Proposed Changes to 2 CCR 604-1:  The current provisions of 2 CCR 604-1 shall be stricken in their entirety and shall be replaced with the provisions below.   

2 CCR 604-1 EMERGING SMALL BUSINESS PROGRAM
Chapter 1 - General Provisions 
I.	Statement of Basis, Authority and Purpose 

Specific statutory authority for the Commission to amend the Emerging Small Business (ESB) Program Rules (2 CCR 604-1) is provided by 43-1-106(8)(j), (k) and (p), C.R.S.  CDOT initiated this process because research conducted over the past two years has shown that the established program is not creating the opportunities envisioned by the creators and needed by the small business community.   In accordance with 24-4-103 (3) C.R.S, the Transportation Commission passed Resolution # TC-1964 dated March 17, 2011 which directed the CDOT Division of Human Resources and Administration (DOHRA) to begin the formal rulemaking process.

While the tenets of the ESB Program remain the same, we are seeking to create a more flexible program that eases administrative burdens on the program administrator and participants, establishes an environment that allows for innovative program benefits, and develops a larger, more qualified pool of participating small business.  Some of the key changes include:

•	Replacing the detailed application process in the rules with provisions that allow for the process to be outlined in program guidelines, which will be available for public comment and Commission review before being implemented.  

•	Increasing the eligible business size standards from the current $2,000,000 for consultants and $4,500,000 for construction contractors to 50% of the then-applicable SBA size standard for the NAICS codes in which the business is seeking certification, capped at fifty percent of the USDOT Disadvantaged Business Enterprise (DBE) Program size limit; and

•	Replacing the detailed reimbursement incentives of the old rules with provisions that allow for flexible and innovative project-based incentives to be developed and modified via the CDOT project specifications process.

Many of the new provisions are consistent with the standards of other small business transportation-related programs.  Moreover, CDOT believes these changes will improve the ability of many small businesses to compete for CDOT contracting opportunities, thereby increasing diversity on CDOT work and lowering the cost of CDOT projects.
II.	Applicability
These Rules shall govern the development and administration of the ESB Program and may be supplemented with other policies and procedures as permitted herein.  In accordance with §43-1-106 (8)(p), C.R.S. the ESB Program and its resources shall only apply to CDOT contracts for Construction, Professional Services and Practice of Research work.  In addition, in the case of a contract for which a part of the contract price is to be paid with funds from the United States Government and for which the United States Government’s terms or conditions are inconsistent with provisions of the Rules, the provisions of the Rules shall not apply to such contract to the extent of such inconsistency.
Chapter 2 - Definitions 
The following definitions shall apply to terms used in the Rules.
1)	Affiliate: Businesses are affiliates of each other if:
a.	Directly or indirectly, either one controls or has the power to control the other;
b.	A third party controls or has the power to control both; or
c.	Relationships or identity of interests between or among parties exist such that affiliation may be found by a reasonable person.
Indicia of control include, but are not limited to: interlocking management or ownership, identity of interests among family members, shared facilities and equipment, and/or common use of employees.
2)	Bid: The offer of a Consultant or Contractor, on the prescribed bid proposal form, to perform the work and to furnish the labor and materials in conformance with the invitation for bids at the prices quoted.
3)	Business: A sole proprietorship, partnership, corporation, limited liability company, joint venture, professional association or any other legal entity authorized by law and operating for profit,  that is properly licensed or registered and otherwise authorized to do business in the State of Colorado.  
4)	Certification: A determination by CDOT that a Business is eligible to participate in the ESB Program as an ESB, subject to continued compliance with the Rules and any other supplemental policies or regulations related to the ESB Program. While certain courses or licenses may be required for Certification, Certification neither represents nor implies that a business or individual is qualified to perform on a contract.
5)	CDOT: Colorado Department of Transportation.
6)	Consultant: A Business qualified to perform and contracting with or intending to contract with CDOT to perform work on a Consultant Services contract.
7)	Construction: Building, altering, repairing, improving, or demolishing work as described in a CDOT project. This term includes “capital construction” and “controlled maintenance” as defined §24-30-1301, C.R.S.
8)	Consultant Services: Professional Services and/or Practice of Research.
9)	Contract: Any CDOT contract for the performance of Consultant Services or Construction work.
10)	Contractor: A Business qualified to perform and contracting with or intending to contract with CDOT to perform work on Construction contracts.
11)	Controlling Interest: Ownership of 51 percent or more of the Business by one person, or ownership of the largest single portion of the Business by one person if no one person holds 51 percent or more.
12)	CFR: Code of Federal Regulations
13)	C.R.S.: Colorado Revised Statutes, as amended.
14)	Emerging Small Business (ESB): Any Business certified by CDOT to participate in the ESB Program that has not otherwise lost such Certification due to graduation or revocation.  
15)	Emerging Small Business Program (ESB Program): The program outlined by the Rules, which is intended to provide assistance to and increase opportunities for Emerging Small Businesses. 
16)	Emerging Small Business (ESB) Program Guidelines: Provisions published by CDOT that detail additional procedures and requirements pertaining to the ESB Program.  The ESB Program Guidelines shall include those provisions specifically required by the Rules as well as any supplemental provisions necessary to carry out the purposes of the Rules. 
17)	Practice of Research: The performance of services involving the design, data collection and data analysis of studies such as evaluation studies, usage studies, feasibility studies, environmental impact studies, polling studies and other such studies performed by a person qualified by education or training or actual performance in the field, but does not include “Professional Services”. 
18)	Principal: A sole proprietor, a general or limited partner, a person who owns 25 percent or more or a controlling interest, a director, or an officer of the business.
19)	Professional Services: Those services defined in § 24-30-1402(6), C.R.S., including: 1) the practice of architecture, 2) the practice of engineering, 3) the practice of professional land surveying, 4) the practice of landscape architecture, and 5) the practice of industrial hygiene.
20)	Program Benefits: The benefits of the ESB Program as detailed in Chapter 4 below.
21)	Receipts: “Total income” (or in the case of a sole proprietorship, “gross income”) plus “cost of goods sold” as these terms are defined and reported on Internal Revenue Service (IRS) tax return forms (such as Form 1120 for corporations; Form 1120S and Schedule K for S corporations; Form 1120, Form 1065 or Form 1040 for LLCs; Form 1065 and Schedule K for partnerships; Form 1040, Schedule F for farms; Form 1040, Schedule C for other sole proprietorships). Receipts do not include net capital gains or losses; taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees; proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. For size determination purposes, the only exclusions from receipts are those specifically provided for in this paragraph. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, and employee-based costs such as payroll taxes, may not be excluded from receipts.
22)	Renewal of Certification: Annual evaluation of the status of Certification of an ESB.
23)	Rules: These regulations enacted by the State of Colorado Transportation Commission to govern the administration of the Emerging Small Business Program.
Chapter 3 - Certification  
I.	Certification Procedures
1)	Certification and Renewal of Certification.  CDOT shall establish reasonable procedures and methods for the Certification and Renewal of Certification of Businesses in order to effectuate the purposes of these Rules. Such procedures shall be detailed in the ESB Program Guidelines.
2)	Application.  At a minimum, all applicants will be required to complete an application to be considered for Certification.  The format and contents of the application shall be determined by CDOT, provided that the contents of the application reasonably relate to the determination of Certification as described herein.  The application shall include questions regarding ethnicity and gender for the purpose of reporting the diversity of race-neutral participation in the ESB Program and on CDOT contracts.  CDOT may investigate the information provided in the application through reasonable means, including but not limited to interviews and on-site investigations. 
3)	Hearing.  CDOT may deny an application for ESB Certification if CDOT determines that the applicant Business does not meet all of the requirements and criteria of the Rules or the ESB Program Guidelines. CDOT shall notify the Business of its determination and the Business may request a hearing concerning such denial, as provided in §§ 24-4-104 and 105, C.R.S.
4)	Reapplication. 
a.	Any ESB that has previously been denied participation or had its participation in the program revoked due to the graduation requirements of the program (size or term of years) prior to July 1, 2011 may reapply for Certification at any time after such date. 
b.	If an ESB graduates from the ESB Program on or after July 1, 2011 due to exceeding the size limits of the program neither it nor any Affiliate thereof shall be considered for Certification. 
c.	Any ESB that is denied Certification or had its Certification revoked pursuant to these Rules, or any Affiliate thereof, may reapply for Certification no earlier than one (1) year following the effective date of such denial or revocation.
II.	Minimum Certification Requirements
Only applicant Businesses that meet the criteria for Certification may participate in the ESB program.  The applicant Business has the burden of proof that such Business meets the Certification criteria.  
1)	Registration.  CDOT may require all applicant Businesses to register and maintain registration in an information database. Any such registration requirement shall be outlined in the ESB Program Guidelines. 
2)	Independence. The Business must be an independent business. To be independent, the Business must demonstrate that its viability does not depend upon a relationship with another Business or Businesses.  In determining whether a Business is independent, CDOT may consider, but is not limited to, whether the Business or its Principals possess the minimum qualifications and equipment necessary to participate in the areas of work for which the Business is seeking Certification and/or the quality and consistency of relationships with other Businesses and individuals in comparison to normal industry practices.   
3)	Qualifying Principal Area of Business. The Business’ principal area of business must be to provide Consultant Services or engage in Construction work that could reasonably be construed to be related to the transportation industry contracts, including contracts for aeronautics, transit and/or highway transportation. If CDOT finds that a Business has not properly identified its principal area of business, it may deny the application. CDOT shall provide the Business with a written explanation of its decision.  
4)	Selection of North American Industry Classification System (NAICS) Codes. An applicant Business must identify its primary NAICS code, indicating its principal area of Business, as well any additional transportation-related NAICS code for which it wishes to be certified.  If CDOT finds that a Business is not actually engaged in the areas of work outlined by the selected NAICS codes or that such NAICS codes are not transportation-related, CDOT may deny Certification for such NAICS codes, provided that CDOT provide the Business with a written explanation of its decision.  In order to change the NAICS codes for which a business is certified, the business must submit a written explanation for such change and receive approval from CDOT.  
5)	Size Limit. The average annual Receipts of the Business for the preceding three years, combined with the average annual Receipts of all Affiliates for the preceding three years, shall not exceed the size limits of the ESB Program.  
a.	Determination by NAICS Code. The size limits of the ESB Program shall be fifty percent (50%) of the size standard established by the Small Business Administration’s “Table of Small Business Size Standards Matched to North American Industry Classification System Codes” as set forth in 13 CFR 121.201, or a successor of such classification system, for each NAICS code identified by the Business. CDOT shall evaluate and determine eligibility for Certification for each NAICS code requested by the Business.
b.	Overall Cap. No Business shall be allowed to participate in the ESB Program if the average annual Receipts of the Business for the preceding three years, combined with the average annual Receipts of all Affiliates for the preceding three years, exceeds 50% of the size limit of the US Department of Transportation Disadvantaged Business Enterprise (DBE) program, which can be found at 49 CFR 26.65(b)(1).
c.	Calculation. The determination of average annual Receipts of the Business and any Affiliates shall be made in accordance with the provisions governing the size calculation of a Business by the Small Business Administration, as stated in 13 C.F.R. 121.104.  CDOT may defer to the Small Business Administration’s determination of a business’ size and/or attestations by a Business as to its size in lieu of conducting its own calculation.     
6)	Training and Development. CDOT may establish minimum training and business development criteria for Certification and Renewal of Certification, including but not limited to CDOT-facilitated courses, financial or business courses, milestones demonstrating business development and management, and/or or any other requirement related to the ability to successfully perform on CDOT contracts.  All training and development requirements shall be detailed in the ESB Program Guidelines.  
7)	Debarment and Conviction. The Business or any Principal thereof shall not have been debarred or convicted of bid-related crimes or violations within the past six years in any state or federal jurisdiction, or be under notice of intent to debar in any jurisdiction. 
8)	Truth and Honesty. The Business or any Principal thereof shall not have provided false, deceptive, or fraudulent statements in the application for ESB Certification or in any other information, statements, or documents submitted to CDOT.
9)	Cooperation and Complete Disclosure. The Business must respond timely to and fully comply with all requests for information that are made by CDOT regarding participation in the ESB Program. If the Business fails to cooperate or to fully disclose any information relevant to participation in the ESB Program, CDOT shall have the right to deny or revoke the Business’ Certification.   
10)	Additional Requirements.  In addition to the minimum eligibility requirements listed above, CDOT may implement additional requirements for Certification in accordance with the purpose of these Rules. Such additional requirements shall be detailed in the ESB Program Guidelines.  
III.	Graduation, Revocation and Suspension of ESB Certification
1)	Graduation. 
a.	An ESB shall be deemed to have graduated from the ESB Program for each NAICS codes for which the ESB exceeds the size limit of the ESB Program as determined in accordance with 3(II)(5)(a) above.  An ESB shall be deemed to have graduated from all NAICS codes if the ESB exceeds 50% of the DBE program size limit as set forth in 49 CFR 26.65(b)(1). 
b.	Graduation shall only occur upon the Renewal of Certification unless, due to mistake or other non-fraudulent activity, the determination of CDOT is called into question.  
c.	CDOT shall provide the Business with written notice that is has exceeded the size limits and the Business shall not claim ESB status, in bids or otherwise, once such notice is issued. Graduation shall not affect the ESB’s status for Contracts that were bid for or awarded prior to the graduation from the ESB Program. 
d.	The size of the ESB shall be determined in accordance with 3(II)(5)(c) above .  
e.	Hearing.  A Business that has been deemed by CDOT to have graduated from the ESB Program shall have the right to a hearing in accordance with §§24-4-104 and 24-4-105, C.R.S.
2)	Revocation.
a.	CDOT shall revoke the Certification of an ESB if it is determined that the ESB no longer meets the minimum certification criteria and any other criteria outlined in the ESB Program Guidelines, excluding the business size limits.
b.	CDOT shall revoke the Certification of an ESB if the ESB fails to comply with the procedures for Renewal of Certification outlined in the ESB Program Guidelines.
c.	CDOT may also revoke ESB Certification if CDOT determines that:
i.	The Business repeatedly fails to cooperate with CDOT;
ii.	The Business or any Principal thereof is reasonably believed to have made false, deceptive or fraudulent statements on its application for ESB Certification, in the course of any determination or hearing associated with ESB Certification, or in any documents or any other information submitted to CDOT;
iii.	The Business or any Principal thereof commits any action or omission which evidences a lack of integrity or honesty in performing public projects; or
iv.	CDOT has reasonable grounds to believe that the public health, welfare, or safety imperatively requires immediate suspension of Certification. 
d.	Revocation may occur at any time, excluding any revocation based upon required registration in a database, which may only occur upon Renewal of Certification.
e.	Except as provided in subsection (f) below, CDOT shall provide written notice to a Business that its Certification is pending revocation. 
f.	If an ESB or any Principal thereof is debarred or convicted of bid-related crimes or violations or is under notice of intent to debar in any jurisdiction, such ESB’s Certification shall be automatically revoked without notice from CDOT.  
g.	Once the Certification of a Business has been revoked, such Business shall not participate on any CDOT contracts as an ESB, regardless of whether such contract has been awarded or bid prior to revocation.      
3)	Appeals.  The procedures contained in §§24-4-104 and 24-4-105, C.R.S. shall apply to any revocation of ESB Certification. If ESB Certification is revoked, such revocation will remain in place until a hearing is held pursuant to §§24-4-104 and 105 C.R.S. and a determination regarding the Certification of the Business is made by the hearing officer.

Chapter 4 - Program Benefits 
I.	Requirements and Criteria 
CDOT may, at its discretion, provide the ESB Program Benefits described in this Chapter subject to the following requirements and criteria:
1)	Compliance with State and Federal Laws and Regulations.  The following benefits shall be subject to all applicable state and federal laws and regulations and implemented in accordance therewith. 
2)	Application of Federal Funds. CDOT will use federal funds to provide development assistance tools only to an ESB that also is certified as a Disadvantaged Business Enterprise (DBE), as defined in 49 C.F.R. Part 26. 
3)	Discretionary Distribution of Assistance. CDOT shall have discretion to determine which ESBs shall receive the development assistance tools.  Among other criteria, CDOT may consider the availability of funds, potential and need of the ESB, areas of need by CDOT, applicability of assistance to CDOT Contracts, past performance and assistance, and availability of resources from CDOT or other organizations to meet the needs of the ESB. 
4)	Cooperation.  At any time, CDOT may modify or terminate assistance to an ESB.  Failure of an ESB to cooperate with CDOT or to follow program guidelines while receiving technical assistance may result in suspension or revocation of Certification.   
5)	Advertisement of Project-Based Benefits. CDOT will provide the project-based program benefits only to the extent CDOT expressly indicates in the project specifications or other contracting documents. 
6)	Priority to Emerging Businesses. CDOT shall tailor the ESB Program Benefits to provide priority and extra assistance to business that are new to or have little experience working with CDOT.
7)	Benefits to Address Areas of Need. CDOT shall have the right to tailor incentives to address areas of over and under concentration within the program and the transportation industry.  This may include, limiting ESB eligibility for benefits based upon over concentrated work areas and increasing incentives or assistance for those work areas without sufficient small business participation.  
II.	Development Assistance Tools
1)	Technical Assistance.  Based upon CDOT’s evaluation of an ESB and its business needs, CDOT may provide individualized technical assistance to an ESB in the following areas: Construction management; Time management and project work scheduling; Project financing requirements, including insurance; Personnel management; Bidding, estimating, job costing, and contract administration procedures; Evaluation and use of project plans; CDOT contracting procedures and specifications; Marketing; and Construction and Consultant Services techniques and industry standards. CDOT may also authorize technical assistance in other areas if it is determined that such assistance reasonably relates to the development of a business in accordance with the purpose of these Rules.
2)	Additional Training and Resources. CDOT, alone or in collaboration with other organizations, may also provide additional training and business development resources for ESBs. Such training and resources may include, but shall not be limited to, CDOT administered courses, mentor-protégé programs, online bidding access, and financial assistance to participate in industry activities and business development courses.  
III.	Means to Increase Contracting Opportunities
1)	Consultant Services Contracts.  CDOT may grant evaluation points to a prospective prime consultant if the consultant is an ESB, uses an ESB as a subconsultant, or agrees to assist in the professional development of an ESB. The number of points or the amount of increase in the weight of existing points to be provided by CDOT may be modified for each Contract.  Additionally, CDOT may provide financial or other incentives for the participation of or assistance to ESB Consultants on CDOT Contracts. 
2)	Construction Contracts. CDOT may: (1) provide financial or other incentives to assist ESBs in obtaining prime contracts, to encourage subcontracting to ESBs, and to reward assistance in the development of ESBs; and/or (2) provide bonding assistance, waive or reduce bonding or insurance requirements, or otherwise lower the qualifications required for an ESB to bid or receive an award for a Contract.
3)	Restricted Projects.  CDOT may restrict the award of Contracts or certain items within Contracts to ESB Consultants and Contractors, joint ventures of which ESBs are a participant, and participants in CDOT’s mentor-protégé program. Upon the annual review of the ESB Program Guidelines, CDOT shall publish a numerical target to identify the quantity of projects or project items that CDOT shall seek to restrict each year.  This target shall be based upon the progress of small business participation on CDOT contracts and the projects suitable for restriction.  Additional criteria and processes for determining whether to restrict a project shall be set forth in the ESB Program Guidelines. 
4)	ESB Contract Goal. CDOT may make attainment of a certain level of ESB participation, or good faith effort to achieve such participation, a condition of Contract award.  The procedures for evaluating such participation and good faith efforts shall be set forth in the advertisement for the Contract. 
5)	Increase Smaller Projects. CDOT may increase the number of smaller-sized Construction and Consultant Services projects in order to increase the opportunities for ESBs to participate on such projects as prime Contractors or Consultants. At a minimum, CDOT shall not unnecessarily or unjustifiably bundle CDOT work and shall take all reasonable steps to facilitate competition by small businesses on Contracts. Upon the annual review of the ESB Program Guidelines, CDOT shall evaluate the opportunities and means for unbundling projects and increasing smaller-sized projects.  
6)	Innovative Incentives.  CDOT may also expand upon these incentives and develop other unique benefits to promote the use of ESBs in order to effectuate a more equitable distribution of CDOT Contracts.
7)	Advertisement.  For each Contract, the applicable incentives shall be detailed in the request for proposals or bidding advertisement published by CDOT. 
IV. Prompt Payment
1)	In accordance with state law, every prime Contractor or Consultant shall pay the subcontractor or subconsultant within seven calendar days of receipt of the payment from CDOT, or within any shorter time provided in the contract between the prime contractor or consultant and CDOT.  
2)	In addition, CDOT may develop additional prompt payment requirements for projects involving ESB prime Contractors and Consultants and ESB subcontractors and subconsultants on CDOT projects.
Chapter 5 - Program Administration 
I.	Enforcement.
1)	Burden.  Any Business that participates in or utilizes the benefits of the ESB Program shall have the burden of proving its compliance with the requirements of the Rules. 
2)	Notification.  Any Business that participates in or utilizes the benefits of the ESB Program shall notify CDOT of any information that may affect the participation of ESB on a Contract. This may include, but shall not be limited to, information that affects the ESB’s Certification, changes the scope of the Contract, or otherwise results in an adjustment of the percentage of work to be performed by an ESB. 
3)	Monitoring and Investigations. CDOT may monitor all Businesses that utilize the benefits of the ESB Program in order to assure compliance with the Rules. CDOT may also receive and investigate complaints and allegations and initiate its own investigations regarding compliance.  
4)	Material Breach of Contract.  On any Contract for which a Business has received or is to receive ESB Program Benefits the failure to meet the obligations of the Contract with respect to ESB participation or assistance shall constitute a material breach of contract.       
5)	Remedies for Non-Compliance. If a Business is found to be in violation of the provisions of the Rules, or to otherwise be in breach of a Contract, it shall be subject to sanctions.   CDOT may exercise any or all of its rights, including but not limited to withholding funds, imposition of monetary penalty, suspension or revocation, as permitted by law in accordance contracting documents.  
II.	Directory. All certified ESBs shall be listed in an ESB Directory that shall be available to the public.
III.	Outreach.  CDOT may publicize the ESB Program via internet, events and other forms of outreach.
IV.	Reporting. At a minimum, on an annual basis, CDOT shall report the progress of the ESB Program to the Transportation Commission.  If necessary, the Transportation Commission may request additional periodic reports regarding the progress of and participation in the ESB Program.  Detailed requirements for such reporting shall be outlines in the ESB Program Guidelines.
V.	Program Evaluation. CDOT will utilize various methods to obtain feedback, evaluation, and advice concerning the operation and content of the ESB Program. These methods may include an advisory committee, surveys, and annual meetings to assess the effectiveness of the program and make recommendations for improving the program.
VI.	Guidelines.  CDOT shall have the power and authority to adopt additional regulations or guidelines to effectuate the purpose, procedures and operations of these Rules. All changes to the ESB Program Guidelines shall be published at least two months prior to implementation and shall be submitted to the Transportation Commission DBE Committee for review.  CDOT shall review the ESB Program Guidelines on an annual basis and may make changes to the guidelines at such time.  CDOT may also modify the guidelines at one other time during the fiscal year. 
Chapter 6 – Miscellaneous
I.	Severability.  If any provision of these rules or their application is held invalid or unenforceable, such invalidity or unenforceability shall not affect other provisions or applications of these rules which can be given effect without the invalid provisions or application.  The remaining provisions are to remain in full force and effect.