ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASE
This matter comes before this tribunal pursuant to 25A S.C. Code Ann. Regs. 63-704(K)
(Supp. 2004) and S.C. Code Ann. 1-23-600(B) (Supp. 2004) upon the request of Petitioner
Wetherill Engineering, Inc. (Wetherill Engineering) for a contested case hearing to review the
decision of Respondent South Carolina Department of Transportation (Department or DOT) to
deny Petitioner’s application for certification as a Disadvantaged Business Enterprise (DBE).
The Department denied Petitioner’s application on the ground that Debora Wetherill, the
president and majority owner of Wetherill Engineering, and the qualifying socially and
economically disadvantaged individual for DBE purposes, cannot demonstrate operational
control over Wetherill Engineering. Specifically, the Department contends that Ms. Wetherill
fails to satisfy the DBE certification eligibility criteria for control of the firm because of her lack
of technical expertise in the firm’s engineering work. Petitioner contends, however, that Ms.
Wetherill does have sufficient expertise and competence to exercise genuine control over the
operations of Wetherill Engineering so as to meet the criteria for certification as a DBE.
After timely notice to the parties, a contested case hearing on the merits of this matter
was held on January 25, 2005, at the South Carolina Administrative Law Court in Columbia,
South Carolina. Based upon the evidence and arguments presented at that hearing, and upon the
applicable law, I find that Wetherill Engineering’s application for certification as a DBE should
be denied because the firm is not controlled by a qualifying socially and economically
disadvantaged individual.
FINDINGS OF FACT
Having carefully considered all testimony, exhibits, and arguments presented at the
hearing of this matter, and taking into account the credibility and accuracy of the evidence, I
make the following Findings of Fact by a preponderance of the evidence:
1.Wetherill Engineering, Inc., is a professional civil engineering firm based in
Raleigh, North Carolina, specializing in transportation planning, roadway and bridge design and
inspection, site design and layout, structural engineering, and geographic information systems.
The firm’s clients include municipal, county, state, and federal governmental entities, as well as
private industries, throughout the southeastern United States.
2.Wetherill Engineering was created in 1995 when Debora Wetherill, her husband,
Edward Wetherill, and Norman Willey purchased a dormant engineering firm, Engineering for
Industry, and merged it with the assets of Mr. Wetherill’s own engineering firm, Wetherill
Associates. At the time Wetherill Engineering was established, Ms. Wetherill owned 52% of the
firm, Mr. Willey owned 40% of the firm, and Mr. Wetherill owned the remaining 8% of the
firm. Two years later, Mr. Willey’s daughter, Cathy Willey, joined the firm and, in 2001, she
acquired half of Mr. Willey’s share of the firm, giving her 20% ownership of the firm and
creating the current ownership structure of the firm. At its inception, Wetherill Engineering
consisted only of Ms. Wetherill, who served as the firm’s president and was responsible for the
business operations of the firm, and Mr. Wetherill and Mr. Willey, who served as vice presidents
of the firm and were employed as the firm’s only engineers. These three individuals also
constituted the firm’s initial board of directors. Over the course of the past ten years, Wetherill
Engineering has expanded to a staff of twenty-five employees, including over a dozen
professional engineers, four apprentice engineers, and two construction inspectors. Throughout
that time, Ms. Wetherill and Mr. Wetherill have retained their respective titles as president and
vice-president of the firm and have kept their places on the firm’s board of directors. At times,
both Mr. Willey and Ms. Willey were vice-presidents of the firm and served on the firm’s board
of directors. However, both Mr. Willey and Ms. Willey were terminated from employment with
the firm and from involvement in the management of the firm in 2004, although they have
retained their ownership interests in the business. Currently, the board of directors of Wetherill
Engineering consists of Ms. Wetherill, Mr. Wetherill, and another of the firm’s engineers, Frank
Price.
3.Debora Wetherill is the primary business manager of Wetherill Engineering. She
owns a majority of the firm’s shares, sits on its board of directors, and serves as its president and
chief executive officer. In this capacity, Ms. Wetherill is generally responsible for all of the
business aspects of the firm’s operations, including: marketing the firm’s services; preparing and
submitting bids for engineering projects in consultation with the firm’s engineers; handling all of
the firm’s financial affairs (including payroll, taxes, insurance, and other accounting matters);
reviewing and executing the firm’s contracts and other business documents; preparing and
implementing office policies and procedures; managing the firm’s human resources (including
setting personnel policies and hiring and firing the firm’s employees); and generally overseeing
the progress of the firm’s projects, through monthly reports, weekly meetings, and daily
conversations about the projects.
However, Ms. Wetherill’s professional experience is limited to general business and
financial matters, and her role at Wetherill Engineering is accordingly limited to these
administrative, managerial responsibilities. See Resp’t Ex. #7, at 3 (listing, in a report of a site
visit conducted by North Carolina in 1995, Ms. Wetherill’s position and responsibilities in the
firm as “President, marketing, management & financial”). Ms. Wetherill does not have an
educational background in engineering or a related field and does not have any direct work
experience related to the technical aspects of engineering or related fields. Nor is Ms. Wetherill
licensed as a professional engineer. Rather, as described in her application for DBE
certification, Ms. Wetherill’s professional experience is in “marketing [and] business
admin[istration].”
Pet’r Ex. #1, at 3. And, her profile on the firm’s website describes her
responsibilities primarily as being involved in “all general business decisions and financial
activities regarding the firm” and serving as the firm’s “director of marketing” and “Director of
Personnel.” Resp’t Ex. #3, at 1. Accordingly, Ms. Wetherill cannot produce, approve, or
critically evaluate civil engineering plans, the principal product of Wetherill Engineering, and
thus she cannot independently and intelligently evaluate the technical merits of the engineering
work provided by her firm’s engineers. For example, she cannot recognize, evaluate, or solve
technical engineering problems that may be presented in the engineering work produced by her
firm. Further, because of this lack of technical expertise, Ms. Wetherill must rely heavily upon
the firm’s engineers in assessing the technical aspects of a proposed project when preparing a bid
for a project and in evaluating the technical merits of an engineer’s work when deciding whether
to hire or fire an engineer. And, she lacks the technical competence to question the opinions of
the engineers in such matters. Therefore, while Ms. Wetherill is clearly heavily involved in the
business management and financial operations of Wetherill Engineering, she does not have the
technical competence and experience directly related to civil engineering such that she can
intelligently and critically evaluate the information presented by the firm’s engineers and make
truly independent decisions regarding the firm’s engineering operations.
4.Wetherill Engineering is certified as a DBE by the North Carolina Department of
Transportation; the City of Raleigh, North Carolina; the City of Charlotte, North Carolina; the
Raleigh-Durham Airport Authority; the Triangle Transit Authority; and the Tennessee
Department of Transportation. Several of these certifications date back to 1995 and have been
renewed over the intervening ten years. However, the Virginia Department of Transportation
and the West Virginia Department of Transportation have denied DBE certification to Wetherill
Engineering, primarily because of Ms. Wetherill’s lack of technical engineering experience. See
Pet’r Ex. #1, at 4 (listing Wetherill’s “DBE Certifications Received and Denied”).
5.On December 8, 2003, Debora Wetherill submitted an application to the South
Carolina Department of Transportation for certification of Wetherill Engineering as a
Disadvantaged Business Enterprise (DBE). After reviewing the firm’s application, an on-site
evaluation conducted by the North Carolina Department of Transportation, and the firm’s
website, the Department denied Wetherill Engineering’s certification request by a letter dated
June 16, 2004. The Department denied DBE certification to Wetherill Engineering on the
ground that Ms. Wetherill, the qualifying socially and economically disadvantaged individual for
the firm, does not possess the requisite technical competence in civil engineering to have true
operational control over the firm. In denying the certification, the Department recognized that
Ms. Wetherill had significant administrative and managerial responsibilities with the firm and
could intelligently discuss the business of the firm, but found these general managerial and
business skills insufficient to demonstrate her genuine control over the technical operations of
the firm’s engineering practice, as required by the applicable state and federal regulations.
CONCLUSIONS OF LAW
Based upon the foregoing Findings of Fact, I conclude the following as a matter of law:
Jurisdiction and General Background
1.This tribunal has jurisdiction over this matter pursuant to 25A S.C. Code Ann.
Regs. 63-704(K) (Supp. 2004) and S.C. Code Ann. § 1-23-600(B) (Supp. 2004).
2.S.C. Code Ann. § 12-28-2930 (2000) establishes a program to set aside
expenditures of state highway funds for contracts with disadvantaged business enterprises
(DBEs). Under this program, the Department, in allocating state highway funds for road, bridge,
and building contracts, is required to “ensure that not less than . . . five percent are expended
through direct contracts with estimated values of two hundred fifty thousand dollars or less with
firms owned and controlled by disadvantaged females (WBEs).” S.C. Code Ann. § 12-23-2930(A)(1)(b) (2000).
In order to certify eligible firms under Section 12-28-2930(A), see S.C.
Code Ann. § 12-28-2930(B) (2000), and to comply with the federal disadvantaged business
enterprises program, the Department has promulgated regulations to implement the state and
federal DBE programs. See 25A S.C. Code Ann. Regs. 63-700 et seq. (Supp. 2004). Under
those regulations, applicants for DBE certification in South Carolina must comply with and
satisfy the DBE standards set forth in the federal regulations at 49 C.F.R. Part 26 (2004). See
25A S.C. Code Ann. Regs. 63-702(A) and 63-703(A) (Supp. 2004).
3.A “disadvantaged business enterprise” is defined by regulation as a “for-profit
small business concern–(1) [t]hat is at least 51 percent owned by one or more individuals who
are both socially and economically disadvantaged or, in the case of a corporation, in which 51
percent of the stock is owned by one or more such individuals; and (2) [w]hose management and
daily business operations are controlled by one or more of the socially and economically
disadvantaged individuals who own it.” 49 C.F.R. § 26.5 (2004).
Burden of Proof
4.In order to be certified as a DBE, an applicant has the burden of demonstrating,
by a preponderance of the evidence, that it meets the regulatory criteria for DBE status,
including the requirements regarding group membership or individual disadvantage, business
size, ownership, and control. 49 C.F.R. § 26.61(b) (2004); see also Leventis v. S.C. Dep’t of
Health & Envtl. Control, 340 S.C. 118, 132-33, 530 S.E.2d 643, 651 (Ct. App. 2000) (holding
that the burden of proof in administrative proceedings generally rests upon the party asserting
the affirmative of an issue); 73A C.J.S. Public Administrative Law and Procedure § 128, at 35
(1983) (“In administrative proceedings, the general rule is that an applicant for relief, benefits, or
a privilege has the burden of proof, and the burden of proof rests upon one who files a claim with
an administrative agency to establish that required conditions of eligibility have been met.”).
Therefore, Wetherill Engineering has the burden of establishing, by a preponderance of the
evidence, that it meets the regulatory criteria of 49 C.F.R. Part 26 such that it should be certified
as a DBE in South Carolina.
5.In the instant matter, Wetherill Engineering contends that it meets all of the
relevant DBE certification criteria. The Department does not contest that Ms. Wetherill, as a
woman, is a socially and economically disadvantaged individual pursuant to 49 C.F.R. §
26.67(a) (2004) (creating a presumption that women are socially and economically
disadvantaged individuals for DBE purposes), that Wetherill Engineering qualifies as a small
business pursuant to 49 C.F.R. § 26.65 (2004), or that Ms. Wetherill is the majority owner of
Wetherill Engineering as defined in 49 C.F.R. § 26.69 (2004). Rather, the Department contends
that Ms. Wetherill, the qualifying disadvantaged individual, does not sufficiently control
Wetherill Engineering, as required under 49 C.F.R. § 26.71 (2004), so as to be eligible for DBE
certification.
Control
6.49 C.F.R. § 26.71 (2004) lays out the rules governing the determination of
whether socially and economically disadvantaged owners control a firm seeking DBE
certification. In order to be considered in control of a firm, the disadvantaged owners “must
possess the power to direct or cause the direction of the management and policies of the firm and
to make day-to-day as well as long-term decisions on matters of management, policy, and
operations.” Id. § 26.71(d). Consequently, a disadvantaged owner “must hold the highest
officer position in the company” and “must control the board of directors,” if the firm is a
corporation. Id. § 26.71(d)(1), (2). Beyond these incidents of formal control over the firm, the
regulations require that “[t]he 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.” Id. §
26.71(g) (emphasis added). While these 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.” Id.
(emphasis added). Consequently, experience and expertise “limited to office management,
administration, or bookkeeping functions unrelated to the principal business activities of the firm
is insufficient to demonstrate control.” Id.
7.Further, where the field involved is subject to professional licensure or
certification by state or local authorities, a business may not be denied certification as a DBE
solely because the its qualifying socially and economically disadvantaged owner does not have
such licensure or certification, unless state or local law affirmatively requires such licensure or
certification in order to own or control the business in question. Id. § 26.71(h). However, the
absence of such a license or credential may be considered as “one factor in determining whether
the socially and economically disadvantaged owners actually control the firm.” Id.
8.Therefore, in technical fields, and particularly technical fields subject to
professional licensure requirements, the lack of technical expertise and professional licensure on
the part of a socially and economically disadvantaged business owner may preclude that owner
from exercising true control over the firm’s operations, as defined in 49 C.F.R. § 26.71, so as to
satisfy the DBE certification requirements. As a number of courts have recognized, the
requirement that an owner of a firm seeking DBE certification have technical competence in the
field in which his business operates is “reasonable and reflects a common sense approach to the
control and management of firms operating in technical fields. . . . [;] [it] reflects the realistic
assessment that, in a technical field, a qualified manager will necessarily possess certain
specialized knowledge of the field.” Lane & Clark Mech. Contractors, Inc. v. Burnley, No. 88-4524, 1990 WL 50509, at *6 (E.D. Pa. Apr. 19, 1990); see also Car-Mar Constr. Corp. v.
Skinner, 777 F. Supp. 50, 54 (D.D.C. 1991) (holding that it is reasonable “for an owner who
would like to benefit from [DBE] status to be required to know about the technical nature of [the
field in question], or at the least, to be able to question the results reached by experts”); Air
Design Sys., Inc. v. Card, No. 92-C-4061, 1992 WL 373142, at *4 (N.D. Ill. Dec. 10, 1992)
(noting that case law “unanimously hold[s] that it is reasonable to interpret the [DBE]
regulations to require that the minority owner possess technical expertise in the core area of the
business seeking certification”).
And, based upon this requirement of technical competence,
courts have routinely held that, in technical fields, it is proper to deny DBE certification to a firm
when the socially and economically disadvantaged owner does not possess the technical
experience and expertise necessary to control the firm’s core, technical operations, but rather
only manages the business and administrative aspects of the firm’s activities and defers to non-disadvantaged individuals for the technical work. See, e.g., Air Design Sys., 1992 WL 373142,
at *4-5 (sheet-metal fabricating and heating, ventilation, and air conditioning (HVAC) business);
Car-Mar Constr., 777 F. Supp. at 54-56 (structural steel erection and general construction); Lane
& Clark Mech. Contractors, 1990 WL 50509, at *5-7 (HVAC business); Whitworth-Borta, Inc.
v. Burnley, No. G87-176 CAS, 1988 WL 242625, at *2-4 (W.D. Mich. June 28, 1988)
(engineering consulting firm); cf. Shearin Constr., Inc. v. Mineta, 232 F. Supp. 2d 608, 613-15
(E.D. Va. 2002) (finding that, “although the question is a close one,” a disadvantaged individual
did possess the technical competence to exercise operational control over an excavation business
where the individual had completed a six-month apprenticeship in the excavation business and
had secured a Class A contractor’s license for the business).
9.In the instant case, Ms. Wetherill does not possess the requisite technical
competence and experience necessary to exercise genuine control over Wetherill Engineering.
As noted above, Ms. Wetherill is extensively involved in the business, financial, and
administrative aspects of Wetherill Engineering’s operations, and has the ability to competently
manage such purely administrative affairs. And, she may have acquired enough familiarity with
the field of engineering to be able to discuss certain basic engineering matters with the firm’s
engineers. Nevertheless, Ms. Wetherill has no technical experience or expertise in the field of
civil engineering, or any related technical field, and, consequently, she cannot intelligently and
critically evaluate the engineering work produced, and technical decisions made, by the firm’s
engineers. She simply lacks the technical background necessary for her to make independent
evaluations of the engineering work produced by her firm, and thus make independent decisions
regarding the core of Wetherill Engineering’s business. Therefore, because Ms. Wetherill does
not have technical experience and expertise in civil engineering or related disciplines, this
tribunal cannot find that she controls the highly technical engineering operations of Wetherill
Engineering pursuant to 49 C.F.R. § 26.71.
10.Because the socially and economically disadvantaged owner of Wetherill
Engineering does not control its core operations, the Department’s decision to deny DBE
certification to Wetherill Engineering must be sustained.
ORDER
Based upon the Findings of Fact and Conclusions of Law stated above,
IT IS HEREBY ORDERED that the Department’s decision to deny the application of
Petitioner Wetherill Engineering, Inc., for certification as a Disadvantaged Business Enterprise
pursuant to S.C. Code Ann. § 12-23-2930 (2000) and 25A S.C. Code Ann Regs. 63-700 et seq.
(Supp. 2004) is SUSTAINED.
AND IT IS SO ORDERED.
______________________________
JOHN D. GEATHERS
Administrative Law Judge
Post Office Box 11667
Columbia, South Carolina 29211-1667
March 17, 2005
Columbia, South Carolina |
