OAR 123-200-1240: Determination of Management Control

(1) All legal documents and financial statements must clearly document that the qualifying individual has management and control of the firm. (2) The qualifying individual(s) must hold the highest officer position in the company (e.g. chief executive officer or president). (a) In a corporation, the qualifying individual(s) must control the Board of Directors. (b) In a partnership, one or more qualifying owner(s) must serve as general partners, with control over all partnership decisions. (c) In order for a qualifying individual to control a partnership, any non-qualifying partners must not have the power, without the specific written concurrence of the qualifying partner(s), to contractually bind the partnership or subject the partnership to contract or tort liability. (d) Qualifying individuals and/or firms must not be subject to any formal or informal restrictions, which limit the customary discretion of the qualifying owner(s). There can be no restrictions (i.e., through corporate charter provisions, by-laws, contracts, or any other formal or informal devices) preventing the qualifying owners from making any business decisions for the firm without the cooperation or vote of any non-certified individual. (3) The qualifying individual must possess sufficient knowledge, managerial and technical competence, experience, and have an overall understanding directly related to the type of business in which the firm seeks certification. The qualifying individual(s) must also be able to maintain day-to-day control over all operational aspects of the business. (a) The COBID will evaluate the training and experience of the qualifying individual based on a variety of factors. In determining whether qualifying individual controls the applicant firm, COBID will consider all the facts in the record, viewed as a whole. The qualifying individual must be able to demonstrate clearly that he or she meets the following factors. The list is not exclusive and COBID may take additional training and experience into consideration when making a determination regarding the qualifying applicant’s qualifications. Factors include: (A) A college degree in the field of expertise; (B) Essential license in Oregon in the field in which the firm operates (e.g. electrician, plumber, engineer, or landscape architect, etc.) that is current and up-to-date; (C) Experience and/or training in the primary field of expertise; (D) Experience in project management in the primary field of expertise; (E) Individual’s presence and activity on work site and ability to determine if work is proceeding in accordance with plans and to supervise field operations, resolve problems, and answer technical questions for subordinates; (F) Individual’s demonstration of knowledge in area of expertise during the certification interview process; (G) Letters of reference from individuals providing same or similar types of work; (H) Contracts, proposals, or other related documents; and (I) Additional training and experience related specifically to construction firms. (i) Has ability to read and interpret blueprints and specifications. (ii) Has independently done take offs and can prepare estimates and bids. (iii) Can operate necessary equipment (e.g. excavator, backhoe, dump truck, etc.) (b) Quality of work performed does not determine an applicant’s eligibility for certification. (c) In order to determine that the qualifying individual(s) has the technical expertise and competence to maintain operational control, he or she may be required to submit proof of expertise to include: (A) A copy of his or her essential license(s). (B) His or her resume. (4) The qualifying individual(s) must have responsibility for the critical areas of business operations and demonstrate the ability to make independent and unilateral business decisions needed to guide the future of the business. (5) The qualifying individual(s) 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. (6) The qualifying individual is not required to have hands-on, direct control or expertise in every aspect of the business’ affairs so long as the qualifying individual is able to intelligently use discretion, critically evaluate, and determine appropriate course of action based on information presented by employees. (7) In order to substantiate management and control of a firm, a qualifying individual(s) cannot engage in outside employment or other business interests that conflict with the management of the firm or prevent the applicant from devoting sufficient time and attention to the affairs of the firm to control its activities. (8) A qualifying individual may control a firm even though one or more of the individual’s immediate family members (who themselves are not qualifying individuals) participate in the firm as a manager, employee, owner, or in another capacity. (9) When a qualifying individual obtains ownership or control of a firm and the previous owner or individual in control is a non-qualifying individual but remains active in some role at the firm, the qualifying individual must demonstrate to the COBID, by clear and convincing evidence, that: (a) The transfer of ownership or control to the applicant was made for reasons other than obtaining certification; and (b) The applicant actually controls the management, policy, and operations of the firm, notwithstanding the continuing participation of a non-qualifying individual who formerly owned or controlled the firm. (10) In considering an MBE, WBE, or VBE certification where a non-qualifying individual was formerly controlling the firm, the COBID may consider the difference between the compensation of the non-qualifying individual and the qualifying individual as a factor in determining control. (11) If the COBID is unable to determine that the qualifying individual controls the firm, as distinct from the other individuals, then the qualifying individual has failed to carry his or her burden of proof concerning control even though they may participate significantly in the firm’s activities. (12) Non-qualifying individuals may be involved in an MBE, WBE, and/or VBE firm as owners, managers, employers, 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. (13) The qualifying individual may delegate various areas of management, policymaking, or daily operations of the firm to other participants in the firm, regardless of whether these participants are qualifying individuals. Such delegation of authority must be revocable, and the certified owner(s) must retain the power to hire and fire any person to whom they delegate such authority. The managerial role of the certified owner(s) in the firm’s overall affairs must be such that the COBID can reasonably conclude that the certified owner(s) actually exercises control over the firm’s operations, management, and policy. (14) The qualifying individual controlling a firm may use an employee leasing company. The use of such a company does not preclude the certified individual(s) from controlling the firm if he or she continues to maintain an employer-employee relationship with the leased employees. (15) When a firm contracts out the actual management of the business to individuals other than the owner or delegates the management to employees, those persons who have the power to hire and fire these managers exercise management control. (16) In determining whether qualifying individual controls a firm, the COBID may consider whether the firm owns equipment necessary to perform its work. The business must own or lease sufficient machinery, equipment, and employees to operate. In making this determination, the COBID shall compare the operations of the certified firm to a non-certified firm in the same or similar business. If leasing, it must be a normal industry practice and the lease must not involve a relationship with a prime contractor or non-qualifying individual that compromises the control or independence of the firm as referenced under OAR 123-200-1100(5). (17) The COBID may grant certification to a firm only for specific types of work in which the qualifying individual has the ability to control the firm. To gain certification in an additional type of work, the qualifying individual needs to demonstrate to the COBID that only its certified owner(s) controls the firm with respect to that type of work. (a) The North American Industry Classification System (NAICS) codes assigned to the firm must describe the types of work the qualifying individual can control and manage and must directly relate to the services provided by the firm. (b) The applicant bears the burden of providing the necessary, detailed company information to COBID for it to make an appropriate NAICS code designation and is primarily responsible to ensure the codes remain current to reflect services provided. (c) In order for certified individuals to control a partnership, any non-certified partners must not have the power, without the specific written concurrence of the certified partner(s), to contractually bind the partnership or subject the partnership to contract or tort liability.