By: Lester Gulitz Published: December 2015

Contractor's Failure to Follow DBE Requirements Results in a Hefty Back Charge

Any contractor who thinks DBE1(or MWBE2) requirements can be taken lightly, should read on.

In 2010 a paving contractor entered into a contract with Orange County to repave certain county roads.  The Notice to Bidders, which was part of the contract, told the bidders that at least 5% of the work on the project was to be performed by DBE subcontractors.  The general specifications to the contract also told the contractors that the work had to conform to the New York State Department of Transportation (NYSDOT) Standard Specifications for Construction and Materials dated May 1, 2008.   That specification indicated that the NYSDOT would decide whether the contractor’s efforts to obtain Disadvantaged/Minority/Women’s Business Enterprise were made in good faith in an effort to meet the DBE goals for the project.  The contract also entitled the County to make an equitable deduction from the contract price for any work not done in accordance with the project specifications.

The Contractor completed its work but did not satisfy the 5% DBE requirement.  NYSDOT advised the County that it was reducing federal financing for the project by the sum of $114,806.25, based upon its determination that the Contractor failed to carry out its DBE commitments in good faith.  The County, in turn, notified the Contractor that it was going to back charge the Contractor the same amount.  

The Contractor sued the County for breach of contract.  The County moved for summary judgment, and the Contractor cross-moved for summary judgment.  The Supreme Court granted the County’s motion dismissing the Contractor’s cause of action to recover $114,806.25, and it denied the Contractor’s cross-motion.  The Contractor appealed to the Appellate Division, Second Department3.

In a short decision, the appellate court said that the County had established its prima facie entitlement to judgment as a matter of law, as the evidence submitted by the County demonstrated that the contract required at least 5% of the work be performed by DBE subcontractors, and that the NYSDOT’s determination that the Contractor failed to carry out its DBE commitments in good faith, entitled the County to make a deduction from the contract price.  The Contractor, said the appellate court, failed to raise a triable issue of fact to defeat the County’s motion.

That meant that the Contractor was not able to demonstrate what, if anything, it did to comply with the DBE requirements for the project. 

That is the lesson to be learned here. 

If your construction business enters into contracts that contain DBE requirements (and almost all public work contracts do) and you do not want to find yourself looking down the barrel of a hefty back charge, you have to document, document and document again all of the steps you took and effort you went through to comply with the DBE requirements – pre-bid, during the bid, and post-contract.  That includes, prior to bidding, maintaining and updating listings of qualified DBE that can be solicited for construction, equipment, services and supplies in your geographic area, contacting appropriate sources in your geographic area and state to identify qualified DBEs, notifying the public agency you contracted with to let them know when you are having problems fulfilling DBE requirements and seeking their “advice”.  DBE and MWBE requirements are here to stay.  Approach them seriously and conscientiously, or pay the price for not doing so.       

1 Disadvantaged Business Enterprises

2Minority and Women Owned Business Enterprises

3Sullivan County Paving & Construction, Inc. v. County of Orange, 127 AD3d 959, 2d Dept. 2015.

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