What do you need to know about getting your M/WBE or DBE certification?

LDA Compliance CMC Network

Having personally been through the process of WBE certification and recertification for a number of different states, agencies and authorities, here’s what I have learned that can help put your business in the best position to get certified and to make the process less painful. 

 

Generally, most certifications have specific criteria that the qualifying individual or group of individuals need to meet in order to get certified. 

 

Typically, a M/WBE or DBE firm is a for-profit small business concern, owned at least 51% by individuals defined as socially or economically disadvantaged or belonging to an ethnicity that has been denied opportunities because of past discrimination. 

 

The government has made it a social policy goal to apply race-neutral or race-conscious goals to public contracts to try to achieve equity in the marketplace. 

 

The criteria for certification may have certain size standards — usually measured by gross revenues or number of employees — and personal net worth limitations, which may exclude certain assets like the present value of retirement assets, primary residence or the value of the firm. 

 

Different programs have different criteria and you may meet the qualifications for one program, but not others. 

 

For example, the DBE program has a personal net worth cap of $1.32 million, while the New York State personal net worth cap is $15 million. 

 

Each program permits the owner to exclude certain prescribed assets as part of the owner’s personal net worth.

 

Certification is usually assigned to a specific governmental group. In NY State, the Division of Minority and Women’s Business Development does the certification. 

 

It is charged with certifying firms, preparing a directory of certified M/WBE firms, and promulgating rules and regulations specifying criteria for approval, denial and revocation of certification. 

 

To apply for MWBE certification with New York State visit the state’s contract system website.

 

The Disadvantaged Business Enterprise (DBE) certification program is a federal program, which applies to U.S. Department of Transportation projects.  

 

The DBE program certification is separate from the state’s M/WBE certification. 

 

Under the DBE Program, there are multiple certifying agencies: 

 

  • – Port Authority of New York and New Jersey
  • – New York State Department of Transportation
  • – Niagara Frontier Transportation Authority
  • – Metropolitan Transportation Authority 

 

The directory of DBE firms is found in a single unified directory

 

The Port Authority of New York and New Jersey — because of its unique status as a bi-state authority — has its own rules and certification programs for M/WBE, DBE, ACDBE, SDVOB and SBE businesses. 

 

So, you may ask, is it enough if I certify with one of these agencies? The answer is No

 

Certification for one of these agencies does not entitle you to be certified with all. Each is a separate application and process, although certifying with one may get you “fast-tracked” with another agency.

 

 

M/WBE criteria for NY state 

 

  • – At least 51% owned and controlled by the minority members and/or women
  • – The minority and/or women ownership interest, is real, substantial and continuing
  • – The minority and/or women ownership has and exercises the authority to independently control the day-to-day business decisions
  • – Independently owned, operated and authorized to do business in the state
  • – Eligible businesses must be owned and operated by women and/or minority group members who are U.S. citizens or permanent residents 
  • – Generally, they must be in operation for at least one year

 

According to the certification requirements, a citizen or permanent resident who has and can demonstrate membership in one of the following groups: 

 

  • – Black persons having origins in any of the Black African racial groups 
  • – Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban, Central or South American 
  • – Descent of either Indian (from the subcontinent) or Hispanic origin, regardless of race 
  • – Native American or Alaskan native persons having origins in any of the original peoples of North America
  • – Asian and Pacific Islander persons having origins in any of the Far East countries, South East Asia, the Indian subcontinent or the Pacific Islands
  • – Women

 

DBE Program Criteria for Certification

 

DBEs are for-profit small business concerns where socially and economically disadvantaged individuals own at least a 51% interest, and also control management and daily business operations. 

 

To be regarded as economically disadvantaged, an individual must have a personal net worth that does not exceed $1.32 million. 

 

To be seen as a small business, a firm must meet Small Business Administration size criteria and have average annual gross receipts not exceeding $26.9 million. (The $23.98 million figure from the DBE regulations was adjusted upward for inflation.) 

 

Size limits for the airport concessions DBE program are higher. 

 

Under the current DBE regulations, African Americans, Hispanics, Native Americans, Asian-Pacific and subcontinent Asian Americans, and women are presumed to be socially and economically disadvantaged. 

 

Other individuals can also qualify as socially and economically disadvantaged on a case-by-case basis. 

 

As you can see, the criteria for New York state’s M/WBE program, and the DBE program are slightly different. 

 

However, like many programs, the agency looks to determine if the provided documentation supports the following requirements that the 51% owner (henceforth known as majority owner) must have: 

  • – Real, substantial and continuing interest in the business
  • – Has and exercises the authority to independently control the day-to-day business decisions
  • – Control on management and daily business operations

 

Required Documentation Must Align with the Ownership and Control

 

When a firm applies for certification, the certifying agency will review all of the documentation and paperwork to determine if the firm meets the program criteria. 

 

The documentation you submit will be scrutinized for compliance with the control, ownership and expertise requirements. 

 

In addition to belonging to the specified group, the majority owner must be actually responsible for and control the management and daily business operations of the M/WBE or DBE firm.  

 

The ownership and control must extend to the core functions of the business. In construction, these core functions relate to the estimating, bid preparation and supervision of field operations. 

 

The owner must be able to make decisions independently and without restrictions. The contributions of money, property or expertise also has to have been real and documented.

 

The application will require the majority owner to swear to the truth about who makes decisions in the organization; who bears responsibility for bidding, contracting, banking transactions; and other indicia of control and ownership. 

 

 

Required documents include: 

 

  • – Proof of citizenship and residency
  • – Corporate documentation
    • – Articles of incorporation 
    • – By-laws 
    • – Stock certificate and transfer ledgers 
    • – Meeting minutes 
    • – Resume of the majority owner, 
    • – Tax returns (of the majority owner and the business)
    • – Proof of capitalization 
    • – Banking records and authorized signatories 
    • – Leases 

 

Before sitting down to complete the application, gather all the necessary documentation and organize it into separate electronic folders. 

 

Suggested folders for a corporation (make subfolders for the information by year):

 

  • – Applications (save PDF copies of the final submissions)
  • – Balance sheets 
  • – Banking signature 
  • – History of the business 
  • – Corporate documents (also include the Secretary of State filing, IRS EIN and a list of the board of directors) 
  • – Company license 
  • – “No Document” statements 
  • – Personal Net Worth affidavits; 
  • – Proof of capitalization 
  • – Proof of Citizenship and gender (of the majority owner)
  • – Resume of the majority owner 
  • – Schedule of salaries
  • – Lease
  • – Company tax Returns

 

The paperwork requirements can be daunting. 

 

If you are going to seek certification, you should not dismiss some of the required documentation as it is going to be evaluated to determine independence, ownership and control. 

 

Below are some areas that require special attention.

 

Resume of the majority owner

 

Make certain that your resume truly reflects your experience and expertise, particularly as it relates to the significant operations of the business. 

 

Don’t limit your control of the day-to-day to the financial and administrative office functions. 

 

You must be able to show knowledge/experience in the nature of the business and capability in the business’ core functions. 

 

List all academic achievements, technical certificates or training that you have undertaken that relates to the business operations. 

 

Remember: You must be able to show you can independently make decisions related to the business.

 

By-laws or operating agreements

 

Corporate documents must permit the majority owner to make business decisions without restrictions. Ensure you have the ability to control the decisions related to the hiring and firing of managers. 

 

Business description and commodity codes

 

Take time to fashion your business description to describe the work you do — all of it. 

 

Look for commodity codes that reflect all aspects of your work. Agencies will use the commodity codes to search for firms to invite to bid. 

 

Primes will use the codes to evaluate whether you can perform commercially useful functions under the code. 

 

MWDBE utilization credit can only be claimed if the certified MWDBE firm has the applicable commodity code. 

 

Proof of work

 

Submit proof that matches and supports your commodity codes. 

 

You will only receive a commodity code if the certifying agency is presented with experience in the area. Commodity codes are not aspirational.

 

Capitalization 

 

Contributions of money, property, equipment and expertise have to be greater than the minority owners, and in proportion to the percentage of equity owned. Loans are not capital contributions. 

 

Books and banking records must show contributions of capital to the business out of assets belonging to the majority owner. 

 

Always ensure that the contact information in the certification directory is up to date and current. Most companies use email and telephone to contact potential firms for opportunities.

 

Tips to Make the Certification Process Renewal Less Painful 

 

  1. Keep an electronic master file of all documents. 
    • – Easy to find and upload
    • – Consistency between all of your applications
    • – Can update as you go
  2. Keep a spreadsheet of all your certifications that includes the certifying agency, the date of certification, the certificate and the expiration date.

 

These programs provide tremendous opportunities to increase the capacity of your business. Make sure you can be in it to win it! 

 

Note: The preferred term for ethnic/racial minority groups is “people of color.” We use the term “minority” in our content because it is the officially used word within the industry. 

 

If you would like more information about the information here, please reach out to Lorraine D’Angelo, LDA Compliance Consulting, Inc. at lorraine@ldacomplianceconsulting.com.

Author

  • The pace of business is changing. Competition is growing. Regulatory change, globalization, shrinking markets, social media, technological advances, business data, government and public expectations and demands, all contribute to your regulatory risk and take you away from doing what you love: building. Your business suffers when aspects of risk are left to chance. Being proactive in your risk management strategy can be a value added and differentiate you and your business from the rest of the pack. Integrated and sustainable compliance risk management can improve your bottom line.

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