HOW ARE BURDENS OF PROOF ALLOCATED IN THE CERTIFICATION PROCESS?

1. In determining whether to certify a firm as eligible to participate as an M/WBE, the County must apply the standards of this rule.
2. The firm seeking certification has the burden of demonstrating to the County, by a preponderance of the evidence, that it meets the requirements of this subpart concerning group membership of minority or gender classification, for ownership, and control.
3. The County must rebuttable presuming that members of the designated groups identified as a woman or a member of the designated minority. This means they do not have the burden of proving to the County that they are that members of the designated groups identified as a woman or a member of the designated minority. In order to obtain the benefit of the rebuttable presumption,individuals must submit a signed, notarized statement that they are a member of one of the groups defined as socially disadvantaged. Applicants do have the obligation to provide the County information concerning their minority status.
4. Individuals who are not presumed to be socially disadvantaged, and individuals concerning whom the presumption of disadvantage has been rebutted, have the burden of proving to the County, by a preponderance of the evidence, that they are socially disadvantaged. (See Appendix E of this part.)
5. The County must make determinations concerning whether individuals and firms have met their burden of demonstrating group membership, ownership, control, and social disadvantage (where disadvantage must be demonstrated on an individual basis) by considering all the facts in the record, viewed as a whole.

WHAT RULES GOVERN GROUP MEMBERSHIP DETERMINATIONS?

1. If, after reviewing the signed notarized statement of membership in a presumptively disadvantaged group, the County have a well-founded reason to question the individual's claim of membership in that group;the County must require the individual to present additional evidence that he or she is a member of the group.
2. The Count must provide the individual a written explanation of the County reasons for questioning his or her group membership and a written request for additional evidence as outlined in paragraph (b) of this section.
3. In implementing this section, the County must take special care to ensure that it do not impose a disproportionate burden on members of any particular designated group. Imposing a disproportionate burden on members of a particular group could violate Title VI of the Civil Rights Act of 1964.
4. In making such a determination,the County must consider whether the person has held himself out to be a member of the group over a long period of time prior to application for certification and whether the person is regarded as a member of the group by the relevant community. The County may require the applicant to produce appropriate documentation of group membership.
5. If the County determines that an individual claiming to be a member of a group presumed to be disadvantaged is not a member of a designated disadvantaged group, the individual must demonstrate their social disadvantage on an individual basis.
6. The County (decisions concerning membership in a designated group are subject to the certification appeals procedure.

WHAT RULES GOVERN DETERMINATIONS OF OWNERSHIP?

1. In determining whether the socially disadvantaged participants in a firm own the firm, the County must consider all the facts in the record, viewed as a whole.
2. To be an eligible M/WBE, a firm must be at least 51 percent owned by socially disadvantaged individuals.
   1. In the case of a corporation, such individuals must own at least 51 percent of the each class of voting stock outstanding and 51 percent of the aggregate of all stock outstanding.
   2. In the case of a partnership, 51 percent of each class of partnership interest must be owned by socially and individuals. Such ownership must be reflected in the firm's partnership agreement.
   3. In the case of a limited liability company, at least 51 percent of each class of member interest must be owned by socially disadvantaged individuals.
3. The firm's ownership by socially disadvantaged individuals must be real, substantial, and continuing,going beyond pro forma ownership of the firm as reflected in ownership documents. The disadvantaged owners must enjoy the customary incidents of ownership, and share in the risks and profits commensurate with their ownership interests, as demonstrated by the substance,not merely the form, of arrangements.
4. All securities that constitute ownership of a firm shall be held directly by disadvantaged persons. Except as provided in this paragraph (d),no securities or assets held in trust, or by any guardian for a minor,are considered as held by disadvantaged persons in determining the ownership of a firm. However, securities or assets held in trust are regarded as held by a disadvantaged individual for purposes of determining ownership of the firm, if:
   1. The beneficial owner of securities or assets held in trust is a disadvantaged individual,and the trustee is the same or another such individual; or
   2. The beneficial owner of a trust is a disadvantaged individual who, rather than the trustee,exercises effective control over the management, policy-making, and daily operational activities of the firm. Assets held in a revocable living trust may be counted only in the situation where the same disadvantaged individual is the sole grantor, beneficiary, and trustee.
5. The contributions of capital or expertise by the socially disadvantaged owners to acquire their ownership interests must be real and substantial. Examples of insufficient contributions include a promise to contribute capital, an unsecured note payable to the firm or an owner who is not a disadvantaged individual, or mere participation in a firm's activities as an employee. Debt instruments from financial institutions or other organizations that lend funds in the normal course of their business do not render a firm ineligible, even if the debtor's ownership interest is security for the loan.
6. The following requirements apply to situations in which expertise is relied upon as part of a disadvantaged owner's contribution to acquire ownership:
   1. The owner's expertise must be:
      1. In a specialized field;
      2. Of outstanding quality;
      3. In areas critical to the firm's operations;
      4. Indispensable to the firm's potential success; In a specialized field;
      5. Specific to the type of work the firm performs; and
      6. Documented in the records of the firm. These records must clearly show the contribution of expertise and its value to the firm.
   2. The individual whose expertise is relied upon must have a significant financial investment in the firm.
7. The County must always deem as held by a socially disadvantaged individual, for purposes of determining ownership, all interests in a business or other assets obtained by the individual:
   1. As the result of a final property settlement or court order in a divorce or legal separation, provided that no term or condition of the agreement or divorce decree is inconsistent with this section; or
   2. Through inheritance, or otherwise because of the death of the former owner.
8. The County must presume as not being held by a socially disadvantaged individual, for purposes of determining ownership, all interests in a business or other assets obtained by the individual as the result of a gift, or transfer without adequate consideration,from any non-disadvantaged individual or non­-M/WBE firm who is:
   1. Involved in the same firm for which the individual is seeking certification, or an affiliate of that firm;
   2. Involved in the same or a similar line of business; or
   3. Engaged in an ongoing business relationship with the firm, or an affiliate of the firm, for which the individual is seeking certification.
9. To overcome this presumption and permit the interests or assets to be counted, the disadvantaged individual must demonstrate to the County, by clear and convincing evidence, that:
   1. The gift or transfer to the disadvantaged individual was made for reasons other than obtaining certification as a M/WBE; and
   2. The disadvantaged individual actually controls the management, policy, and operations of the firm, notwithstanding the continuing participation of a non-disadvantaged individual who provided the gift or transfer.
10. The County must apply the following rules in situations in which marital assets form a basis for ownership of a firm:
    1. When marital assets (other than the assets of the business in question), held jointly or as community property by both spouses, are used to acquire the ownership interest asserted by one spouse, the County must deem the ownership interest in the firm to have been acquired by that spouse with his or her own individual resources, provided that the other spouse irrevocably renounces and transfers all rights in the ownership interest in the manner sanctioned by the laws of the state in which either spouse or the firm is domiciled. The County do not count a greater portion of joint or community property assets toward ownership than state law would recognize as belonging to the socially disadvantaged owner of the applicant firm.
    2. A copy of the document legally transferring and renouncing the other spouse's rights in the jointly owned or community assets used to acquire an ownership interest in the firm must be included as part of the firm's application for M/WBE certification.
11. The County may consider the following factors in determining the ownership of a firm. However, the County must not regard a contribution of capital as failing to be real and substantial, or find a firm ineligible, solely because:
    1. A socially disadvantaged individual acquired his or her ownership interest as the result of a gift, or transfer without adequate consideration, other than the types set forth in paragraph (h) of this section;
    2. There is a provision for the co-signature of a spouse who is not a socially disadvantaged individual on financing agreements,contracts for the purchase or sale of real or personal property, bank signature cards, or other documents; or
    3. Ownership of the firm in question or its assets is transferred for adequate consideration from a spouse who is not a socially disadvantaged individual to a spouse who is such an individual. In this case, the County must give particularly close and careful scrutiny to the ownership and control of a firm to ensure that it is owned and controlled,in substance as well as in form, by a socially disadvantaged individual.

WHAT RULES GOVERN DETERMINATIONS CONCERNING CONTROL?

1. In determining whether socially disadvantaged owners control a firm, the County must consider all the facts in the record, viewed as a whole.
2. Only an independent business may be certified as an M/WBE. An independent business is one the viability of which does not depend on its relationship with another firm or firms.
   1. In determining whether a potential M/WBE is an independent business,the County must scrutinize relationships with non-M/WBE firms, in such areas as personnel, facilities, equipment, financial and/or bonding support, and other resources.
   2. The County must consider whether present or recent employer/employee relationships between the disadvantaged owner(s) of the potential M/WBE and non-M/WBE firms or persons associated with non-M/WBE firms compromise the independence of the potential M/WBE firm.
   3. The County must examine the firm's relationships with prime contractors to determine whether a pattern of exclusive or primary dealings with a prime contractor compromises the independence of the potential M/WBE firm.
   4. In considering factors related to the independence of a potential M/WBE firm, the County must consider the consistency of relationships between the potential M/WBE and non-M/WBE firms with normal industry practice.
3. An M/WBE firm must not be subject to any formal or informal restrictions which limit the customary discretion of the socially disadvantaged owners. There can be no restrictions through corporate charter provisions, by-law provisions,contracts or any other formal or informal devices (e.g., cumulative voting rights, voting powers attached to different classes of stock, employment contracts, requirements for concurrence by non-disadvantaged partners,conditions precedent or subsequent, executor agreements, voting trusts, restrictions on or assignments of voting rights) that prevent the socially disadvantaged owners, without the cooperation or vote of any non-disadvantaged individual, from making any business decision ofthe firm. This paragraph does not preclude a spousal co-signature on documents as provided for in these rule.
4. The socially disadvantaged owners must possess the power to direct or cause the direction of the management and policies of the firm and to make day-to-day as well as long-term decisions on matters of management, policy and operations.
   1. A disadvantaged owner must hold the highest officer position in the company (e.g., chief executive officer or president).
   2. In a corporation, disadvantaged owners must control the board of directors.
   3. In a partnership, one or more disadvantaged owners must serve as general partners,with control over all partnership decisions.
5. Individuals who are not socially disadvantaged may be involved in an M/WBE firm as owners, managers, employees,stockholders, officers, and/or directors. Such individuals must not, however, possess or exercise the power to control the firm,or be disproportionately responsible for the operation of the firm.
6. The socially disadvantaged owners of the firm may delegate various areas of the management, policymaking, or daily operations of the firm to other participants in the firm, regardless of whether these participants are socially disadvantaged individuals. Such delegations of authority must be revocable, and the socially disadvantaged owners must retain the power to hire and fire any person to whom such authority is delegated. The managerial role of the socially disadvantaged owners in the firm's overall affairs must be such that the recipient can reasonably conclude that the socially disadvantaged owners actually exercise control over the firm's operations, management, and policy.
7. The socially disadvantaged owners must have an overall understanding of, and managerial and technical competence and experience directly related to, the type of business in which the firm is engaged and the firm's operations. The socially disadvantaged owners are not required to have experience or expertise in every critical area of the firm's operations, or to have greater experience or expertise in a given field than managers or key employees. The socially disadvantaged owners must have the ability to intelligently and critically evaluate information presented by other participants in the firm's activities and to use this information to make independent decisions concerning the firm's daily operations, management, and policymaking. Generally, expertise limited to office management, administration, or bookkeeping functions unrelated to the principal business activities of the firm is insufficient to demonstrate control.
8. If state or local law requires the persons to have a particular license or other credential in order to own and/or control a certain type of firm, then the socially disadvantaged persons who own and control a potential M/WBE firm of that type must possess the required license or credential. If state or local law does not require such a person to have such a license or credential to own and/or control a firm, the County must not deny certification solely on the ground that the person lacks the license or credential. However, the County may take into account the absence of the license or credential as one factor in determining whether the socially disadvantaged owners actually control the firm.
9. 1. The County may consider differences in remuneration between the socially disadvantaged owners and other participants in the firm in determining whether to certify a firm as an M/WBE. Such consideration shall be in the context of the duties of the persons involved, normal industry practices, the firm's policy and practice concerning reinvestment of income, and any other explanations for the differences proffered by the firm. The County may determine that a firm is controlled by its socially disadvantaged owner although that owner's remuneration is lower than that of some other participants in the firm.
   2. In a case where a non-disadvantaged individual formerly controlled the firm,and a socially disadvantaged individual now controls it, the County may consider a difference between the remuneration of the former and current controller of the firm as a factor in determining who controls the firm, particularly when the non-disadvantaged individual remains involved with the firm and continues to receive greater compensation than the disadvantaged individual.
10. In order to be viewed as controlling a firm, a socially disadvantaged owner cannot engage in outside employment or other business interests that conflict with the management of the firm or prevent the individual from devoting sufficient time and attention to the affairs of the firm to control its activities. For example,absentee ownership of a business and part-time work in a full-time firm are not viewed as constituting control. However, an individual could be viewed as controlling a part-time business that operates only on evenings and/or weekends, if the individual controls it all the time it is operating.
11. 1. A socially disadvantaged individual may control a firm even though one or more of the individual's immediate family members (who themselves are not socially disadvantaged individuals) participate in the firm as a manager, employee,owner,or in another capacity. Except as otherwise provided in this paragraph,the County must make a judgment about the control the socially disadvantaged owner exercises vis-a-vis other persons involved in the business as the County do in other situations, without regard to whether or not the other persons are immediate family members.
    2. If the County cannot determine that the socially disadvantaged owners-as distinct from the family as a whole-control the firm, then the socially and economically disadvantaged owners have failed to carry their burden of proof concerning control, even though they may participate significantly in the firm's activities.
12. Where a firm was formerly owned and/or controlled by a non-disadvantaged individual (whether or not an immediate family member), ownership and/or control were transferred to a socially disadvantaged individual, and the non-disadvantaged individual remains involved with the firm in any capacity, the disadvantaged individual now owning the firm must demonstrate to the County, by clear and convincing evidence, that:
    1. The transfer of ownership and/or control to the disadvantaged individual was made for reasons other than obtaining certification as a M/WBE; and
    2. The disadvantaged individual actually controls the management,policy, and operations of the firm, notwithstanding the continuing participation of a non-disadvantaged individual who formerly owned and/or controlled the firm.
13. In determining whether a firm is controlled by its socially disadvantaged owners, the County may consider whether the firm owns equipment necessary to perform its work. However, the County must not determine that a firm is not controlled by socially disadvantaged individuals solely because the firm leases, rather than owns, such equipment, where leasing equipment is a normal industry practice and the lease does not involve a relationship with a prime contractor or other party that compromises the independence of the firm.
14. The County must grant certification to a firm only for specific types of work in which the socially disadvantaged owners have the ability to control the firm. To become certified in an additional type of work, the firm need demonstrate to the County only that its socially disadvantaged owners are able to control the firm with respect to that type of work. The County must not require that the firm be recertified or submit a new application for certification, but the County must verify the disadvantaged owner's control of the firm in the additional type of work.
    1. The types of work a firm can perform (whether on initial certification or when a new type of work is added) must be described in terms of the most specific available Purchasing code for that type of work. If the County chooses,the County may also,in addition to applying the appropriate Purchasing code, apply a descriptor from a classification scheme of equivalent detail and specificity. A correct Purchasing code is one that describes, as specifically as possible, the principal goods or services which the firm would provide to is set by Chatham County Purchasing Department. Multiple Purchasing codes may be assigned where appropriate. Program participants must rely on, and not depart from, the plain meaning of purchasing code descriptions In determining the scope of a firm's certification. If the County Directory does not list types of work for any firm in a manner consistent with this paragraph; the County must update the Directory entry for that firm to meet the requirements of this paragraph.
    2. Firms and recipients must check carefully to make sure that the Purchasing codes cited in a certification are kept up-to-date and accurately reflect work which the County has determined the firm's owners can control. The firm bears the burden of providing detailed company information the certifying agency needs to make an appropriate Purchasing code designation.
    3. If a firm believes that there is not a Purchasing code that fully or clearly describes the type(s) of work in which it is seeking to be certified as a M/WBE, the firm may request that the certifying agency, in its certification documentation, supplement the assigned Purchasing code(s) with a clear, specific, and detailed narrative description of the type of work in which the firm is certified. A vague, general, or confusing description is not sufficient for this purpose, and recipients should not rely on such a description in determining whether a firm's participation can be counted toward M/WBE goals.
    4. A certifier is not precluded from changing a certification classification or description if there is a factual basis in the record. However, certifiers must not make after-the-fact statements about the scope of a certification,not supported by evidence in the record of the certification action.
15. A business operating under a franchise or license agreement may be certified if it meets the standards in this subpart and the franchiser or licenser is not affiliated with the franchisee or licensee.In determining whether affiliation exists,the County should generally not consider the restraints relating to standardized quality,advertising, accounting format, and other provisions imposed on the franchisee or licensee by the franchise agreement or license, provided that the franchisee or licensee has the right to profit from its efforts and bears the risk of loss commensurate with ownership. Alternatively, even though a franchisee or licensee may not be controlled by virtue of such provisions in the franchise agreement or license, affiliation could arise through other means, such as common management or excessive restrictions on the sale or transfer of the franchise interest or license.
16. In order for a partnership to be controlled by socially disadvantaged individuals,any non­ disadvantaged partners must not have the power, without the specific written concurrence of the socially and economically disadvantaged partner(s),to contractually bind the partnership or subject the partnership to contract or tort liability.
17. The socially disadvantaged individuals controlling a firm may use an employee leasing company. The use of such a company does not preclude the socially disadvantaged individuals from controlling their firm if they continue to maintain an employer-employee relationship with the leased employees. This includes being responsible for hiring, firing, training, assigning, and otherwise controlling the on-the-job activities of the employees, as well as ultimate responsibility for wage and tax obligations related to the employees.

WHAT ARE OTHER RULES AFFECTING CERTIFICATION?

1. 1. Consideration of whether a firm performs a commercially useful function or is a regular dealer pertains solely to counting toward M/WDBE goals the participation of firms that have already been certified as M/WBEs. Except as provided in paragraph (a) (2) of this section, the County must not consider commercially useful function issues in any way in making decisions about whether to certify a firm as an M/WBE.
   2. The County may consider, in making certification decisions, whether a firm has exhibited a pattern of conduct indicating its involvement in attempts to evade or subvert the intent or requirements of the M/WBE program.
2. The County must not refuse to certify a firm solely on the basis that it is a newly formed firm, has not completed projects or contracts at the time of its application, has not yet realized profits from its activities, or has not demonstrated a potential for success. If the firm meets disadvantaged,size, ownership, and control requirements of this Part, the firm is eligible for certification.
3. M/WBE firms and firms seeking M/WBE certification shall cooperate fully with the County requests (and CHATHAM COUNTY's requests) for information relevant to the certification process. Failure or refusal to provide such information is a ground for a denial or removal of certification.
4. Only firms organized for profit may be eligible M/WBEs. Not-for-profit organizations, even though controlled by socially and economically disadvantaged individuals, are not eligible to be certified as M/WBEs.
5. An eligible M/WBE firm must be owned by individuals who are socially disadvantaged. Except as provided in this paragraph, a firm that is not owned by such individuals, but instead is owned by another firm, even an M/WBE firm, cannot be an eligible M/WBE.
   1. If socially disadvantaged individuals own and control a firm through a parent or holding company, established for tax, capitalization or other purposes consistent with industry practice, and the parent or holding company in turn owns and controls an operating subsidiary, the County may certify the subsidiary if it otherwise meets all requirements of this subpart. In this situation,the individual owners and controllers of the parent or holding company are deemed to control the subsidiary through the parent or holding company.
   2. The County may certify such a subsidiary only if there is cumulatively 51 percent ownership of the subsidiary by socially disadvantaged individuals. The following examples illustrate how this cumulative ownership provision works:
      1. Socially disadvantaged individuals own 100 percent of a holding company, which has a wholly-owned subsidiary. The subsidiary may be certified, if it meets all other requirements.
      2. Disadvantaged individuals own 100 percent of the holding company, which owns 51 percent of a subsidiary. The subsidiary may be certified, if all other requirements are met.
      3. Disadvantaged individuals own 80 percent of the holding company, which in turn owns 70 percent of a subsidiary. In this case,the cumulative ownership of the subsidiary by disadvantaged individuals is 56 percent (80 percent of the 70 percent). This is more than 51 percent, so the County may certify the subsidiary, if all other requirements are met.
      4. Same as Example 2 or 3, but someone other than the socially and economically disadvantaged owners of the parent or holding company controls the subsidiary. Even though the subsidiary is owned by disadvantaged individuals, through the holding or parent company, the County cannot certify it because it fails to meet control requirements.
      5. Disadvantaged individuals own 60 percent of the holding company, which in turn owns 51 percent of a subsidiary. In this case, the cumulative ownership of the subsidiary by disadvantaged individuals is about 31 percent. This is less than 51 percent, so the County cannot certify the subsidiary.
      6. The holding company, in addition to the subsidiary seeking certification, owns several other companies. The combined gross receipts of the holding companies and its subsidiaries are greater than the size standard for the subsidiary seeking certification and/or the gross receipts cap of §26.65(b). Under the rules concerning affiliation, the subsidiary fails to meet the size standard and cannot be certified.
6. Recognition of a business as a separate entity for tax or corporate purposes is not necessarily sufficient to demonstrate that a firm is an independent business, owned and controlled by socially and economically disadvantaged individuals.
7. The County must not require an M/WBE firm to be prequalified as a condition for certification unless the recipient requires all firms that participate in its contracts and subcontracts to be prequalified.
8. A firm that is owned by an Indian tribe or Native Hawaiian organization, rather than by Indians or Native Hawaiians as individuals, may be eligible for certification. Such a firm must be controlled by socially disadvantaged individuals.
9. The following special rules apply to the certification of firms related to Alaska Native Corporations (ANCs).
   1. Notwithstanding any other provisions of this subpart, a direct or indirect subsidiary corporation, joint venture,or partnership entity of an ANC is eligible for certification as an M/WBE if it meets all of the following requirements:
      1. The Settlement Common Stock of the underlying ANC and other stock of the ANC held by holders of the Settlement Common Stock and by Natives and descendants of Natives represents a majority of both the total equity of the ANC and the total voting power of the corporation for purposes of electing directors;
      2. The shares of stock or other units of common ownership interest in the subsidiary, joint venture, or partnership entity held by the ANC and by holders of its Settlement Common Stock represent a majority of both the total equity of the entity and the total voting power of the entity for the purpose of electing directors, the general partner, or principal officers; and
      3. The subsidiary, joint venture,or partnership entity has been certified by the Small Business Administration under the 8(a) or small disadvantaged business program.
   2. If an ANC-related firm does not meet all the conditions of this section,then it must meet the requirements of paragraph of this section in order to be certified, on the same basis as firms owned by Indian Tribes or Native Hawaiian Organizations.