One of the things I’m always telling my clients is that there are some things you do that make business sense and there are other things you do to get DBE certified – and they are not necessarily the same!
The DBE program has some very specific, and often, peculiar rules that sometimes make no business sense at all. If you don’t know those rules, it can trip you up and cause you to be denied DBE certification. The following are some real life examples we’ve dealt with:
A client once came to me after she had been denied DBE certification because the certifying agency claimed that she did not control her business. The basis of that decision? My client’s father had lent her $50,000.00 just before she applied for certification. When I spoke to her father, he explained that he was in business for many years and he thought there was no way his daughter could be DBE certified without showing that she had the funds to actually carry out the work she was proposing to do. Of course, there is no requirement in the DBE program that you show adequate capitalization. In the end, we counseled the client not to appeal the denial and simply wait a year to reapply. We also counseled her to repay the loan as soon as possible.
A client was denied because the certifying agency thought her husband who was not an owner or employee of the business had too much control. The reason? My client had made her husband a signatory on the firm’s bank accounts so that in case of emergency her husband could sign checks on her behalf. Even though the husband was employed in a completely different line of business and had no other involvement in his wife’s business, the certifying agency ultimately decided the husband had too much control.
My client ran a company that had multiple offices in multiple states. He travelled back and forth between the various offices. However, the day to day management of each office was handled by area managers. He had obtained DBE certification in multiple states with no problem. When he applied to a state (State B) he was informed that his DBE certification was denied. That state decided that because he did not reside in the state and did not handle the day to day activities of the local office himself, he could not be DBE certified. Luckily for my client, State B didn’t follow the rules for Interstate Certification. We were able to get State B to reverse the denial. Once the denial was reversed my client withdrew his application because he did not want to risk losing his other DBE certifications.
Our client’s annual No Change Affidavit was due right after the tax filing due date. However, he normally filed his taxes late. This was not a problem until the certifying agency decided that he had exceeded the Personal Net Worth limit of the DBE program. Although it made business sense for him to file his taxes late, in order to remain in the DBE program he was forced to file his taxes in order to show that he continued to be below the PNW threshold.
In all of these scenarios the client had to balance between what made business sense and what made sense under the DBE program. Ultimately, in order to remain in the program they had to do what made sense under the DBE program. As a DBE certified firm you will be presented with opportunities and scenarios that make perfect business sense but could jeopardize your DBE certification.
We have considerable experience counseling and assisting DBE certified firms. If you need any advice on anything involving your DBE certification gives a call or email me today.