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July 11, 2008

 
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
 
Reference No.:  08-0086
 
Ms. Kimberly Smith
President
Ackerman & Baynes, LLC
4211 15 Erdman Avenue
Baltimore, MD 21213
 
Dear Ms. Smith:
 
This is in response to the appeal that you filed on behalf of your firm, Ackerman &
Baynes, LLC (“Ackerman & Baynes”).  We have carefully reviewed the material from
the Washington Metropolitan Transit Authority (“WMATA”) as well as that submitted
by you and have concluded that the denial of  Ackerman & Baynes’ certification as an
eligible DBE under criteria set forth in 49 CFR Part 26 ("the Regulation") is supported by
substantial record evidence.
 

Your appeal is denied based upon our determination that substantial record evidence
supports WMATA’s conclusion that you, the socially and economically disadvantaged
owner, do not 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.

The specific reasons for the denial of your appeal include the following:
 
CONTROL
 
§26.61(b) states, “The firm seeking certification has the burden of demonstrating to
you, by a preponderance of the evidence, that it meets the requirements of this
subpart concerning group membership or individual disadvantage, business size,
ownership, and control.”
 
§26.71 (a) states, “In determining whether socially and economically disadvantaged
owners control a firm, you must consider all the facts in the record, viewed as a
whole.”
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§26.71(d) states, “The socially and economically 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.”

§26.71(g) states, “The socially and economically 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 and economically 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 and economically 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.”

 
According to the firm’s DBE certification application, you are the 51 % owner of
Ackerman & Baynes, a firm seeking certification in fabricated structural steel
manufacturing services. Your husband, [REDACTED], a non-disadvantaged individual,
owns the remaining 49%. The record indicates that Ackerman & Baynes has been in
existence since January 1, 1945.  You and your husband purchased the firm April 15,
2005.  According to the firm’s articles of incorporation you and your spouse are the only
members of the Board of Directors.
 
WMATA determined that you, the socially and economically disadvantaged owner,
disproportionately depend on non-disadvantaged individuals for their knowledge and
background expertise, which is necessary to control the technical aspects of the firm’s
operations. 
 
According to your résumé, your experience appears to be in the areas of accounting,
computer software, and business administration. Specifically, from 2001 to 2005, you
worked for the [REDACTED] as a Business Education Teacher.  From 1993 to 1995, you
were a Developer for [REDACTED].  From 1985 to 2005, you worked for
[REDACTED] as a Sales Director.  The record reveals that you have a Pennsylvania
State Teaching Certificate in Business and Information Technology, a B.S. Degree in
Business Management/Accounting from [REDACTED] and an AA Degree in Business
Original can be found at

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Administration from [REDACTED].  According to MDOT’s onsite report your duties

include hiring and firing of staff (office), signing contracts, accounting, paying bills,
payroll and administrative work.  Although it appears you may be involved in the day-to-
day operations of the firm, there is no indication in the record that you could perform the
technical aspects of the business’ operations, without the assistance of others.  Your
functions at Ackerman & Baynes appear limited in nature and your expertise is unrelated
to the firm’s primary activities.  The record is void of any information that substantiates
that you could operate the firm’s equipment or have a sufficient understanding of the
firm’s operations in order to assist or direct others in the field. The regulation clearly
requires DBE owners to possess sufficient technical knowledge to enable him/her to
control critical day-to-day operational decisions of their businesses. 
 
[REDACTED], non-disadvantaged and 49% owner, has over 20 years of experience in
engineering and manufacturing, and also has been an overseer in the fields.  According to
the record, [REDACTED] works full time as a Director for [REDACTED] and has a B.S.
in Chemistry from [REDACTED].  The record contains a copy of a loan from
[REDACTED] in the amount of [REDACTED], in which both you and [REDACTED]
are guarantors. In addition as part owner of the firm, the DBE application indicates that
[REDACTED] shares signature authority with you and is authorized to write checks and
make financial transactions in behalf of the firm.  Only one signature required on checks.
 

According to the Maryland Department of Transportation’s (MDOT) onsite report

review, [REDACTED], a non-disadvantaged individual and former owner of the firm,
serves as the General Manager responsible for overall plant operations, bidding,
estimating jobs, contracts and bid signing, and assisting you with the hiring and firing of
staff. 

 
[REDACTED], a non-disadvantaged individual and son of the former owner, serves as
the firm’s Plant Manager and is responsible for supervising plant staff and plant
operations. According the to the firm’s DBE application, [REDACTED] assists you with
financial decisions for the firm.
 

[REDACTED], also a non-disadvantaged individual and the firm’s Vice President of

Sales, has worked for the firm since 1981.  His résumé indicates that his role at
Ackerman & Baynes include maintaining the existing customer base while exploring new
and creative ways to grow the business, customer visits, estimating, field measuring, light
sketching and reading the blue prints for both labor and material take offs.  From 1979 to
1981, he worked for [REDACTED] as a Machinist Apprentice.  The firm’s DBE
Original can be found at

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application indicates that [REDACTED] assists you with contract negotiation and
execution; marketing and sales and is solely responsible for estimating and bidding.

The individuals associated with Ackerman & Baynes who possess the requisite
experience and expertise to run this type of business is [REDACTED], [REDACTED],
[REDACTED] and [REDACTED], all non-disadvantaged individuals.  The record also
indicates that these non-disadvantaged individuals have many years of experience in the
critical aspects of the firm’s primary operations.  It is also important to note that Messrs.
[REDACTED] and [REDACTED] worked for the applicant firm under the ownership of
[REDACTED].      
 
Substantial record evidence supports WMATA’s conclusion that the socially and
economically disadvantaged owner does not 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.  In addition, the direct involvement of the former
owner in this process raises major concerns about the day-to-day and long term decisions
on matters of management, policy and operations. 
 

§26.71(i)(1) states, recipients may consider differences in remuneration between the

disadvantaged owners and other participants in the firm in determining whether to
certify a firm as a DBE. 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. Recipients may determine that a firm is controlled by its
disadvantaged owner although that owner's remuneration is lower than that of
some other participants in the firm.

 
The Regulation requires that participating DBE owners enjoy the profits and losses of
their businesses in a degree that is commensurate with their ownership interest.  The
Department has reviewed the compensation paid to you, the socially and economically
disadvantaged owner and that of non-owners of the firm and have concluded that the
socially and economically disadvantaged owner’s compensation is not commensurate
with her ownership interest in the business.  The record evidence reveals that Messrs.
[REDACTED] and [REDACTED] receive salaries in the amounts of [REDACTED] and
[REDACTED] respectively.  The record indicates that you, the socially and economically
disadvantaged owner received a salary in the amount of [REDACTED] an amount
significantly lower than that of non-disadvantaged employees and non-owners of the
firm.  According to MDOT’s onsite report you indicated that you are not a salaried
employee and are compensated by occasional owner draws.
Original can be found at

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When you arrive to the site, type the name of the company you are interested in reading
about into the search box and hit “search”.

 
Pursuant to §26.71(i)(1), remuneration is a factor in determining whether an
applicant controls their firm.  Substantial record evidence therefore, supports the
WMATA’s conclusion that you do not control Ackerman & Baynes within the
meaning of the Departments Regulations.  Therefore, you have failed to meet
your burden of proof in demonstrating, by a preponderance of the evidence, the
firm meets the requirements of the DBE program pursuant to §26.61(b).
 
ADDITIONAL CONCERNS
 
The record reveals that source of the funds used to initially start the firm came from a
joint savings account and from the sale of personal real estate properties owned by you
and your non-disadvantaged husband, [REDACTED].  This raises questions regarding
your contribution of capital to purchase the firm.  The Regulation provides that
contributions of capital or expertise by the disadvantaged owner to acquire his/her
ownership interest in the participating DBE business be real, substantial and continuing. 
However, since WMATA did not raise this as an issue, we will not address it further.
 
In summary, the information provided cumulatively supports a conclusion that Ackerman
& Baynes does not meet the criteria as required for DBE certification under 49 CFR Part
26.  The company is, therefore, ineligible to participate as a DBE on WMATA’s Federal
financially assisted projects.  This determination is administratively final as of the date of
this correspondence.
 
 
Sincerely,
 
 
 
Joseph E. Austin, Associate Director
External Civil Rights Programs Division
Departmental Office of Civil Rights
 
cc:  WMATA