The U.S. Department of Transportation distributes some $4 billion a year in contracts reserved for minority-owned and other “disadvantaged” businesses, but conducts virtually no oversight and has no idea if the program is accomplishing any of its goals, a new inspector general’s report found.
Each state is required to run its own minority-contracting program to handle federal transportation money, but states often did not check to make sure owners of companies known as Disadvantaged Business Entities (DBEs) were not in fact wealthy or that they actually did the work rather than take a cut and pass it off to a white-owned firm
Despite the cost of the program, it is so lackadaisically administered that “officials for all 15 states we spoke to say that they have limited or no communication with DOT Headquarters about the DBE program,” and what communication they did have took place with a federal employee who took it upon himself to make DBE oversight an unofficial part of his job — and who has since retired, the report says.
While the federal government left it to the states to administer the program, states often also abandoned oversight. The District of Columbia did not have a single staffer monitoring compliance “until it hired a contractor in 2010. As a result, the agency did not perform compliance checks or monitoring,” the report says.
That allowed situations such as a company listing its vice president, a minority who owned only 5 percent of a company, as its president in order to qualify as disadvantaged. The District easily could have detected the misrepresentation by checking it against corporate databases, but it never did, the inspector general’s report says.
Companies are required to renew their certifications with the states each year to confirm that they still count as disadvantaged, but they often don’t bother. The report said 74 or 121 DBE firms’ certification files were missing some or all of these required annual affidavits.
As for what actually happens on job sites, such as whether any minority companies are actually doing the work, most states surveyed had no idea because they did not conduct site visits.
“In fiscal years 2010 and 2011 alone, [office of the inspector general] investigators uncovered a significant amount of DBE fraud, leading to over $88 million in recoveries, restitutions, and fines — along with 10 indictments and 8 criminal convictions,” the report says. But detected fraud is just the tip of the iceberg, because the federal government “does not track and, therefore, cannot account for its billions of dollars in annual DBE awards and payments.”
Bob Ashby, the retired DOT official cited in the report, defended the program but said the disconnect between the multitude of Washington offices in charge of the program and the variety of state offices carrying it out made accountability difficult. More funding is needed, he said.
“The most important thing that could be done is to have additional staff and resources at the state and local level so that you have not just civil rights people but the procurement department who are checking in the field,” he said.