unit prices between the DBE subcontractor and the supplier.

Provided these conditions are met, the prime contractor must submit a Joint Check Agreement Request form to BECO for approval. The prime contractor, subcontractor, and supplier must all sign the Joint Check Agreement Request form, which can be found in the BECO section of the ADOT website. 

Once BECO has approved a joint check agreement, all parties must retain documentation of the agreement and all payments made, and copies of canceled checks must be submitted by email to BECO so they can monitor the agreement. Failing to comply with BECO requirements and monitoring is considered a breach of contract.

Substitution/Termination of DBE

Any attempt to substitute one DBE for another or to terminate any DBE subcontractor must be approved by BECO, and the reasons for doing so must be explained. If the change would reduce DBE participation below the DBE goal, the change must be justified. Good cause for substitution or termination generally includes situations where the listed DBE

  • fails or refuses to execute a written contract.
  • fails or refuses to perform the work of its subcontract in a way consistent with normal industry practice standards.
  • fails or refuses to meet the prime contractor’s reasonable, nondiscriminatory bond/insurance requirements.
  • becomes bankrupt, insolvent, or exhibits credit unworthiness.
  • is ineligible to work on public works projects because of suspension and debarment proceedings pursuant to federal or state law.
  • is not a responsible contractor.
  • voluntarily withdraws from the project and provides written notice of its withdrawal to the Department.
  • is ineligible to receive DBE credit for the type of work required.
  • a DBE owner dies or becomes disabled with the result that the firm is unable to complete its work on the contract.
  • other documented good cause that the Department determines compels the termination or substitution of the DBE subcontractor.
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Pursuant to Title VI of the Civil Rights Act of 1964, and the Americans with Disabilities Act (ADA), ADOT does not discriminate on the basis of race, color, national origin, age, sex or disability. Persons that require a reasonable accommodation based on language or disability should contact ADOT’s Civil Rights Office at civilrightsoffice@azdot.gov. Requests should be made as early as possible to ensure the State has an opportunity to address the accommodation.

De acuerdo con el título VI de la Ley de Derechos Civiles de 1964 y la Ley de Estadounidenses con Discapacidades (ADA por sus siglas en inglés), el Departamento de Transporte de Arizona (ADOT por sus siglas en inglés) no discrimina por raza, color, nacionalidad, edad, género o discapacidad.  Personas que requieren asistencia (dentro de lo razonable) ya sea por el idioma o por discapacidad deben ponerse en contacto con la Oficina de Derechos Civiles en civilrightsoffice@azdot.gov. Las solicitudes deben hacerse lo más pronto posible para asegurar que el equipo encargado del proyecto tenga la oportunidad de hacer los arreglos necesarios.