Poor guidance and lack of enforcement in the Department of Transportation’s Disadvantaged Business Enterprise program allowed debarred or suspended small businesses to receive contracts for federally funded transportation projects, according to a report released by the DOT inspector general last week.

“Twenty-six state DBE directories identified three suspended or debarred firms that should be excluded from receiving federally funded contracts,” the report said.

The directories are supposed to list only eligible firms, but some suspended and debarred firms have slipped through the cracks. And because the IG’s investigation was not comprehensive, many more may be incorrectly listed as eligible on the DBE directories, allowing them to be selected for contracts, according to the report.

The DBE program is designed to allow socially and economically disadvantaged small business owners to fairly compete for federally funded transportation projects. Contracts are administered by state and local transportation agencies, and firms may be suspended for violations like tax fraud.

One firm was suspended in February 2012 and still remains on DBE directories in New York, New Jersey, and Maryland. The last was unaware of the firm’s suspension.

The IG faulted the DBE program’s lack of guidance for handling suspended and debarred firms. The New York Department of Transportation was uncertain if one business's suspension should result in its decertification, and the firm received an $8.1 million DBE subcontract after being suspended.

The DOT also lacks a process for informing state and local agencies which businesses have been suspended, the IG said, and local agencies don't always require firms to submit the forms that would disclose this information.

Additionally, the DOT mandates on-site certification reviews, but doesn't say how frequently. As a result, state and local agencies don't do consistent reviews. The three ineligible firms identified by the IG hadn't received an on-site review since 2008.

“The DOT distributes several billion dollars annually through its DBE program,” the report said. “It is important that the department strengthen its controls."

Read the full report here.