DBE Appeal Case Brief: SURVEYING SOLUTIONS INC.; Ref No.: 14-0071

Brief Synopsis of the Case:

When the owner of Surveying Solutions, Inc., a DBE firm, passed away, majority ownership of the firm passed to non-disadvantaged individual and SSI lost its DBE certification. Subsequently, the owner of another DBE firm, GEO Precision Services (Geo) purchased SSI with the intent of making it a subsidiary of his firm.

For some reason, Michigan Department of Transportation (MDOT) took exception to this arrangement and removed the Geo’s DBE certification. The disadvantaged individual then dissolved Geo, transferred Geo’s assets to SSI and applied for DBE certification.

MDOT denied SSI’s DBE application for 1) failure to cooperate with the agencies requests for tax returns and lease agreements from two unrelated firms whose owners had familial ties with employees of SSI and 2) because MDOT alleged that the disadvantaged owner had only purchased SSI with the intent of applying for DBE certification in violation of 49 CFR § 26.71 which governs when a firm owned by a non-disadvantaged individual is purchased by a disadvantaged individual and the non-disadvantaged individual remains with the firm.

Holding:

DOT reversed MDOT’s decision because MDOT failed to show how the family ties between employees of SSI and the outside vendors affected the disadvantaged owner’s independence or control of the firm.

On the issue of transfer of ownership, DOT concluded that the record demonstrated the disadvantaged owner had purchased the company for reasons other than obtaining DBE certification.

Another important holding of this case (albeit in a footnote) is that MDOT improperly found lack of cooperation where the disadvantage owner failed to produce tax returns and other lease agreements from firms over which he had no control.

Analysis:

Interestingly, the events of this case starting with the death of the SSI’s original owner began in 2011 and concluded in 2015 when DOT rendered its decision. During that period it is unclear whether the SSI’s new owner ever sought the service of an attorney. It is clear that MDOT made errors besides the final error which resulted in the denial of certification. For example, MDOT’s objection to making one company the subsidiary of the other was likely improper but it doesn’t appear that the firm ever protested that decision. Nor was, MDOT’s decertification of the firm