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DBE Final Rule
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APPENDIX E to Part 26--Individual Determinations of Social and Economic Disadvantage
The following guidance is adapted, with minor modifications,
from SBA regulations concerning social and economic disadvantage
determinations (see 13 CFR 124.103(c) and 124.104).
Social Disadvantage
I. Socially disadvantaged individuals are those who have been
subjected to racial or ethnic prejudice or cultural bias within
American society because of their identities as members of groups
and without regard to their individual qualities. Social
disadvantage must stem from circumstances beyond their control.
Evidence of individual social disadvantage must include the
following elements:
(A) At least one objective distinguishing feature that has
contributed to social disadvantage, such as race, ethnic origin,
gender, disability, long-term residence in an environment isolated
from the mainstream of American society, or other similar causes not
common to individuals who are not socially disadvantaged;
(B) Personal experiences of substantial and chronic social
disadvantage in American society, not in other countries; and
(C) Negative impact on entry into or advancement in the business
world because of the disadvantage. Recipients will consider any
relevant evidence in assessing this element. In every case, however,
recipients will consider education, employment and business history,
where applicable, to see if the totality of circumstances shows
disadvantage in entering into or advancing in the business world.
(1) Education. Recipients will consider such factors as denial
of equal access to institutions of higher education and vocational
training, exclusion from social and professional association with
students or teachers, denial of educational honors rightfully
earned, and social patterns or pressures which discouraged the
individual from pursuing a professional or business education.
(2) Employment. Recipients will consider such factors as unequal
treatment in hiring, promotions and other aspects of professional
advancement, pay and fringe benefits, and other terms and conditions
of employment; retaliatory or discriminatory behavior by an employer
or labor union; and social patterns or pressures which have
channeled the individual into non-professional or non-business
fields.
(3) Business history. The recipient will consider such factors
as unequal access to credit or capital, acquisition of credit or
capital under commercially unfavorable circumstances, unequal
treatment in opportunities for government contracts or other work,
unequal treatment by potential customers and business associates,
and exclusion from business or professional organizations.
II. With respect to paragraph I.(A) of this appendix, the
Department notes that people with disabilities have
disproportionately low incomes and high rates of unemployment. Many
physical and attitudinal barriers remain to their full participation
in education, employment, and business opportunities available to
the general public. The Americans with Disabilities Act (ADA) was
passed in recognition of the discrimination faced by people with
disabilities. It is plausible that many individuals with
disabilities--especially persons with severe disabilities (e.g.,
significant mobility, vision, or hearing impairments)--may be
socially and economically disadvantaged.
III. Under the laws concerning social and economic disadvantage,
people with disabilities are not a group presumed to be
disadvantaged. Nevertheless, recipients should look carefully at
individual showings of disadvantage by individuals with
disabilities, making a case-by-case judgment about whether such an
individual meets the criteria of this appendix. As public entities
subject to Title II of the ADA, recipients must also ensure their
DBE programs are accessible to individuals with disabilities. For
example, physical barriers or the lack of application and
information materials in accessible formats cannot be permitted to
thwart the access of potential applicants to the certification
process or other services made available to DBEs and applicants.
Economic Disadvantage
(A) General. Economically disadvantaged individuals are socially
disadvantaged individuals whose ability to compete in the free
enterprise system has been impaired due to diminished capital and
credit opportunities as compared to others in the same or similar
line of business who are not socially disadvantaged.
(B) Submission of narrative and financial information.
(1) Each individual claiming economic disadvantage must describe
the conditions which are the basis for the claim in a narrative
statement, and must submit personal financial information.
(2) When married, an individual claiming economic disadvantage
also must submit separate financial information for his or her
spouse, unless the individual and the spouse are legally separated.
(C) Factors to be considered. In considering diminished capital
and credit opportunities, recipients will examine factors relating
to the personal financial condition of any individual claiming
disadvantaged status, including personal income for the past two
years (including bonuses and the value of company stock given in
lieu of cash), personal net worth, and the fair market value of all
assets, whether encumbered or not. Recipients will also consider the
financial condition of the applicant compared to the financial
profiles of small businesses in the same primary industry
classification, or, if not available, in similar lines of business,
which are not owned and controlled by socially and economically
disadvantaged individuals in evaluating the individual's access to
credit and capital. The financial profiles that recipients will
compare include total assets, net sales, pre-tax profit, sales/
working capital ratio, and net worth.
(D) Transfers within two years.
(1) Except as set forth in paragraph (D)(2) of this appendix,
recipients will attribute to an individual claiming disadvantaged
status any assets which that individual has transferred to an
immediate family member, or to a trust, a beneficiary of which is an
immediate family member, for less than fair market value, within two
years prior to a concern's application for participation in the DBE
program, unless the individual claiming disadvantaged status can
demonstrate that the transfer is to or on behalf of an immediate
family member for that individual's education, medical expenses, or
some other form of essential support.
(2) Recipients will not attribute to an individual claiming
disadvantaged status any assets transferred by that individual to an
immediate family member that are consistent with the customary
recognition of special occasions, such as birthdays, graduations,
anniversaries, and retirements.
(3) In determining an individual's access to capital and credit,
recipients may consider any assets that the individual transferred
within such two-year period described by paragraph (D)(1) of this
appendix that are not considered in evaluating the individual's
assets and net worth (e.g., transfers to charities).
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