ORDERS:
ORDER OF REMAND
STATEMENT OF THE CASE
This matter comes before this Court 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 Supervac of Jacksonville PLM, Inc. (Supervac) for a contested case hearing to challenge the decision of Respondent South Carolina Department of Transportation (Department or DOT) to deny its application for certification as a Disadvantaged Business Enterprises (DBE) in South Carolina. Supervac contends that Bruce Clark, the president and sole owner of Supervac, has suffered from social and economic disadvantages as a result of his Parkinson’s disease such that Supervac qualifies for DBE certification based upon his disability. While the Department recognizes that Mr. Clark suffers from Parkinson’s disease, it contends that Mr. Clark has not demonstrated that he or his firm has, in fact, faced social and economic disadvantages as a result of his disability, and thus argues that Supervac’s application for DBE certification was properly denied.
After timely notice to the parties, a contested case hearing in this matter was held on June 7, 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 the matter of Supervac’s application for DBE certification must be remanded to the Department for it to re-evaluate Supervac’s eligibility under the appropriate federal application requirements.
BACKGROUND
Supervac of Jacksonville PLM, Inc., is a paving and road-work company based in Jacksonville, North Carolina. Bruce Clark, the president and sole owner of Supervac, suffers from Parkinson’s disease, and, based upon his disability, Supervac has been certified as a disadvantaged business enterprise in North Carolina since 1998. On September 3, 2004, Supervac filed a “Disadvantaged Business Enterprise Eligibility Certification Application” with the South Carolina Department of Transportation, in which it sought certification as a DBE in South Carolina. The application was submitted on a three-page application form created by the Department which consists of a section for the contact information for the applicant and twenty-one numbered questions regarding the nature, controlling interests, and ownership of the applicant business, and to which certain documents are attached, including a certification affidavit, a personal statement of the applicant’s net worth, and an affidavit of social and economic disadvantage. See Pet’r Ex. # 1. After reviewing Supervac’s application, the Department requested further information from Supervac regarding its eligibility for DBE certification by a letter dated September 14, 2004. Specifically, the Department asked Supervac to submit objective, concrete evidence that Mr. Clark had suffered from both social and economic disadvantages so as to qualify his business as a DBE. However, in response to the Department’s request, Mr. Clark only submitted general information regarding his disability and the history of his business. Based upon this response, the initial application, and the report of an on-site inspection of Supervac conducted by North Carolina authorities in 1998, the Department denied Supervac’s application because Mr. Clark had failed to establish that he had suffered social and economic disadvantages as a result of his disability. Supervac then sought contested case review of that decision before this tribunal.
DISCUSSION
As discussed below, I find that, because the Department failed to evaluate Supervac’s request for DBE certification using the DBE certification application form mandated by federal law, this matter must be remanded to the Department for it to re-evaluate Supervac’s request with information provided by Supervac under the proper federal application form.
The South Carolina Department of Transportation is charged with the implementation of both state and federal disadvantaged business enterprise programs in South Carolina. See 25A S.C. Code Ann. Regs. 63-700 et seq. (Supp. 2004); 49 C.F.R. § 26.1 et seq. (2004). As part of this implementation, the Department is responsible for certifying businesses as bona fide disadvantaged business enterprises under the procedures and criteria provided in the federal regulations at 49 C.F.R. Part 26 (2004). See 25A S.C. Code Ann. Regs. 63-702 through 63-704 (Supp. 2004); 49 C.F.R. § 26.83 (2004). These federal regulations set forth detailed procedures that must be followed by certifying entities, like the Department, in conducting these DBE certification reviews, including specific requirements for the applications that must be submitted by prospective DBEs:
You [the certifying entity] must take all the following steps in determining whether a DBE firm meets the standards of subpart D of this part [which sets forth the basic DBE eligibility criteria]:
. . .
(7) Require potential DBEs to complete and submit an appropriate application form, unless the potential DBE is an SBA certified firm applying pursuant to the DOT/SBA MOU.
(i) You must use the application form provided in Appendix F to this part without change or revision. However, you may provide in your DBE program, with the approval of the concerned operating administration, for supplementing the form by requesting additional information not inconsistent with this part.
(ii) You must make sure the applicant attests to the accuracy and truthfulness of the information on the application form . . . .
(iii) You must review all information on the form prior to making a decision about the eligibility of the firm.
49 C.F.R. § 26.83(c)(7) (emphasis added). In short, by federal regulation, the Department is required not only to obtain an application from a prospective DBE firm before certifying the firm as a DBE, but also to use the precise application form provided in the federal regulations “without change or revision” and to review all information provided on that particular application before making a certification decision.
However, in the case at hand, the Department did not comply with the application requirements set forth in the federal regulations. Rather than using the federal DBE certification application form provided in Appendix F to 49 C.F.R. Part 26 to evaluate Supervac’s application, the Department used its own certification application form that differs significantly from the federal form. While the Department’s form covers much of the same general ground as the federally-mandated form, e.g., both contain sections addressing the “ownership” and “control” of the applicant firm, the twenty-one items of the Department’s three-page form simply do not provide as much information about the applicant as the over sixty items found on the eight-page federal form. In particular, the federal form inquires much more deeply into the financial circumstances of the applicant firm than does the Department’s form. Compare 49 C.F.R. Part 26, App. F, at 6-7 with Pet’r Ex. # 1, at 2-3. In sum, despite the plain, mandatory language of the federal regulations, the Department did not evaluate Supervac’s request for DBE certification under the form provided in the federal regulations “without change or revision,” but instead used a different form of its own creation.
Further, this federal application requirement is not merely a matter of form over substance. As the regulations make clear, the Department is not only required to use the particular language, structure, and formatting of the federal form when reviewing a request for DBE certification, but also to “review all information on the form prior to making a decision about the eligibility of the firm.” 49 C.F.R. § 26.83(c)(7)(iii) (emphasis added). Here, by using its abbreviated form instead of the federal form, the Department did not review all of the information that would have been collected on the federal form prior to making a decision on Supervac’s eligibility for DBE certification. And, this lack of information may have affected the Department’s decision in this matter. One of the primary reasons the Department denied Supervac’s certification request was that it had failed to demonstrate that its “entry into and advancement in the business world has been negatively impacted due to diminished capital or access to credit.” Pet’r Ex. # 5, at 2. However, as noted above, the Department’s application form did not inquire about Supervac’s financial circumstances to the extent the federal form would have, and, in particular, the Department’s form did not contain the questions regarding Supervac’s banking information and bond status that would have been found on the federal application form. See 49 C.F.R. Part 26, App. F, at 6-7. Therefore, because the Department failed to evaluate Supervac’s request for DBE certification under the form and substance of the DBE certification application mandated by federal law, this matter must be remanded to the Department for it to re-evaluate Supervac’s request under the proper application procedures.
Finally, while perhaps not a basis for remand standing alone, this tribunal is also concerned about the adequacy of the Department’s site review of Supervac in this matter. Both state and federal regulations require the Department to conduct an on-site review of a firm applying for certification as a DBE. See 25A S.C. Code Ann. Regs. 63-704(E) (Supp. 2004) (“The Department will conduct an on site review to verify and evaluate the information provided by the applicant firm.”); 49 C.F.R. § 26.83(c)(1) (2004) (requiring the Department to “[p]erform an on-site visit to the offices of the firm” applying for DBE certification). Under these regulations, the site reviews or on-site visits should consist of interviews with the owners and principal officers of the firms and visits to job sites or facility sites. 25A S.C. Code Ann. Regs. 63-704(E); 49 C.F.R. § 26.83(c)(1). However, the federal regulation further provides that the Department “may rely upon the site visit report of any other recipient with respect to a firm applying for certification,” presumably in lieu of conducting its own on-site visit. 49 C.F.R. § 26.83(c)(1). In the case at hand, the Department did not conduct an on-site review of Supervac, but relied instead upon a report of an on-site visit conducted by North Carolina authorities in May 1998. This tribunal recognizes that the Department may not have the resources to travel out-of-state to conduct its own on-site reviews of out-of-state firms applying for DBE certification in South Carolina and that the Department is permitted by federal regulation to rely upon the on-site reviews conducted by other entities. Nevertheless, it raises certain concerns when, to satisfy the site visit requirement in evaluating an out-of-state firm’s application for DBE certification, the Department relies solely upon the report of an on-site visit of the firm conducted by authorities from another state over six years earlier and makes no effort to at least interview the owners and principals of the applicant firm, whether by meeting at a location in South Carolina or by conducting an interview by telephone, video conferencing, or other technologies. For example, in the instant case, a personal interview with Mr. Clark, the owner and president of Supervac, may have provided the Department with the sort of concrete examples of the social and economic disadvantages suffered by Mr. Clark that it found lacking in the written documentation he submitted. These concerns regarding the adequacy of the Department’s site review of Supervac further support the conclusion that a remand of this matter to the Department is appropriate.
ORDER
Therefore, for the reasons stated above,
IT IS HEREBY ORDERED that the matter of Supervac’s request for certification as a DBE in South Carolina is REMANDED to the Department for it to re-evaluate Supervac’s request under the appropriate federal application requirements.
AND IT IS SO ORDERED.
______________________________
JOHN D. GEATHERS
Administrative Law Judge
July 22, 2005
Columbia, South Carolina |
