For federal transportation contracts and for small business administration programs, it is beneficial to have your business certified as a Disadvantaged Business Enterprise, or DBE. The easiest way to gain DBE status is if the business is at least 51% owned by a member of one of the “official” minority groups – Asian American, Black, Hispanic, Native American or Hawaiian/Pacific Islander – as such businesses are considered presumptively disadvantaged as long as they do not exceed certain income thresholds.
But what if the government official suspects that the owner claiming minority status is not actually a member of the group to which he claims to belong? Almost everything I’ve read on the subject in the academic literature suggests that the government does not arbitrate disputes over racial identity and therefore must certify on the basis of self-identification.
This, however, is not true.
49 CFR Section 26.63—What Rules Govern Group Membership Determinations?(a)(1) If, after reviewing the signed notarized statement of allegedly disadvantaged group membership (see §26.61(c)), you have a well-founded reason to question the individual’s claim to membership in that group, you must require the person to show additional proof that they are a member of the class.(2) You must provide the person with a written explanation of why you have a question about their membership in a group and a written request for further evidence as set out in paragraph (b) of this section.(3) When In implementing this section, you must take particular care not to impose a disproportionate burden on members of a particular designated group. Imposing a disproportionate burden on members of a particular group could violate Section 26.7(b) and/or Title VI of the Civil Rights Act of 1964 and 49 CFR Part 21.(b) To make such a decision, you need to determine whether the person held themselves out as a member of the group for an extended period of time prior to applying for certification and whether the person is considered a member of the group by the relevant community. . You may require the applicant to produce appropriate documentation of group membership.
The SBA provides the following additional guidance: “Persons claiming disadvantaged status as [for example] Hispanic Americans can establish membership in this designated group by providing a birth certificate indicating their race, Hispanic-exclusive group membership cards, or other evidence.” Office of Business Development US Small Business Administration, Standard Operating Procedure for the Office of Business Development SOP 80 05 5 (2016), 81. If there are additional DOT guidance, I was unable to locate it.
What remains unclear, meanwhile, is whether (a) the decision maker should also consult the official federal definition of the group, under Statistical Directive No. 15, which is discussed in detail in this article And in my classified book; and (b) what if the individual meets the federal definition but does not generally present themselves as a member of the class (but will acknowledge their minority ancestry if asked) and/or is not considered by others as a member.
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