Appendix E to Part 26 - Individual Determinations of Social and Economic Disadvantage
49:1.0.1.1.19.8.3.1.15 : Appendix E
Appendix E to Part 26 - Individual Determinations of Social and
Economic Disadvantage
The following guidance is adapted, with minor modifications,
from SBA regulations concerning social and economic disadvantage
determinations (see 13 CFR 124.103(c) and 124.104).
Social Disadvantage
I. Socially disadvantaged individuals are those who have been
subjected to racial or ethnic prejudice or cultural bias within
American society because of their identities as members of groups
and without regard to their individual qualities. Social
disadvantage must stem from circumstances beyond their control.
Evidence of individual social disadvantage must include the
following elements:
(A) At least one objective distinguishing feature that has
contributed to social disadvantage, such as race, ethnic origin,
gender, disability, long-term residence in an environment isolated
from the mainstream of American society, or other similar causes
not common to individuals who are not socially disadvantaged;
(B) Personal experiences of substantial and chronic social
disadvantage in American society, not in other countries; and
(C) Negative impact on entry into or advancement in the business
world because of the disadvantage. Recipients will consider any
relevant evidence in assessing this element. In every case,
however, recipients will consider education, employment and
business history, where applicable, to see if the totality of
circumstances shows disadvantage in entering into or advancing in
the business world.
(1) Education. Recipients will consider such factors as
denial of equal access to institutions of higher education and
vocational training, exclusion from social and professional
association with students or teachers, denial of educational honors
rightfully earned, and social patterns or pressures which
discouraged the individual from pursuing a professional or business
education.
(2) Employment. Recipients will consider such factors as
unequal treatment in hiring, promotions and other aspects of
professional advancement, pay and fringe benefits, and other terms
and conditions of employment; retaliatory or discriminatory
behavior by an employer or labor union; and social patterns or
pressures which have channeled the individual into non-professional
or non-business fields.
(3) Business history. The recipient will consider such
factors as unequal access to credit or capital, acquisition of
credit or capital under commercially unfavorable circumstances,
unequal treatment in opportunities for government contracts or
other work, unequal treatment by potential customers and business
associates, and exclusion from business or professional
organizations.
II. With respect to paragraph I.(A) of this appendix, the
Department notes that people with disabilities have
disproportionately low incomes and high rates of unemployment. Many
physical and attitudinal barriers remain to their full
participation in education, employment, and business opportunities
available to the general public. The Americans with Disabilities
Act (ADA) was passed in recognition of the discrimination faced by
people with disabilities. It is plausible that many individuals
with disabilities - especially persons with severe disabilities
(e.g., significant mobility, vision, or hearing impairments) - may
be socially and economically disadvantaged.
III. Under the laws concerning social and economic disadvantage,
people with disabilities are not a group presumed to be
disadvantaged. Nevertheless, recipients should look carefully at
individual showings of disadvantage by individuals with
disabilities, making a case-by-case judgment about whether such an
individual meets the criteria of this appendix. As public entities
subject to Title II of the ADA, recipients must also ensure their
DBE programs are accessible to individuals with disabilities. For
example, physical barriers or the lack of application and
information materials in accessible formats cannot be permitted to
thwart the access of potential applicants to the certification
process or other services made available to DBEs and
applicants.
Economic Disadvantage
(A) General. Economically disadvantaged individuals are
socially disadvantaged individuals whose ability to compete in the
free enterprise system has been impaired due to diminished capital
and credit opportunities as compared to others in the same or
similar line of business who are not socially disadvantaged.
(B) Submission of narrative and financial information.
(1) Each individual claiming economic disadvantage must describe
the conditions which are the basis for the claim in a narrative
statement, and must submit personal financial information.
(2) [Reserved]
(C) Factors to be considered. In considering diminished
capital and credit opportunities, recipients will examine factors
relating to the personal financial condition of any individual
claiming disadvantaged status, including personal income for the
past two years (including bonuses and the value of company stock
given in lieu of cash), personal net worth, and the fair market
value of all assets, whether encumbered or not. Recipients will
also consider the financial condition of the applicant compared to
the financial profiles of small businesses in the same primary
industry classification, or, if not available, in similar lines of
business, which are not owned and controlled by socially and
economically disadvantaged individuals in evaluating the
individual's access to credit and capital. The financial profiles
that recipients will compare include total assets, net sales,
pre-tax profit, sales/working capital ratio, and net worth.
(D) Transfers within two years. (1) Except as set forth
in paragraph (D)(2) of this appendix, recipients will attribute to
an individual claiming disadvantaged status any assets which that
individual has transferred to an immediate family member, or to a
trust, a beneficiary of which is an immediate family member, for
less than fair market value, within two years prior to a concern's
application for participation in the DBE program, unless the
individual claiming disadvantaged status can demonstrate that the
transfer is to or on behalf of an immediate family member for that
individual's education, medical expenses, or some other form of
essential support.
(2) Recipients will not attribute to an individual claiming
disadvantaged status any assets transferred by that individual to
an immediate family member that are consistent with the customary
recognition of special occasions, such as birthdays, graduations,
anniversaries, and retirements.
(3) In determining an individual's access to capital and credit,
recipients may consider any assets that the individual transferred
within such two-year period described by paragraph (D)(1) of this
appendix that are not considered in evaluating the individual's
assets and net worth (e.g., transfers to charities).
[64 FR 5126, Feb. 2, 1999, as amended at 68 FR 35559, June 16,
2003]