ORDERS:
FINAL ORDER AND DECISION
STATEMENT OF THE CASEThis matter comes before the Administrative Law Judge Division (Division) upon the
request of Petitioner Jenner & Tyler Construction, Inc. (Petitioner or Company) for a contested case
hearing pursuant to S.C. Code Ann. § 1-23-600(B) (Supp. 2002) and 25A S.C. Code Ann. Regs.
63-700 et seq. (Supp. 2002), challenging Respondent South Carolina Department of Transportation's
(Department) denial of Petitioner's application for certification as a Disadvantaged Business
Enterprise (DBE). After notice to the parties, a final hearing before the Division was conducted on
February 6, 2003. Upon review of the relevant and probative evidence and the applicable law, I find
that the DBE Certification of Jenner & Tyler Construction, Inc. should be granted.
FINDINGS OF FACT
After observing the witnesses and considering the testimony and evidence presented at the
hearing, I make the following Findings of Fact based on the preponderance of the evidence:
1. Notice of the date, time, place, and nature of the hearing was timely given to all
parties.
2.Jenner & Tyler Construction, Inc. is a construction firm which does “site work” for
commercial construction jobs. This type of work involves everything which prepares the property
for vertical construction. It includes clearing the land, laying storm drains, reading blue prints to
determine and set lines, etc.
3.Marshall Tyler is the President of the Company, which is a statutory close
corporation. He has over 21 years experience in site work. After working with Tim Jenner at Jenner
Construction doing residential clearing and landscaping, Mr. Tyler wanted to form his own
construction firm to return to doing commercial site work. Mr. Tyler talked with Mr. Jenner, and they
agreed to establish Jenner & Tyler Construction, Inc. in April, 2000. The business was incorporated
with Marshall Tyler owning 51% of the stock and Tim Jenner owning 49%. At the time of the initial
incorporation, Tyler was Chairman of the Board of Directors, President and Secretary of the
Corporation; Jenner was Vice-President and Secretary. Currently, Tyler continues as President and
Jenner as Secretary. Tyler borrowed $20,000 from Jenner to open the business, and has paid back
$10,000 as part of their verbal agreement to pay back the loan as the company made money.
4.In November 2002, the corporation was changed to a statutory close corporation to
provide a more streamlined operation. Tyler controls the corporation, including the organization of
the company, the authority to bid for work and the authority to hire and fire employees for the
company. Tyler still owns the majority of the stock and continues as President. He alone has the
authority to sign checks for the company, and he is the only person who has ever signed a contract
for the company. David Jensen, an employee of Jenner and Tyler, testified that Tyler is the person
he goes to for everything, including safety concerns, vacations, permits, bids and proposals, and
purchases.
5.The Respondent contends that Tyler does not “own” the corporation as required in
the state and federal statutes.
6.Mike Amerson, a general contractor, testified as to his experience in the commercial
construction industry, and his dealings with Jenner and Tyler Construction Company. He has hired
Jenner and Tyler Construction approximately six or seven times in the past. He talks with Marshall
Tyler about scheduling, work orders and employees. He has not talked with Jenner regarding any
site work.
CONCLUSIONS OF LAW
Based upon the foregoing Findings of Fact, I conclude, as a matter of law, the following:
1.The Division has subject matter jurisdiction in this case pursuant to S.C. Code Ann.
§ 1-23-600(B) (Supp. 2002) and 23A S.C. Code Ann. Regs. 63-704(K) (Supp. 2002). The statutory
standard of proof is to determine the case by a preponderance of the evidence.
2.The Department is required to certify eligible firms to participate in the South Carolina DBE
program pursuant to S.C. Code Ann. § 12-28-2930(B) (Rev. 2002). Businesses receiving the
certification are then allocated a certain percentage of highway funds for construction and renovation
projects.
3.As a recipient of federal highway funds, the Department is also required to implement a DBE
program in compliance with 49 C.F.R. Part 26. The Department has promulgated regulations to
implement both the state and federal DBE programs in South Carolina. See 25A S.C. Code Ann.
Regs. 63-700 et seq. (Supp. 2002).
4.Pursuant to the regulations, the Department has adopted the standards for certifying DBEs,
which are set forth in 49 C.F.R. Part 26. See 25A S.C. Code Ann. Regs. 63-702(A) and 63-703(A)
(Supp. 2002).
5.“ DBE” stands for “Disadvantaged Business Enterprise” and is defined generally as a small
business concern owned and controlled by a socially and economically disadvantaged individual. See
49 CFR, Subpart A, Section 26.5. The regulations provide that Native American owners are
rebuttably presumed to be socially and economically disadvantaged for purposes of the DBE
program. See 49 CFR Section 26.67(a). The regulations further set forth certain rules to be used for
determining whether or not the socially and economically disadvantaged individual "owns" and
"controls" the firm as required by the eligibility standards. See 49 CFR 26.69 and 26.71.
6.A business seeking certification as a DBE has the burden of demonstrating, by the
preponderance of the evidence, that it meets the requirements of 49 C.F.R. Part 26 concerning group
membership or individual disadvantage, business size, ownership, and control. 49 C.F.R. § 26.61. The
Department does not contest that Jenner & Tyler Construction, Inc. meets the requirements of 49
CFR Part 26 as to individual disadvantage and business size. The Department contends only that the
firm has failed to meet its burden of proving that it meets the requirements for ownership and control
by the minority owner.
7.The DBE regulations require that:
The socially and economically disadvantaged owner must possess the power to direct
and cause the direction of the management and policies of the firm and to make the
day-to-day as well as long-term decisions on matters of management, policy and
operations. 49 CFR Section 26.71(d).
8.In addition, the regulations provide the following in regard to the degree of technical
expertise required in order to control a firm within the meaning of the DBE regulations:
The 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.
The socially and economically disadvantaged 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. Generally, expertise limited
to office management, administration, or bookkeeping functions unrelated to the
principal business activities of the firm is insufficient to demonstrate control. 49
C.F.R. § 26.71(g).
9.The regulations require the disadvantaged owner to have "technical competence" and
experience directly related to the type of business in which the firm is engaged and the firm's
operations. Unfortunately, however, the regulations do not define "technical competence."
10.At the very least, "technical competence" must consist of "a base level of technical
knowledge of the industry" and "a sufficient background and expertise...with respect to delegated
aspects of the business to be able to intelligently use and critically evaluate information" presented
by employees in making "decisions concerning the daily operational activities of the business." See
Car-Mar Construction Corp. v. Skinner, 777 F. Supp. 50, 55-56 (D.D.C. 1991). The evidence is
clear that Marshall Tyler does have the technical competence and experience related to commercial
site work, and makes cogent decisions concerning the daily operations of the company. See, e.g.
Hoffman & Company, Inc. v. SC DOT, 00-ALJ-19-0533-CC.
11.The Department contends that Tyler does not "own" Jenner and Tyler Construction Company,
Inc. within the meaning of the regulations because he did not make a "real and substantial" financial
contribution to the firm. 49 C.F.R §26.69(c) sets forth that a firm's
ownership by disadvantaged individuals:
must be real, substantial, and continuing, going beyond pro forma ownership of
the firm as reflected in ownership documents. The disadvantaged owners must
enjoy the customary incidents of ownership, and share in the risks and profits
commensurate with their ownership interests, as demonstrated by the substance,
not merely the form, of arrangements.
Additionally, 49 C.F.R §26.69(e) provides that:
[t]he contributions of capital or expertise by the socially and economically
disadvantaged owners to acquire their ownership interests must be real and
substantial. Examples of insufficient contributions include . . . an unsecured note
payable to the firm or an owner who is not a disadvantaged individual . . . .
11. Tyler’s initial ownership was acquired, in substantial part, by a loan from Jenner. However,
49 C.F.R §26.73(b) provides: “[y]ou must evaluate the eligibility of a firm on the basis of present
circumstances. You must not refuse to certify a firm based solely on historical information indicating
a lack of ownership or control of the firm by socially and economically disadvantaged individuals at
some time in the past, if the firm currently meets the ownership and control standards of this part.”
12.Currently, the only debt Tyler owes to Jenner on the original loan of $20,000 is $10,000. In
addition, Tyler’s expertise is in the area of commercial site work. Jenner’s expertise is almost
exclusively residential. Even though Jenner was the party who provided the capital to fund the start-up, Tyler had the experience and knowledge in the specific area of the business. He enjoys the
“incidents of ownership, and [he] share[s] in the risks and profits. . . . .” This situation seems to be
exactly the type to be addressed by the DBE program. Therefore, I conclude that Marshall Tyler has
made, and continues to make, a real and substantial contribution to Jenner and Tyler Construction
Company, Inc., and that he is the "owner" of the Company within the meaning of 49 C.F.R. §26.69.
13.The DBE regulations do not prohibit the involvement of non-disadvantaged persons in a firm.
49 C.F.R. § 26.71(e) states, in part, that "[i]ndividuals who are not socially and economically
disadvantaged may be involved in a DBE firm as owners, managers, employees, stockholders,
officers, and/or directors." Furthermore, 49 C.F.R. § 26.71(f) provides that:
[t]he socially and economically disadvantaged owners of the firm may delegate
various areas of the management, policymaking, or daily operations of the firm to
other participants in the firm, regardless of whether these participants are socially and
economically disadvantaged individuals. Such delegations of authority must be
revocable, and the socially and economically disadvantaged owners must retain the
power to hire and fire any person to whom such authority is delegated. The
managerial role of the socially and economically disadvantaged owners in the firm's
overall affairs must be such that the recipient can reasonably conclude that the socially
and economically disadvantaged owners actually exercise control over the firm's
operations, management, and policy.
Applying these guidelines to the facts of this case, it is undisputed that Tyler holds the position
of President of Jenner and Tyler. The evidence further reveals that Tyler performs virtually all key
management functions for the Company. Tyler has the power to direct the management and policies
of the firm and to make both day-to-day and long-term decisions concerning the management, policy
and operations of the Company.
ORDER
IT IS HEREBY ORDERED that the application for certification as a Disadvantaged Business
Enterprise of Jenner & Tyler Construction, Inc., is GRANTED.
AND IT IS SO ORDERED.
____________________________________
CAROLYN C. MATTHEWS
Administrative Law Judge
April 24, 2003
Columbia, South Carolina |
