Becoming a woman-owned business enterprise (WBE), minority-owned business enterprise (MBE), or other type of disadvantaged business enterprise (collectively, DBE) is a very attractive option for some businesses, particularly companies in the construction industry that want to obtain government contracts. Construction projects receiving Federal, state, or sometimes city funding have DBE participation goals, and general contractors use qualified DBEs on bids to meet those goals. As a result, DBEs can sometimes successfully bid jobs for a higher price than their non-DBE competitors.
A business may qualify as a DBE by meeting some fairly stringent criteria. The business must be at least 51% owned by the disadvantaged owner. The disadvantaged owner must also control the business, meaning that the owner must make strategic business decisions and be adept at the tasks that are at the heart of the business. If, for example, the business HVAC installation, the disadvantaged owner should at a minimum be able to read a set of plans and direct their employees’ work, if not to actually do the work themselves. Tasks like bookkeeping, human resources, or administration alone are generally insufficient to establish the disadvantaged owner’s control of the business.
Becoming a DBE isn’t as easy as simply filling out a form. The process for certifying can be time-consuming and demanding, and requires the applicant to submit a lot of paperwork relating to its ownership, finances, and business organization. Some of the information doesn’t appear relevant, such as an explanation of other family members in the business, an analysis of how the business received startup funding, or a statement of the disadvantaged owner’s personal assets. But failing to provide all information can result in the application being denied. Once an application is denied, it’s very difficult to overcome the presumption that the company was never qualified to become a DBE at all. A lawyer’s help in preparing and analyzing the application can maximize the company’s chances of success.
If you have any questions about DBE certification, feel free to reach out to us. It’s our goal to help your business bloom.