If your company is applying for Disadvantaged Business Enterprise (DBE) through your state’s Department of Transportation (or local agency administering the state’s certification program), the socially and economically disadvantaged (“SED”) owner must have experience in and be able to understand the technical side of the business.

I often see managerial and technical experience and competence become an issue during certification in situations such as:

• SED individual takes over a family business.
• SEC owner does all the office and administrative work, relying on others to run technical side of the business.
• An SED individual purchases an existing business in which they have no prior experience.

The rules governing DBE certification include requirements that the SED must be able to show this technical knowledge and experience in order to become certified, as it demonstrates control.  49 C.F.R. § 29.71(g) provides:

The socially and economically disadvantaged owners must have an overall understanding of, and managerial and technical competence and experience directly related to, the type of business in which the firm is engaged and the firm’s operations. The socially and economically disadvantaged owners are not required to have experience or expertise in every critical area of the firm’s operations, or to have greater experience or expertise in a given field than managers or key employees. The socially and economically disadvantaged owners must have the ability to intelligently and critically evaluate information presented by other participants in the firm’s activities and to use this information to make independent decisions concerning the firm’s daily operations, management, and policymaking. Generally, expertise limited to office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm is insufficient to demonstrate control.

To break that down, here are a few items to note:

• The SED does not have to have experience/expertise in every area of the business.
• The SEC does not need to have more experience/expertise in the field of the business than managers or key employees.
• The SEC needs to have enough knowledge to properly evaluate information presented by others in the company and make independent decisions about matters facing the company.
• Working in the office on administrative tasks is not enough.

The SED owner should have experience in the activities of the business prior to applying, and the company’s application materials should reflect that experience.  If the SED owner does not have that experience or expertise, they should wait until they have acquired that knowledge to apply for DBE certification.